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'Heritage' hotels make old buildings new again
February 28 2012

Some of India’s oldest building stock is finding new life as heritage hotels, an emerging accommodations segment that promises travelers unique guest experiences in historical settings.

Highlights
  • The total number of heritage rooms in India is fewer than 10% of the country’s total hotel supply, according to India government figures.
  • The government has classified heritage properties into one of three sub-segments: Heritage, Heritage Classic and Heritage Grand.
  • The chosen marketing mix is most often determined by the property and its location, according to sources interviewed for this report. 

REPORT FROM INDIA—Once viewed as ancient, deteriorating money pits, some of India’s oldest building stock is finding new life as heritage hotels, an emerging accommodations segment that promises travelers unique guest experiences in historical settings.

Indian chains such as WelcomHeritage have approximately 42 properties comprising 900 rooms across 37 locations throughout India. The Indian Heritage Hotels Association includes 170 hotels comprising approximately 8,000 rooms. 
 

Converted heritage hotels face many challenges, but the segment is growing in India giving old properties a new lease on life. (Credit: Neemrana Group.)

And with the total number of heritage rooms in India counting fewer than 10% of the country’s total hotel supply, according to India government figures, there exists plenty of room to grow—and opportunities for conversion, according to sources interviewed for this report.

 

Given India’s rich cultural heritage, the old properties strewn across the country are waiting for a fresh lease of life, according to Aman Nath, co-chairman Neemrana Group of Hotels.

“We have a list of over 200 properties—havelis, forts, palaces—in our files, which can be turned around,” he said.

But not every opportunity is viable. For one thing, converting heritage properties typically is a very expensive endeavor, said Randhir Vikram Singh, general secretary of the IHHA and owner of Mandawa Hotels.

“Some of the hotel chains wish to expand use of heritage properties, but as a huge fund is required for renovation etc., hesitation is being shown as most of the heritage properties are located in remote villages where carrying the construction material and labor is a big problem,” he said.

Challenges abound 
Costs aside, the simple act of conversion is challenging and often fraught with red tape, Nath said.

“The biggest problem, though, is the regulations and controls. There are nearly 56 types of clearances required. Converting the property into a hotel means grappling with each of the formalities. Despite liberalization, very little has changed at ground level. The direction of the policy causes many a mismatch,” he said.

The government has classified heritage properties into one of three sub-segments: Heritage, Heritage Classic and Heritage Grand.

And if the bureaucracy and expense weren’t enough to turn some investors away, heritage properties typically have low room counts, which means less cash flow to recoup the high up-front costs.

“These are not high-inventory hotels,” said Ranjit Sinh Parmar, founder and CEO of Palaces of India – Camps of India. “The properties were meant to be private residences and not hotels. So there is not a very high room inventory.”

Some properties have fewer than 15 rooms or more than 40 rooms, he said. The rule of thumb is the hotel’s average size with comprise of 20 rooms to 30 rooms.

Each converted property also requires different management and ownership strategies that fit these unique spaces. Even under one chain, the mode of operation varies from property to property, owner to owner. There exist stand-alone properties, joint ventures, leases, managed properties, pure-marketing agreements, and branding and marketing (as in WelcomHeritage’s model). 

 

India’s oldest buildings are finding new life as heritage hotels, promising unique guest experiences in historical settings. (Credit: Neemrana Group.)

“In our process of working, we take something which is actually a ruin, wasted property, a national heritage, and make it viable,” Nath said. “It takes almost two years to actually get the property operational. We work on any model that is comfortable and uncomplicated. Some properties are owned, some are leased, some are managed … What binds it all together is our passion to restore such property and preserve it for posterity.”

 

Marketing heritage properties represents another hurdle.

“In locations where the heritage hotels are located, land is not an issue, but the connectivity usually is,” Kirpal said. “Marketing a heritage property cannot be compared to any segment of hotels because of their locations in leisure destinations of the country wherein the heritage hotels are more tourism-centric than the mid-market or luxury segment hotels, which are city based.”

The chosen marketing mix most often is determined by the property and its location, according to sources interviewed for this report. 

“The events segment, which is wedding, film shoots, lifestyle shows, is the fastest-growing segment,” Parmar said. “Corporate segment business and conference is another lucrative segment though in such a case, the location is crucial with a distance of just four to five hours drive from a major city. Of course, leisure tourism is there, but it has to be sold as a concept.”

“The location of the property should connect it to its natural market segment,” Parmar added. “Most hotels need to be near the city or at a drivable distance. Nearly 75% of the heritage properties are non-city hotels.”

Heritage growing
Challenges aside, the segment is showing strong growth in India. The state of Rajasthan, for example, has 150 total hotels comprising approximately 6,000 rooms, of which the heritage segment accounts for 54 hotels and more than 1,400 rooms.

Of the IHHA’s 175-property portfolio, the majority are in Rajasthan. However, the state of Kerala further south is catching up fast, Singh said.

WelcomHeritage is taking note of such growth and is looking to capitalize, according to Sanjay Kirpal, the chain’s CEO.

“Heritage tourism is a very lucrative segment in India and at the same time it’s a fairly competitive as well … Today, there really is a market for everyone and to suit every traveler’s budget. Therefore, it is correct to state that heritage hotels have a large market available.”

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