india's+hotel+industry

8/8/2019 India's+Hotel+Industry

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INDIA¶S HOTEL INDUSTRY INDIA¶S HOTEL INDUSTRY

Presented by MEDIA INDIAPresented by MEDIA INDIAIndia's hotel industry is experiencing an unprecedented boom, driven India's hotel industry is experiencing an unprecedented boom, driven

by increasing numbers of business and tourist arrivals.by increasing numbers of business and tourist arrivals.But how long can the good times last? But how long can the good times last?



Business and investments: Current situation Business and investments: Current situation of I ndias hotel sof I ndias hotel s

Some figures : Hotel Imperial New Delhi: 99.57 % occupancy. Hotel Trident Hilt on,Gurgaon

(suburban Delhi): 98.3 % occupancy. Indian hotels are witnessing mindblowingoccupancy rates.

Increase in average room rent f or the entire hotel industry over the last year: 35 %.

Unmet demand f or hotel rooms: 150 000 rooms. Additional demand this year: 15 000rooms.

The boom has attracted several global players, ranging from Starwood and Mariott t o Four Seasons and ShangriLa. The largest hotel company in the world,French chain Accor, has entered India and is now devising aggressive plans f or expansion in themarket . Several others are racing t o increase their presence in India, including the

Marriott group.

Currently Marriott has over 1,000 rooms spread across f our properties in Mumbai andGoa.



A booming market A booming marketT he es tabl ished hotel chains

A number of global players arealready well established in India.These include Hilt on, Shangri-La,Radisson, Mariott, Meridien,Sherat on, Hyatt, Holiday Inn,InterContinental and Crowne Plaza.

Investments

Now besides hotel companies, eventhe investment firms and privateequity companies are beginning t o get excited about India. BerggruenHo

ldings India, a subsidiary

of New Y ork-based investment company

Berggruen Holdings,has announcedthat it is seed-f unding a non-luxuryhotel chain in India.

Private equity firm Warburg Pincushas picked up around 27 % stake inDelhi-based mid-price hotel

chain,Lemon Tree, f or $ 60.2 million.



The engine of growthThe engine of growth

Tourist boomTourist boom

The tourism trafficThe tourism traffic has been growing between 20-28 % every year for the last four years and this rate of growth is expected tocontinue for the next few years.

The constant boom and the resultant

demand-supply mismatch has led to sharpincreases in the average room rates and thuspushing up revenues of industry players(hotels, tour operators, airlines, shippinglines, etc)

The tourism sector is expected to perform very well in futureand the industry offers aninteresting investment opportunity for long-term investors.

Most of the five-star hotels are seeing morethan 80 % occupancy and some of the lesser-

known five-star hotels are overbooked.



Incredible India

The Ministryof T

ourism is p

ushing thegreat Indian st ory effectively with its

subtle and charming Incredible Indiacampaign

We have spent $5 million on thiscampaign since December 2002 and plant o keep it going, Amitabh Kant, the joint secretary at Indias Ministry of Tourism.

According t o estimates, another 150,000rooms will have t o be added across thecountry in the next five t o seven years t o be able t o meet the increased demand.

At 6,762 rupees, Bangalore had the

highest ARR across all categories in the30 cities. New Delhi was the secondhighest, registering an ARR of 5,498rupees. All India ARR increased 26.9 %over the previous year. Star categoryoccupancies ranged from 46.3 % t o 72.1 %.



The future growthThe future growth Hospitality experts believe that the Indian hotel industry will witness higher than usual

growth in the coming peak season. The good times f or the Indian hospitality industryare here t o stay, with t op-end hotels experiencing high room occupancy rates even inthe lean season.

The lean season has been exceptionally good f or us. O ur room occupancy rate hasbeen around 89 per cent and we are looking at over 95 per cent occupancy f or theperiod September t o December, says Kapil Chopra, general manager, Trident Hilt on,Gurgaon.

There was an increase of 15 % in the number of international t ourist arrivals in Indiaand 14 % in the f oreign exchange earnings in the first quarter of 2006 as compared t o the same period last year.

The non-luxury segment in particular has been perking up with more and more invest orsspotting the demand supply imbalance, surge in domestic travel and growth in spendingamong middle-class Indians.



The CompetitionThe Competition

The world's leading hotel brands - joining the battle

The country has been flooded by some of theworld's leading hotel brands. New brandssuch as Amanda, Satinwoods, Banana Tree,Hampt on Inns, Scandium By Hilt andMandarin Oriental are planning t o enter theIndian hospitality industry in joint vent ureswith domestic hotel majors.

Unitech, which is setting up two hotels inDelhi,has already f ormed a joint vent ure withMarriott International t o run its three newhotels in India, which are expected t o start operations by 2008. The three new hotelswill be located in K olkata, Gurgaon andNoida. We are investing around 700 crore

rupees t o set up these hotels, says Unitechmanaging direct or Sanjay Chandra.

All other majors including Marriott, Hyatt,Hilt on, Accor, Four Seasons et c are brisklyreinf orcing their presence in India.



Indian hotel companies look overseasIndian hotel companies look overseas

The movement is not one-way. Cash-rich Indian hotelcompanies have been acquiring properties overseas.The Tata group's Indian Hotels Company is in theprocess of acquiring Bost on-based luxury hotel theRitz-Carlt on f or around $170 million dollars (around765 crore rupees). Due diligence is likely t o becompleted soon. The hotel will be acquired throughthe companys New Y ork-based subsidiary, says RK Krishna K umar, vice chairman of Indian Hotels.

Indian Hotels is looking t o strengthen its presence inthe United States with this acquisition. It has also set up pr

operties in the Middle East, the United Kingd

omand Africa. Its fierce rival, Oberoi group, has also been

active overseas with properties in Saudi Arabia,Mauritius, Egypt, Australia and Indonesia, andelsewhere.

With growing competition, hotels are undertremendous pressure t o generate new lines of revenuewith creative approaches. With newer players poised

t o enter the market one of the key fact ors that willdrive f ut ure demand is alternate revenue streams.

Hotels are trying every possible way t o generate cashfrom alternative sources t o achieve economies of scale. Reducing transaction costs, increasingproductivity and promoting traditional Indian values



Looking for new nicheLooking for new niche

Many business hotels in India areintegrating f ull-fledged spas on theirpremises, originally a main stay of resort properties.

Another interesting trend in India isthat of mixed-use developments. Whilethe concept has proved t o besuccessf ul abroad, it is still at theembryonic stage in India. In this typeof development, the real estate wouldtypically include an apartment block or

aco

mmercial bl

ock (retail

oroffice)along with a hotel.

However, in order t o attract morevisit ors, India still needs t o dramatically increase the number of rooms available.



The challenges to faceThe challenges to face

The lack of adequate infrastructuredevelopment. The airports at the primary

gatewayc

itieso

f Delhi and Mu

mbai have beenprivatised, and work has commenced onmodernisation. New privately owned internationalairports are expected t o be commissioned at Hyderabad (2008) and Bangalore (2009), which willgive a large boost t o the economic growth of theseareas.

There is still need to improve air

connectivity; rail and road connections as well asgeneral infrastruct ure like power and water.

The result of the industry's success. As competition increases, there is a definitepressure on ARR and operating margins. Theindustry market will definitely shift from beingdemand-driven t o supply-driven and that the hotelcompanies will need t o revisit their strategies and,

of course, their prices.

Some players are already preparing for thedifficult times when the ARRs are ex pected to fall by 30-40 percent in the nex t 3-4 yearsand then the distinguishing fact or f or the hotels willbe the offer in its entirety rather than just the priceor the facilities that the hotels offer.

india's+hotel+industry

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