Luxury will have a new address in the national capital from November. Joining other opulent structures in the diplomatic enclave will be the Rs 1,600-crore, 260-room Leela Palace Kempinski Hotel in Chanakyapuri. As business and leisure travel picks up again, the hospitality industry is back in business. To keep pace with rising demand, both domestic and global hotel chains are in expansion mode. Currently, India has 1,30,000 hotel rooms. The ministry of tourism expects an ambitious 10 million foreign visitors in 2010 while industry estimates forecast six million international tourists and 650 million domestic travellers. That will still put tremendous pressure on hotels, and tariffs will soar. At the height of the boom in 2007-08, rooms were being sold at a 20 per cent premium.
Not surprisingly, India has emerged as a destination for the world's biggest names in hospitality. As they look to grow outside their saturated home markets in the US and Europe, brands like Starwood Hotels & Resorts, Four Seasons Hotels, Hyatt, Mövenpick Hotels and Resorts, Accor Group, Dusit International, and Swissotel Hotels and Resorts amongst many others are stepping up expansion efforts in India. And those who are yet to come in, like Jumeirah of the United Arab Emirates, Europe's Corinthia Hotels and Thailand's Amari Group, are rapidly firming up their strategy.
"India is a key focus of our expansion efforts, in large part, because it is a market that today is relatively under-hoteled," says Phil McAveety, executive vice-president and chief brand officer, Starwood Hotels and Resorts Worldwide. "As a point of perspective, India with a population of one billion has just 1,00,000 hotel rooms, while New York City has roughly 80,000."
As hotel chains expand, 89,449 rooms are expected to come up in the branded segment over the next five years, estimates HVS Hospitality Services, a hotel consultancy firm. Much of this will be driven by homegrown hotels. The Indian Hotels Company, for instance, is aggressively expanding across segments. While the Taj will remain a luxury brand, 19 hotels are being rolled over into the group's newly minted five-star brand Vivanta. It also has the two-year-old Gateway Hotel in the three-star segment and Ginger Hotels in economy.
Similarly, ITC operates and manages close to 100 properties in 80 cities under various brands like WelcomHotels, WelcomHeritage and Fortune, while the Oberoi Group operates the Oberoi Hotels & Resorts and Trident Hotels' brands, and Krizm Hotels operates Lemon Tree and Red Fox. It's not difficult to understand why: none is willing to let go of any price segment.
Given that India is expected to continue growing at 8 per cent plus, the hospitality sector will follow. Branded rooms are up from 39,000 to 62,531 in four years; much of the growth since 2009. Last year alone 12,500 rooms were added. "It is very rare to see a growth of 25 per cent in a single year and this definitely is the fastest growth in the world, albeit on a low base", says Manav Thadani, managing director, HVS Hospitality Services. But, he cautions, only 67 per cent, or about 60,000 rooms will come up.
While there is plenty of development in the luxury and upscale segments, there is a shortage in the mid-market and budget categories. Unlike the US where for every one five-star room, there are five to six three-star rooms and seven to eight economy rooms, in India over 50 per cent rooms are in the four-star category, thanks to sky-high real estate prices. That is equivalent to 50 per cent business class seats in an airline.
Adding It All Up
The Big Boys Will Get Bigger
Hotel Brand: Accor: Novotel
Category: Five-star
Footprint in India: Three hotels- two in Hyderabad and one in Mumbai
Expansion Plans: To add 3,376 rooms across 13 cities
Hotel Brand: Accor: Ibis
Category: Three-star
Footprint in India: Two properties in Gurgaon and Pune
Expansion Plans: To add 3,111 rooms across 16 cities
Hotel Brand: ITC*
Category: Four- and five-star deluxe
Footprint in India: Owns and manages over 100 properties across 80 cities
Expansion Plans: To add 4,000 rooms across 95 cities
Hotel Brand: Oberoi
Category: Four-and five-star deluxe
Footprint in India: Owns and manages 11 hotels across 10 cities
Expansion Plans: To add 431 rooms in two cities
Hotel Brand: Peppermint
Category: Budget
Footprint in India: One property in Gurgaon
Expansion Plans: To add 500 rooms across eight cities.
Hotel Brand: Lemon Tree
Category: Three-star
Footprint in India: Owns and manages over 12 properties across 10 cities
Expansion Plans: To add 1,770 rooms across six cities
* includes ITC/WelcomHeritage/WelcomHotels/Fortune
