After slow start, IHG to double India presence

British hospitality group IHG, which runs InterContinental, aims to double its operating hotels in India in the next five years, after a slowish phase of development in the past few years. This year, the company has signed 13 new deals across luxury, premium and budget hotels. Its next phase of expansion, beyond its 46 hotels, will focus on Gurugram, Jim Corbett National Park (in Uttarakhand), Mumbai, Amritsar and Goa, said Elie Maalouf, IHG's CEO, who was on a visit to India recently. Close to 70% of its new deals are in mid-scale and uppermid-scale segments, reflecting the company's focus on this growing market in India. Premium and luxury hotels will still expand, but at a slower pace.

Hotel rates have gone through the roof around the world. Do you see a rationalisation happening?

Two things happened: One, there was quite a bit of inflation so hotels had to respond to it. Hotels were not a source of inflation—labour costs went up, energy prices went up, construction costs went up a lot, interest rates went up, food and beverage costs went up. So, when all these inputs into building, maintaining and staffing it properly, go up, rates go up too. On average, hotel rates have not increased more than inflation. We've had three to four years of 6-8% inflation, so the rate is nominally higher. On the other hand, we also had very strong demand, and when demand is high, and new hotel supply isn't growing that much, then there's an opportunity for higher pricing.

Indicators like GDP growth and burgeoning middle class—India is experiencing all of that. Does that help in growing business?

India is the perfect example for what you look for in the growth of travel— strong GDP growth, very strong middle class growth, infrastructure investment, local consumption, and a growing young population. When we put all of that together, it's inevitable that travel grows. Low-cost airline carriers are expanding, airports are being built. It covers all the elements of a market that looks very good for future travel and hospitality growth.

But despite that, IHG's number of hotels in India is small. Especially if you look at your competitors or a market like China.

We have 46 open hotels, another 50 or so are under development. In fact, we are announcing today a brand new agreement with Brigade group to build an Intercontinental in Hyderabad for 300 rooms. We're adding hotels to our development program every year. Yes, we think we're just getting started in India and it can be much bigger for us than what it is today. But I would say none of the major international companies have a very large position.

The world saw a phase of revenge travel after the pandemic. Do you think it has passed?

Yes. We're in a different phase of travel now, revenge travel is gone. During revenge travel, people were just expressing themselves after being stuck at home without interacting with people, going to restaurants, bars, and seeing places. There were stories of people ordering fake airline meals to bring home just because they missed the thing they complained about the most. But they loved the idea of travel. There were flights in Australia that took people from nowhere to nowhere, because they couldn't go anywhere else. They just wanted to leave the airport. This showed us how much people missed traveling. Now while we're still at a higher level of travel than before covid, it is not as much as it was when there was revenge travel, and is more sustained. It isn't as if what went up is going down, but settled at a higher peak than before covid.

Two years ago IHG announced four luxury brands would launch in India. Is there any progress on that?

We have two Six Senses resorts open in India. We have a new Voco brand, which is one of our premium brands. we’ve opened one hotel, we’ve announced three others and we’ll announce another InterContinental. I'm confident we'll have another brand, Regent Hotels & Resorts in India . We'll have a Vignette Collection and a Kimpton Hotel + Restaurant, which is the largest and most successful boutique luxury brand in the world.

‘‘India covers all the elements of a market that looks very good for future travel and hospitality growth Elie Maalouf CEO, IHG