Making room for more

Three of the world's most famous hotel chains "" the Four Seasons, Shangri-La and Aman Resorts "" are all making an entry into the Indian market

Is there room at the top in the Indian hotel industry? Three of the world's most famous hotel chains certainly seem to think so.

After studying the market for years and hesitating nervously, the Four Seasons, Shangri-La and Aman Resorts are all making their entry into the Indian market.

They aren't the only ones who are turning their attention to India. The Hilton Group has decided that it's time to stage a comeback and has tied up with the Oberoi Group.

Two other groups "" the Carlson Group and the Marriott chain "" are furiously hunting for new hotels in India's top cities.

The tourism industry has just gone through some of its worst years ever. So what has triggered the sudden burst of optimism? Take a look at what is happening in Mumbai.

In the last two years there has been a hotel construction spree in Mumbai and more than 2,000 new rooms were added. Despite that, reservations are tough to get and the city's hotels are running at 80 per cent occupancy.

Says Asian Hotels managing director Shiv Jatia: "The last two years were the worst phase for the industry in the last 50 years. But it's over."

That view is clearly shared by top foreign chains. Take Aman Resorts, the chain famed for its luxury properties.

In January this year, the chain spent Rs 76.25 crore to buy the Lodhi Hotel in Delhi which was put on the block by the India Tourism Development Corporation (ITDC).

Later in the year, it tied up with Maharaja Gajsingh of Jodhpur for his Umaid Bhavan Palace which was earlier run by the ITC Group.

Now, Aman Resorts is starting a small resort in Ranthambhore where guests will stay in luxury tents. The tent resort will compete with Vanyavilas, the luxury Oberoi resort which is also nearby.

Aman Resorts is clearly looking at India in a new light. The same is true for Shangri-La which is planning to have five or six hotels in 'gateway' Indian cities like Mumbai and Bangalore.

The company has already tied-up with the Sud family of Delhi to run what was formerly the Kanishka Hotel. The Suds bought the Kanishka Hotel for Rs 96 crore from the ITDC.

Shangri-la's chief executive officer and managing director Giovanni Angelini says the group would like to move quickly and identify more hotels within the next two years.

Also, Angelini has promised that once the company establishes its presence in India, it would look at the mid-market segment and might bring its 'Traders' brand of hotels to India.

Everyone who's anyone in the hotel industry always keeps a close eye on what the the world's most upmarket hotel brand Four Seasons is upto.

Four Seasons has been looking at India for over a decade but it has always hesitated about making a big move.

Now, however, it is tying up with the Jatia Group which owns Asian Hotels. It is acquiring a strategic stake in Magus Estates & Hotels Pvt Ltd, a special purpose vehicle floated by the Jatias for their upcoming property in Mumbai. Four Seasons has entered into a 20-year management contract for the property.

Unlike Four Seasons, the Hilton Group has been in India before. In fact, it has made two forays into the Indian market and been forced to withdraw. But it's trying to make sure that it's third time lucky and tying up with Blue Coast Hotels and Resorts owned by Arun Suri.

Hilton will take a one-third stake in a joint venture company called Hospitality Holdings India Ltd along with Suri. The Hilton Group has big plans for the joint venture and could invest upto Rs 500 crore to open new hotels in Goa, Bangalore and Mumbai.

Of course, that isn't the only move that Hilton has made into the Indian market. A few months ago it struck a highly-publicised management contract deal to run several Oberoi hotels in India.

The Hilton Group will run all the Oberoi's Trident Group hotels as well as the Oberoi in Mumbai. The tie-up with the Oberois has helped to give the Hilton Group an instant and powerful presence in the Indian market.

Don't imagine that the existing foreign hotel chains in India are standing still while newcomers make big plans for the future.

The Marriott will take over the 168-room Viceroy Hotel in Hyderabad, which will be turned into the 308-room Hyderabad Marriott, to be operational next year.

And the Intercontinental now has six properies in India, three of which became operational in the past year.

Even Carlson, which owns the Radisson, Regent and Country Inns brands, is scouting for new properties in Bangalore and Mumbai.

Industry consultants insist that this is just the beginning. They say that others are looking at ways to enter the market. Likely entrants in the not-too-distant future include chains like the Mandarin Oriental, Ritz Carlton and Steigenberger.

And don't think the action will be confined to the five-star luxury segment. For the first time foreign chains are looking seriously at the mid-market and budget segments.

Analysts predict the Marriott is likely to announce the entry of its mid-market Courtyard brand soon and Accor may bring its mid-market Ibis or Mercure brands to India within a year.

The reasons why the hotels are taking a second look at India is obvious. Uttam Dave, managing director of hotel consultancy firm Panell Kerr Forster, puts it down mainly to the fact that everyone is now bullish about the Indian economy.

But Dave also throws in an additional reason: a lot of the companies now reckon that China is a relatively mature market so they are now looking at India for fast growth.

This view is echoed by HVS International managing director Manav Thadani,who points to the strong fundamentals of the Indian economy and the fact that Indo-Pakistan tension has gone down considerably.

Thadani believes that there are currently enough hotel rooms in India for around 2.5 million tourists. But if this number rises steeply the hotels will start feeling the pressure.

He says that demand has already overtaken supply in Bangalore. Also, other markets like north Mumbai, Hyderabad and Chennai are very strong.

Certainly, all the signs are that things are looking upward. The revenue per available room (Revpar), which is the true index of a hotel's business, has risen sharply in the last one year at key destinations including Mumbai and Delhi. The Revpar has gone up even though lots of new rooms have been added.

Occupancies in hotels across the six main cities are also expected to rise sharply during the current financial year with Bangalore leading the way with 86 per cent occupancy compared to just 64 per cent two years back.

That's followed by Mumbai with 72 per cent occupancy despite 1,200 rooms coming into the market in the last 20 months and Delhi with 67 per cent occupancy despite over 200 rooms being added in the last one year. The only exception was Kolkata where occupancies dropped by 4 per cent.

However, the number of available rooms in Kolkata zoomed by 50 per cent during this period.

Interestingly, this upturn has not been fuelled by a fall in the average room rate.

Analysts say that since a hotel project typically takes around three to four years to become operational, there's plenty of time for the current hoteliers to make hay before fresh supply comes into the market.

What will happen next? The industry is gung-ho about the future. Occupanies are almost touching the levels they reached in 1997-98 which were the best ever for the industry. And they are certain there's plenty of room for growth.