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The Inn Thing

Foreign hotel chains are willing to play host as business and leisure travellers multiply in India, report Naomi Canton and Shalini Singh.
Hindustan Times | By Naomi Canton and Shalini Singh
UPDATED ON MAY 31, 2008 08:52 PM IST

In may this year, the 33-storey Four Seasons Hotel began operations in Worli, the hip region of Mumbai. The arrival of this 202-room five star international hospitality biggie in India’s commercial capital is a direct result of the business boom in India’s hotel industry.

There are about 14 international brands now in India. According to the hotel consulting firm, HVS Hospitality Services, there will be 37 international hotel brands in India by 2010. Siddharth Thaker, executive director, HVS, says: “The average rate of hotel rooms in India has gone up by 280 per cent over the last three years. So, the reason the Four Seasons has come here is because international chains are recognising that people travelling in India can now pay their rates. The boom has got the Four Seasons here, not the other way round.”

Others chains are following suit. Hilton Hotel has tied up with DLF Ltd to set up 75 hotels in India and the French hospitality company Accor with brands like Sofitel and Novotel in its stable, has tied up with the Dubai-based EMAAR properties to develop budget hotels in India under its Formula 1 brand.

Getting organised

India currently has three lakh hotel rooms of which two lakh are in the disorganised sector and only 40,000 are in the branded hotel sector, covering all sectors from budget to five star. This is grossly inadequate for the large amount of business travel now taking place in India, according to Thaker. International tourism is miniscule and is not playing any role in the hotel boom, he adds.

Five million tourists arrived in India in 2007; the number is expected to touch 10 million by 2010. But Indians are travelling much more now — 382 million Indian tourists travelled domestically in 2007. “About 68 million Indians take regular annual vacations so it is ten times the size of the international tourist market,” he added.

With high demand and short supply, hotel tariffs have been skyrocketing especially since 2002. Says Rishi Kapoor, director strategic planning, The Imperial Hotel, Delhi: “We have seen a growth of 20 per cent in the average room rate year on year for over 5 years now. The travel into Delhi on private jets seems to have gone up, which directly affects the demand for a hotel like ours.”

Markets calling

More than one lakh branded quality hotel rooms are in various phases of construction in India right now. Hotel room numbers will triple in Delhi and more than double in Mumbai, according to HVS. The largest number of rooms will be created in the National Capital Region where 80 new hotels are opening up, offering 19,400 rooms, ahead of the Commonwealth Games in 2010.

The three cities that will see the largest increase in branded hotels are IT hubs of Bangalore, Hyderabad and Pune. Bangalore accounts for 51 per cent of foreign business travelers visiting India annually. According to Mr. A Balakrishna Hegde, president, Confederation of Real Estate Developers’ Association of India, Karnataka: “Both the domestic and international traveller is contributing towards the flourishing hotel business and probably the former, especially from the IT segment, is the mainstay.”

In Chennai, over 600 rooms will be added by the two five-star deluxe hotels, Leela and JW Marriott scheduled to rise on the banks of the Adyar river.

Mumbai remains the most attractive hotel investment market though with 11,000 rooms added to its existing 7,402 branded hotel rooms. The new international convention centre at the Bandra Kurla Complex and expansion of the airport gives Mumbai a strong platform for demand. The Oberoi group, which has 21 hotels in India, is opening up its third hotel — a Trident in Bandra Kurla Complex in Mumbai, at the end of the year.

New business hubs are determining the location for hotels in all the segments. Intercontinental Hotels Group (IHG) opened Crowne Plaza Today in Gurgaon last year owing to Gurgaon’s growth rate pegged at 11-12 per cent. Says Kadambini Mittal, director-marketing and sales, Crowne Plaza Today, Gurgaon: “With few properties in our category of the premium segment here and given this high growth trend, we’ve not witnessed even a single off-season so far. Now with the Convention Centre coming up in Dwarka, the going can only be better.” Thaker adds: “In the long term, India needs branded medium sized hotels (80-100 rooms) with budget and mid-market positioning that can justify the value for money.”

(With inputs from B R Srikanth in Bangalore and G C Shekhar in Chennai)

What’s hot

Indian Oberoi Hotels and the Taj Hotels Resorts and Palaces, and the global chain Aman Resorts have forayed into a niche and growing market of wilderness tourism. The rationale for this move is the increasing tribe of nature lovers for whom the safaris in the South Africa and East Africa have become passé. India, with more than 500 wildlife sanctuaries and National Parks and a rich pick of flora and fauna, is a natural destination for nature-loving tourists.

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