India's luxury hospitality sector is growing and interestingly at that. Some of the twists, turns and developments are not less thrilling than a Hollywood suspense flick. We try to track the industry as it gathers speed minute-by-minute
By: Karishma Suri
Posted on: February 16, 2013
India’s luxury hospitality sector is growing and interestingly at that. Some of the twists, turns and developments are not less thrilling than a Hollywood suspense flick. We try to track the industry as it gathers speed minute by minute…
India is a land of hospitality, heritage and culture. But as the Indian industrialist, Mr Mukesh Ambani correctly put it, is also a land of billion opportunities. How you take advantage of those opportunities, of course, depends on you. Slowly but surely, the Indian hospitality industry has emerged as one of the key industries driving growth of the services sector in India. The face of the hospitality sector is changing and odds seem in favour of the Indian market which has scope and promise for good opportunities.
Closely linked to the hospitality industry is the tourism industry which is getting a boost from the former. The Indian hospitality industry has recorded healthy growth fuelled by hearty inflow of overseas tourists as well as increased tourist movement within the country and it has become one of the leading players in the global industry.
A quick picture
Everything looks good in a discussion but what is the current situation of this sector? According to Mr Kapil Aggarwal, VP Hotel Sales and Marketing at Hyatt, rising affluence and the current under-penetration throws up significant growth opportunities for the hospitality sector. Being one of the top travel and tourism destinations in the world and given the rich historical value, India makes as an ideal product for multiple levels of tourism. With 740 million domestic travellers (in 2011) and over 6.3 million FTAs, India, after China, seems to be one of the most lucrative hotel markets in the world and has the second largest construction pipeline in Asia.
“The performance of the hotels industry is intrinsically knit with economic growth, hence given the recent slump in the economic performance we had seen a marginal dip in the operations of the industry, as is the case with industries that depend on discretionary spending. On the positive side though, domestic tourism in India has come of age with better connectivity and is likely to counter any downfall in the international tourist arrivals. We remain optimistic on the long term growth story for the Indian hospitality industry. This is further reinforced by the India-centric growth strategy by several global hotel majors,” said Mr Aggarwal.
But as is true for every luxury category in India, the hospitality industry is not as easy to wade through as well. Logistical problems have served as bumps which keep impeding growth and dent excitement. India’s travellers and hotel guests are not very kind in their praise as well. Mr Tamir Kobrin, General Manager at The Leela Palace New Delhi, said, “Indian guests certainly expect more. More in terms of value for money, particularly on their own home turf. So, one must understand that their expectations are high, especially in cuisine and personalized service. Be it Jain food or hand faucets, a hotel must adapt to cater to its captive audience, and ensure excellence and consistency. Indians are not necessarily more finicky, but their expectations make them look tougher than what they actually are.”
With the diversity in demographics and culture, India presents itself as a very unique travel destination. New entrants take note, as according to Mr Aggarwal, key tourism markets such as Goa, Jaipur and Bangalore will continue to be some of the most sought after locations in India to explore. “Mumbai and Delhi are key business destinations. There is some over supply seen in the NCR and Chennai markets, bringing down ARRs (average room rates), but we believe this will even out shortly,” he advised.
Apart from locations waiting to be furnished by hotel properties, India, due to its inherent welcoming culture, makes it somewhat easier to set up shop here. Mr Kobrin agrees, “The Indian hospitality industry has a tremendous pedigree of professionals who are well-educated and ambitious to achieve great results. It, therefore, is a fantastic starting point as hospitality is ingrained in them, hence, you must find a way to bring it out. Furthermore, you are able to constantly push the bar higher and achieve exceptional results, because you have continued growth in the industry as a whole.”
A bigger leap
India is currently seeing phenomenal, and might we add, sudden growth of hospitality chains. “We are looking at a country which is developing at consistent pace, and to cope with such growth, we could see demand growing at a faster pace than supply in the short term, but the latter will catch up eventually,” said Mr Aggarwal. Simply saying, India is on high priority radar for international hospitality chains, among other developing countries, which are now in a stage of economic revival.
Suggesting that India is probably registering pent-up demand, Hyatt has decided to expand their presence in India and further strengthen their presence in the mid-market segment. Being one of the first international hotel brands to enter in India, they believe that quality over quantity does the trick! “We do not want to be the largest hotel chain, but the most preferred brand,” said Mr Aggarwal.
Not surprisingly then, Hyatt has recently launched two Park Hyatt properties in Chennai and Hyderabad. Shangri-La Mumbai has also opened doors and is current flavour of the city. Swissotel’s new property in Goa is all set to welcome guests soon. Fairmont recently opened its first property in Jaipur while Marriott launched in Bengaluru. Westin Group plans to launch 11 hotels this year in fast-growing markets, including India. After the quite recent opening of uber-luxurious Sofitel BKC Mumbai, Sofitel plans to launch So Sofitel in Mumbai soon. Even a Ritz-Carlton is on the cards!
With the future beckoning positivism and leads for the hospitality sector, Hyatt is, in fact, introducing new brands in India as well. There are currently more than 50 Hyatt hotels under development in India, which are expected to add more than 12,000 rooms. The Hyatt Place brand has finally entered India with the recent launch of Hyatt Place Hampi, which will be followed by Hyatt Place Pune and Hyatt Place Hinjewadi. “We are launching the Hyatt Place outside the US market for the first time in India. Over the next six months, we are also looking at opening some exciting hotels starting with Hyatt Regency Gurgaon, Hyatt Regency Ludhiana and Hyatt Regency Raipur,” counted Mr Aggarwal. The brand will open 23 Hyatt Place hotels, 16 of Hyatt Regency and one Hyatt House by 2015. Along with this, they will also be bringing in Hyatt Andaz to India, with the first one coming up in the Delhi International Airports hospitality district by 2014.
Taking over the world
But it’s not just the opening of new properties which has excited us. The Indian hospitality industry is seeing many different ways of development. The Leela Palaces, Hotels and Resorts, recently partnered with real estate company Supertech Ltd, to present The Leela Palace Noida, at Supernova, Noida. Supertech will construct and develop the property which will be operated and managed by The Leela. This strategy of asset light expansion is being practised by The Leela group for other locations as well.
Another point in focus is the recent re-branding of Ista Hotels (owned by the Khannas of Ananda in the Himalayas previously) as Hyatt hotels. Wondering how that would help them as an international brand? Mr Aggarwal explained that for a global hotel major, having a strategic tie-up with a local hospitality brand which has hands-on experience and expertise in key Indian business cities was important. From the perspective of joint venture and re-branding, joining hands with another strong domestic player is key to judicious growth planning. For Hyatt, the Ista group of hotels provided that necessary experience and distributional reach in key markets.
Notably, after much speculation, controversy and to-and-fro about DLF Group divesting in New Delhi’s Aman Hotel (an international hospitality brand again), Aman New Delhi is now becoming The Lodhi by the DLF Group. The renaming follows DLF's decision to sell back Amanresorts, the luxury hotel chain, to its original owner, Adrian Zecha, for $300 million. DLF will retain the Delhi property, but will give up the Aman brand name, since retaining it would have cost them massively.
These are just a few examples, which make us feel that the market is simmering, and is soon going to gain pace for massive, and strong, growth.
Several international players, including Intercontinental, Hilton, Accor, Marriott International, Starwood and more have established a presence in the Indian hospitality space. Prominent Indian companies in the hospitality industry include Indian Hotels Company Ltd (IHCL), East India Hotels (EIH), ITC, and The Leela Palaces, Hotels & Resorts. Most of these players have seen significant expansion in recent years and further expansion in smaller towns and cities is on the cards. India seems to be one of the fastest-growing tourist destinations in the world for the next 10-15 years. What comes next would probably not surprise us seeing the favourability of our nation especially towards this sector.