Last month, Arne Sorenson, the biggest hotelier in the world, scored a century in India by throwing open the Sheraton Grand Bengaluru Whitefield Hotel & Convention Center to the public.“We opened 15 hotels last year; we should open the same number in India this year,” he quipped. What Sorenson did not publicise, though, is the fact that Marriott, with more than 22,000 rooms, has taken the top slot in India in terms of room inventory – overshadowing local peers Taj, Oberoi, ITC and The Leela. Taj, with 14,400 rooms, is already a distant second.It’s 6,500 hotels in 127 countries with over 30 brands. If that’s not a colossal, what is? And India is already the third most strategic market, after the US and China.Acquiring Starwood Hotels and Resorts has helped Marriott bulk up, but without a doubt, global chains are fast eating into the market share of the deeply entrenched domestic rivals, most of whom have been battling rising costs, high debt and profitability pressures.“We will double our footprint in India in next few years,” Mark Hoplamazian, global president, Hyatt Hotels Corporation, boasted last year after a reset in expectations and expansion plans. Hyatt currently has 29 hotels in India across 18 cities. In 2002, international brands accounted for under 20% of the 25,000 branded rooms in India. Today, they account for about 50% of current supply of 1,23,000 branded rooms and by 2020, they will account of 76% of supply, as per Patu Keswani, chairman and managing director, Lemon Tree Hotels, which recently went public.Overall, five of the eight biggest hotel brands in India in terms of room inventory are global brands. In 2016, international hotel brands signed up 11,831 keys, compared to 4,781 keys by domestic brands. In 2017, international brands signed up 8,868 rooms, compared to 7,152 by the domestic chains, as per a report by Jones Lang LaSalle Property Consultants.And the global chains are keen to bring most of their portfolio brands to India soon. “India is one of Marriott International’s most important markets in Asia, with the second-highest number of hotels and rooms after China,” said Paul Foskey, chief development officer, Marriott International “Given India’s robust economy and rising middle class, we see incredible opportunity to continue working with owners to open hotels from across Marriott’s extensive array of brands, particularly in the upper midscale, upscale and luxury segments.”Marriott started its journey in India in 1999 and 19 years hence, it has 102 operating hotels. In the pipeline are 50 hotels, which will add another 12,000 rooms. At the top end of the spectrum are brands such as the Ritz Carlton, St Regis, JW Marriott and the portfolio is completed by brands such as Fairfield by Marriott, Four Points by Sheraton and Aloft.63980950

PROSPECTS IN THE MIDDLEInternational hotel companies currently dominate the luxury space and have not, so far, managed the same thrust in the mid-market/economy space. With the expanding middle class, rising disposable income and changing aspirations, future growth will come from mid-market/economy segments for those brands that manage to aggregate or scale up capacity with the right economics, as the next million rooms get built in India, argues Keswani.The next battleground for hospitality will be the non-metros. While there are plenty of hotel development opportunities across key cities and micro-markets, hoteliers are focusing on tier II-III cities to keep up with increasing demand, especially with the uptick in domestic travel.AccorHotels has launched multiple offerings — Novotel Guwahati, Novotel Lucknow and its first dual property in Chennai, Ibis and Novotel. “We have been the first international hotel brand to enter certain locations in cities like Dwarka, Coimbatore and Kochi. We have a strong pipeline underway and a target of reaching 80 hotels by 2020 in India,” says Jean-Michel Cassé, chief operating officer, India and South Asia, AccorHotels.Radisson Group has equally fast-paced expansion plans. “In the last two years, we signed for 14 hotels. We are on track to achieve our target of nine openings for 2018, and we expect to round up the year with 100 hotels,” says Raj Rana, CEO, South Asia, Radisson Hotel Group.FIGHTBACK AT THE TOPTop Indian hotel companies will have to adapt to be profitable. They have been compelled to go asset-light, either by selling some properties to reduce debt or by having a mix of owned and managed hotels. The fact is that hotel companies across the globe have moved from owned to managed offerings and a similar evolution of Indian companies was but natural.The Oberoi Group, which owned most of its hotels, now wants to play the management contract game. “About 10 years ago, the group decided that it should have the same policy as other international hotel groups. A decision was taken that The Oberoi Group will expand mainly by signing management contracts,” says PRS Oberoi, executive chairman, Oberoi. The chain owns or manages 4,500 rooms and suites in India and abroad, expecting to add 1,500 in the next three years.EIH, which owns and operates the Oberoi chain of luxury hotels, saw net profit grow to Rs 121 crore in FY17, from Rs 67 crore in FY15. Net revenues fell to Rs 1,526 crore in FY17 from Rs 1,668 crore in FY15. Lower interest and depreciation expenses enhanced profit, say analysts.For Indian Hotels Company-owned Taj, the next five-year plan includes selling non-core assets and becoming less ownership driven (60% of its assets will not be owned by it by 2022), reducing dependence on the luxury segment, moving the hotels portfolio of some group companies to the holding company, monetising its non-core assets — including residential apartments in Mumbai and other land banks — and forging new external and internal alliances with other Tata companies. Taj, with 129 hotels at present, will ramp up room inventory 50% by 2022.Indian Hotels posted losses for five straight fiscals, ending FY17, though the figures have reduced. Losses came down to Rs 83 crore in FY17 from Rs 347 crore in FY15. In the same period, net revenues dipped to Rs 4,020 crore in FY17 from Rs 4,188 crore in FY15. Indian Hotels plans to improve Ebitda margin from 17% at present, to 25% by 2022.Companies like Taj will have to reduce debt and enhance margins. “Our margins are very low today. We should be able to improve these around the principles of asset management. This will help us grow at an accelerated pace and improve shareholder value, to scale up inventory and multiply our portfolio to bolster profitability and improve margins,” says Suma Venkatesh, executive vice-president, development and real estate, Taj Hotels. The Tata group hospitality company is also looking at using unutilised floor space index and unlocking value of land banks. Companies are increasingly working towards the optimum assets mix.ITC Hotels, for instance, has an ‘asset right’ strategy. “While our luxury brand ITC Hotel will always be a key area of focus, we are in the process of consolidating our position in the upper upscale segment with the WelcomHotel brand, through a mix of owned and managed properties. We currently own and manage 14 WelcomHotels in the country. On the anvil are five more, both owned and managed,” says Dipak Haksar, chief executive, ITC Hotels & WelcomHotels.THE BOTTOMLINE IS…Both Taj and ITC have multiple offerings in the upper segment in the largest cities but need to expand brand portfolio as the remaining Indian cities may not support very high capex hotels in the medium term, says Abhijeet Umathe, associate director, advisory, Knight Frank India. Playing on heritage will be a good strategy, deep-rooted as Indian hotel companies are in the local environment and considering their understanding of local markets, customer behaviour, business cycles and trends.This gives them the necessary arsenal to compete with international rivals who bring in global best practices, loyalty programmes and reservation networks, says Mandeep S Lamba, managing director, India, hotels and hospitality group, Jones Lang LaSalle Property Consultants India.Additionally, Indian hotels have been reluctant about increasing room rates despite robust demand and strong growth in occupancy levels. This would be missing out on a big opportunity, as all fundamentals are positive — high disposable incomes, rising employment, upcoming infrastructure and increase in travelling.Local players are also still in their nascent stage in terms of global realignment vis-à-vis loyalty programmes. Taj InnerCircle recently entered a strategic alliance with Shangri-La Hotels & Resorts, which, for the first time, gave Indian customers access to 200 hotels across 131 destinations in 27 countries. And this is just the beginning. “Going forward, we are looking to forge new alliances with partners both within and outside the group,” says Venkatesh. ITC relaunched a guest programme in 2012 as Club ITC — a synergy between ITC’s premium luxury and lifestyle businesses ITC Hotels and Wills Lifestyle.In 2016, Club ITC collaborated with Starwood Preferred Guest (SPG) to offer its members exclusive access to holidays at over 1,200 hotels worldwide. With a member base of approximately of 4 lakh, close to 30% of ITC Hotels’ room revenues can be attributed to Club ITC.Loyalty programmes are certainly a key driver of growth for international brands. “One of the prominent reasons for Marriott’s acquisition of Starwood was access to the SPG loyalty members. That said, loyalty programmes are one of several levers that drive the decision to stay at a hotel,” says Achin Khanna, managing partner, strategic advisory, Hotelivate.Among other measures, local chains have tried revamping their digital channels and reservation systems in a bid to counter their foreign peers and online travel agents, considered both a boon and a bane for the hotels business.The domestic hotel industry has its fair share of challenges. GST of 28% on accommodation charging Rs 7,500 and above is a major deterrent, with serious consequences on tourism. Also, several destinations in India are overbuilt. “However, it is expected that demand will catch up with supply in the next two to three years,” says Oberoi.That being the case, it becomes all the more imperative for an increase in competitive intensity. For, if it does come to ‘India versus the Rest of the World’ in hospitality, perhaps it’s time to put the famed atithi devo bhavah to test.