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Media Information
Global hotel biggies make a beeline for India

Published & Updated as on - 2010-03-23

Indian hospitality industry has become an attractive investment destination for global hospitality companies. Many global hotel chains plan to enter India and some that are already present in the country are keen on expansion. The companies are betting big on shortage of hotel rooms in the country.

US-based MGM Mirage Hospitality, Amari from Thailand, Fairmont Raffles Hotels, Golden Tulip Hotels, Movenpick Hotels and Resorts, Corinthia Hotels group from Europe are among the chains that are set to come to India.

According to industry estimates, there are around 40 international hotels, which are expected to be operational in the country in the next 3 years. These global chains are now entering the full range—upper scale, mid-scale, economy and budget.“India is more profitable for global hospitality firms then the international market. There is huge demand-supply gap which offers huge opportunities for international firms,” said Kaushik Vardharajan of HVS Hospitality Services.

According to HVS, an EBIDTA margin of 40-50 % in India as compared to 20% back at home is attracting global hospitality firm to set up presence in the indian subcontinent.

Thailand-based Amari Hotels has entered into a joint venture with Mandeep S Lamba, to launch Amari India. It will foray into India with the signing of its first property in Delhi by April 2010, which will be operational in 2011. Amari is scouting for expansion opportunities in the Indian metro and tier-II cities and plans to operate seven hotels and resorts within the next 5-7 years. For the same, locations and developers have been identified in Delhi, Mumbai and Goa.

Focussed on Indian market, it is working to develop a new room product for tier-II cities in India. “India’s business buoyancy and burgeoning hospitality industry provides us with a compelling business rationale to strategically move ahead in this market,” said Mr Peter Henley, Amari’s Chief Executive Officer commented.

Similarly, MGM Mirage Hospitality is looking at signing management contracts with real estate developers as joint venture initiative with local companies to set up hotel properties in the country. “We believe very strongly that India represents an enormous opportunity for our business model,” said Rich Kapoor VP Development MGM Mirage Hospitality.

MGM is also looking to roll out multiple hotels in NCR,Mumbai, Hyderabad, Bangalore, Chennai, Kolkata, Kerala, Goa and Rajasthan. The firm plans to bring in Bellagio, MGM Grand and Skylofts brands out of its global portfolio.

According to data from HVS, international and domestic hotel chains had announced in August that they would build at least 94,00 rooms in India, while the actual construction is underway for 3,840 rooms.

“During the boom years, leading real estate firms had announced hotel projects but dropped them as realty prices crashed and the cost of borrowings increased steeply last year,” added Vardharajan.

Given that the gestation period varies from three - five years, Fairmont Raffles Hotels International is in advanced discussions for managed properties in Bangalore, Delhi, Gurgaon, Mumbai, Hyderabad, Chennai and Goa. It is planning to add at least a dozen hotels across in India between all three brands — Raffles, Fairmont and Swissôtel . “We are looking at all the tier -I and II cities for expansion,” said Feisal Jaffer, executive director—strategy and development , Fairmont Raffles Hotels International.

Fairmont Raffles has already signed up three properties in Kolkata, Jaipur and Hyderabad with the Swissôtel Kolkata opening next month. “The growth prospects in India are quite strong and the market is amongst the top two priorities for the company,” he explained.

However, falling rates of up to 18% over last year has become a cause of concern for these hospitality chains. In 2008-09, the average room rate was Rs 7,800 which has now come down to Rs 6,396 per night. “The room rates in new hotels are dropping. It is not a good sign but we expect this to stabilise going ahead,” said Pankaj Kodesia, senior VP (business development) South Asia, Golden Tulip Hotels.

Golden Tulip plans to add 10 properties totalling 800 keys across tier-II towns by the end of next financial year. “We are looking for opportunities in the resort segment and plan to bring in some more brands in India,” added Kodesia.

Existing hotels such as Accor and Four Seasons are also ramping up presence in the Indian subcontinent.

Luxury hotel brand, Four Seasons, is in various stages of discussions with developers for rolling properties in Bangalore, Hyderabad , Delhi, Goa and Pune. “There is enough room for several players to enter the market. India will became a major market for our company,” said Sanjiv Shukla Director Marketing Four Seasons. The firm opened first property in Mumbai in 2009.

Accor, which has five hotels, is expanding its network to 50 with 10,000 rooms in 15 cities by 2012.

Source: The Economic Times 22/3/10

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