Global Hotel Chains Make Room for Growth in India
Marriott, Starwood, InterContinental moving faster than local cos to increase property count Gaining Ground
Mumbai: International hotel chains Marriott, Starwood, Carlson Rezidor and InterContinental Hotel Group are looking to scale up the number of properties in India by 2020, moving faster than their local rivals, widening their presence to strengthen their negotiating position with online travel agencies and take on new-age disruptors such as Airbnb.
US operator Marriott, which has 32 hotels in the country, has over 35 units in the pipeline across its seven brands. Carlson Rezidor runs 76 hotels and has a target of 170 operational and under-development properties in India by 2020. British hospitality chain InterContinental Hotel Group wants to triple its business over the next 3-5 years in India, its third-biggest growth market.
Overseas hotel chains currently own almost half the branded rooms offered in the country and are set to surge ahead of their Indian rivals by 2020. With more rooms in their control, hotel operators will be in a better position to negotiate rates with online travel agencies, while a wider presence in the country will help them to compete with room aggregators.
Experts estimate demand for hotel rooms will increase 11-12%, while supply will expand at a slower pace. Pan-India hotel occupancy crossed 60% in 2015 – for the first time in five years – on the back of improved market sentiment. A rise in domestic travel and government initiatives such as Make in India, Digital India and the e-visa scheme are expected to drive demand for hotel rooms.
International chains are expanding faster than their Indian counterparts primarily because they only manage hotels.
Indian groups such as Taj, Oberoi, ITC and The Leela have been focused on owning and operating their hotels. With the cost of land rising and debt levels growing, Indian companies have been forced to turn asset-light and realise the need to expand through management contracts. Taj Hotels Resorts and Palaces, a part of the Tata Group, opened 20 new properties between 2012-13 and 2015-16, according to an investor presentation in December. The Oberoi Group is expected to open six properties by 2019, according to its 2015 annual report.
“It is only in the recent times that Indian chains have started looking towards management contracts as a serious growth model, while international brands have been doing this globally since decades and in India, for at least a decade. So international cha- (Numbers indicate branded hotel room share in %) Estimated rise in demand for hotel rooms in India
ins have grown their share faster,” said Achin Khanna, managing director for consulting and valuation practice at hotel consultancy HVS South Asia.
India currently has 125,000 branded hotel rooms, which will expand to 155,000 by 2020 and currently almost 50% of the rooms are under international brands, according to HVS.
“India is quickly going become our third-largest market in terms of operating hotels and rooms by end of this year,” Thomas Mangas, chief executive of Starwood Hotels & Resorts, told ET during a recent interview. “I don’t know any other market which is growing at the rate like in India and in terms of the size and scope, it is the fastest-growing scale market.”
With Marriott’s global acquisition of Starwood, the combined entity will soon become the world’s largest hotel chain. In India, Marriott-Starwood will be the biggest by room inventory, beating market leader Taj Group.
Management contract & franchise
Large bouquet of brands spread across different price points
Strong distribution network
Expansive loyalty programme