Starwood Hotels & Resorts Worldwide is on an expansion spree in India. With familiar names like Sheraton and Le Meridien already here, the company is set to introduce more brands, with the proposed launch of its luxury hotel, W, in Mumbai. Frits Van Paasschen, President and CEO of Starwood Hotels and Resorts Worldwide, spoke to Ruchika Chitravanshi on the projects. Edited excerpts:
What are your expansion plans in India and what kind of investments do you have in mind?
We are opening our luxury hotel, W, under a management contract with Jaguar Buildcon in South Mumbai. It is expected to open by 2015. We have 31 hotels operating in India and we want to get to 50 in the next couple of years. By 2015, we want to have 100 hotels, either under operation or construction. We continue to see great growth in India.
Which category do you want to build?
Our brands in the Indian hotel parlance would go from high-end luxury to five-star to four. The bulk of our business is five-star and we see it as a great opportunity to grow here. At the same time, because the market here is developing so extensively, we see opportunities across all of our nine brands. Our sweet spot as a company is more five-star than mid-market. Both in India and around the world, we are growing our four-star brand.
What is the status of your plan to introduce your super luxury brand, St Regis?
We would love to introduce our St Regis brand in India. Finding a fit is more difficult than I would have thought. We have no definitive deal to open the hotel. St Regis around the world is the highest in terms of luxury and we do see an opportunity here. We want to have the right owner and opportunity in terms of physical and architectural structure, which is critical. The two cities we would consider would be Delhi and Mumbai, due to the market’s absolute size.
Recently, we opened St Regis in Bali, Singapore, a number of markets in China, and Bangkok. If it is a resort, then it will be Goa. St Regis in India is pitched at or higher than the level of the Imperial in Delhi. Imperial is number one and leads luxury hotels in Delhi.
After the slowdown, what is your strategy and how does India fit in it?
The downturn was less traumatic for India than in many places. We have been very happy to be surprised by the upside. The industry has bounced back in the last two years better than we might have hoped for. We are seeing a return to luxury and in business travel as people realise that in order to grow their businesses, they need to get out and explore opportunities. We will see extraordinary demand here as hotels take time to build, especially in Tier-II cities like Jaipur, Udaipur, Mysore, Amritsar, Chandigarh.
What is your unique India strategy?
India stands out because of the size of the opportunity. In actual fact, our business model, which is to work with local developers to expand our global brands, is quite similar here to other markets. Our business, in a nutshell, is to create returns for our owners. The investments we are making in call centres, information technology (IT) or developing talents is the best way for us to create value for owners. We are in the process of developing a call centre in India, for India. We have outsourced our IT activities to Bangalore, so we have another reason to be in India from that viewpoint as well.
You have a concept of 'trophy assets' for revenue maximisation. Which are these and how much revenue do you plan to generate from these?
Those are the hotels that we still own. We are making a transition from a real estate company, which is how we started, to be a global operator of hospitality brands. We sold some $7-billion worth of real estate in the past six years. We still have 60 wonderful hotels around the world that we haven't yet sold. We have told our investment community that our strategy is to make sure we get the best value for the hotels we sell. During the downturn, there wasn't an opportunity to sell. To be world class at something, an immense amount of focus on the core activity is needed. Revenue from the 60 hotels can be around $6 billion.
What is the concept of vacation ownership? Do you plan to launch it here?
We scaled it down to a level that makes economic sense for the business. We don't plan on having it in India. It is almost entirely focused on North America. It works like this: You buy a week of vacation on a dealer basis, in the sense that you would own a property and use it or exchange it for some other property of ours.
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Which is your preferred model in India, franchisee or management?
At the higher end, we strongly recommend managing those properties. At the lower, we would franchise with the right partner.
The three major challenges you face in India?
Entitlement, permits and the long time it takes to build a hotel. So, we might anticipate to build a hotel in five years time here and the same thing in another part of the world will take 2-2.5 years. There is complexity in this market, but it remains an opportunity.