Everyone in the hotel world has an India strategy; they’re either already here or en route, drawn by a market under-served for decades.
This despite the fact that luxury hotel rooms that cost an average of Rs 10,429 a night at peak in 2008, were selling for Rs 6,850 in 2013, almost half that. Occupancy rates have also reduced to barely above break-even.
Understandably, industry pundits are hesitant to predict its fortune in 2014. Rattan Keswani, deputy managing director at Lemon Tree Hotels, says, “The trend is expected to continue; however, a lot will depend on the election results and confidence levels in the second half of 2014-2015.”
How do hotels deal with a downturn and rapid growth, both at the same time?
Here are a few trends that are likely play out in 2014.
Brand swaps rise
Brand-swapping was once seen only in developed markets. According to Achin Khanna, managing director of HVS consulting practice in South Asia, “The growing number of new brands and competition has resulted in a lot of brand conversion. We will see a lot more in 2014.”
While ITC has taken over four Raviz properties in Kerala, Lemon Tree replaced Golden Tulip in Jaipur and the Meridien in Ahmedabad.
Douglas Martell, InterContinental Hotels Group (IHG), says, “Converting an existing hotel property is an easier way to add to the growth of the brand portfolio. Although it involves costs to pace up the brand standard, hoteliers look forward to more conversions as it helps increasing the revenue of the group.”
IHG is bringing in its Crowne Plaza and Holiday Inn brands to replace Hilton and its own Double Tree brands in two hotels in Delhi (these properties are owned by Eros Resorts and Hotels Ltd).
Restructuring and refinancing
The commodity-fuelled high of 2008 also saw a gaggle of hotel companies announcing big dollar investments. Unfortunately, just like in other sectors where companies are struggling with huge debts, hoteliers are paying the price of ambition. Some of the biggest names continue to be overleveraged. The Indian Hotels Company has debts of close to Rs 4,000 crore and losses of Rs 390 crore in 2012-13. The Leela Group and the Kamat Group are among those who have gone through financial restructuring. 2014 will see more rejigs.
Banking on infrastructure
In late 2013, the Indian government included hotel projects costing over Rs 200 crore and convention centres of over Rs 300 crore under the ‘infrastructure sub-sectors’ category. This helps companies in two ways: Loans get cheaper and repayment periods get longer. The Rs 200 crore cut-off, though, has put a damper on the hopes of mid-scale and budget hotel owners, as the average cost for them to build a property is much less.
More M&As
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(This story appears in the 07 March, 2014 issue of Forbes India. To visit our Archives, click here.)
Brand swapping seems like a good way to go in the current situation if major global hotel chains using it in their development strategy.
on Sep 18, 2014Indian luxury hotel prices are low compare to south Asia. Now This prices are available to upper middle class people.If we attract that Upper middle class people will be fill all most major hotel rooms in Season. Praveen http://india.dialus.com/businessdetails/Hyderabad/Hotels.html
on May 6, 2014Hotels in India are EXTREMELY expensive compared to other South Asian countries. Our STAR ratings of hotels do not make sense, its fooling. Moreover, government needs to soften its stand on the way it taxes a hotel
on Mar 7, 2014Fooling? How? kindly explain.
on May 3, 2014