Global Ho­tel Chains Make Room for Growth in In­dia

Mar­riott, Star­wood, In­terCon­ti­nen­tal mov­ing faster than lo­cal cos to in­crease prop­erty count Gain­ing Ground

The Economic Times - - Brands: Creating Desire - Di­vya.Sathya­narayanan @times­

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

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