Asian Hotels (West) hopes to join the big league with the construction of the JW Marriott near Delhi airport’s new terminal
The Delhi airport has a brand new terminal, billed as one of the largest anywhere in the world. Close to the airport no less than 13 properties, hotels and community centres, are under construction. One of them is the JW Marriott by Asian Hotels (West). The 525-room hotel is slated to start operations in 2012 and will cost Rs 700 crore.
Asian Hotels (West) Chairman & Managing Director Sushil Gupta can barely conceal his glee. The reason is not far to seek. His company was carved out of Asian Hotels which, amongst others, operated the Delhi Hyatt Regency. Once the JW Marriott is up and running, Gupta will have close to 1,100 rooms, not very different from what Asian Hotels have. His Mumbai Hyatt Regency has over 400 rooms and his Bangalore Clarion has 130. Next on the cards is the Pune Clarion with 150 rooms. That will take Gupta’s room count still higher.
What the count hides is Gupta’s strategy to target different sections of the market with different brands. While this wisdom had come to global hotel chains many years ago, the homespun hoteliers have only recently realised that one fit doesn’t suit all. The best example is Indian Hotels Company. Its portfolio includes luxury Taj hotels, upper upscale Vivanta by Taj hotels, midscale Gateway hotels and budget Ginger hotels. Gupta too has JW Marriott in the luxury space, Hyatt Regency in the upper upscale segment and Clarion in the midscale segment.
Gupta has his mathematics worked out. Each room of the JW Marriott will cost, says he, Rs 1 crore if the cost of the land is not taken into account. Breakeven will happen at 45 to 48 per cent occupancy. “The gross profit of our Mumbai property is Rs 50 crore. Once the Delhi property is ready, in the next two to three years, it will shoot up to Rs 170 crore,” says he. He hopes to price the JW Marriott at more than Rs 10,000 per room per night.
Location matters
It is crucial for any hotel company, says Gupta, to have properties in Mumbai and Delhi which together account for 70 per cent of the business. “So our focus was to get one built in Delhi, with the idea of finishing it at the earliest. What is important is where you are located. We are at the right location (situated in between Delhi and Gurgaon), and the hotel is right next to the new airport terminal. There are other hotel chains that are quite active too; but I think we are much ahead of others,” says he.
According to industry estimates, the new-look Delhi airport will see a lot more traffic, which throws a huge business opportunity for hotels. Ernst & Young Associate Director (real estate practice) Chintan Patel says: “It’s not a new trend. For instance, at international airports like New York, London and Milan, one can find a lot of luxury hotels around. Two, apart from only occupancy, another attraction of these hotels is allotting meeting space to delegates and the business community that flies in solely for conferences and can fly out without having to enter the city. They can catch the next flight. Three, also on the cards is a fair amount of pre-selling marketing deals between airline companies and hotel property-owners. For instance, the crew of any airline that has to operate in a back-to-back schedule will prefer staying nearer to the airport.”
The demand-supply gap in the hotel industry means the profit margins of the hotels coming up near the airport could be high. KPMG Director (aerospace & defence) Amber Dubey says: “There are significant advantages that the airport enjoys. One, while the national air traffic is growing at 18 to 20 per cent per annum, the traffic growth here is expected to be even higher. Two, with the capacity constraints at the Mumbai Airport, and with the commissioning of Navi Mumbai Airport at least three to four years away, airlines are likely to increasingly use Delhi as their hub. Transit passengers may prefer to stay at hotels in the airport’s neighbourhood.” Analysts also say there is a shortage of at least 8,000 to 10,000 hotel rooms in Delhi. The hotel rooms likely to come up in the hospitality district of the airport in the next two to three years will fulfill only a fraction of the shortage.
Stand out
Some rivals admit that the JW Marriott will stand out amidst the hotels coming up at the airport because it is the only luxury property. That in itself will differentiate it from the rest. Still, Gupta says that enough differentiation will be created for the hotel. To begin with, the rooms of this hotel will be bigger than the convention in order to press home the luxury experience. “Though there won’t be much of a difference from our Mumbai property, there will be more of gadgetry that will replace the older interior designs. We do business hotels — it has to be comfortable except the sizes of the rooms will be different now. A room in the Mumbai Hyatt Regency is 38 square metres; a room in the Delhi JW Marriott will be 45 square metres. Rooms are becoming bigger, and the focus is now on the detailing, particularly the lighting part,” says he.
Gupta reasons that the change in the size of the rooms was taken into consideration by keeping the desires of the new-age business traveller who wants a spacious bathroom. “The basic requirement is that, as a hotel property owner, you want to give a bigger bathroom. Consider this. Once, the customer is back after the day’s work, where will he spend most of his time? You will watch television or you will spend your time in the washroom,” says he. “For instance, the kind of shower in a hotel used to make that difference at one time; but now, it’s all standardised. And they are getting more functional, from the security point of view too.” But, adds Gupta, the spa and health club facilities will be high-end. The Delhi JW Marriott will have the advantage of opening early,” says he. He wants to build the hotel in 27 months, which is three to six months lower than the norm in the luxury space.
The biggest pull could be the JW Marriott brand, feels Gupta. “With the JW Marriott, I find another advantage which is its loyalty programmes in customer relationship management. It’s an upscale property, an upscale brand, and thus has an edge over others,” says he. Adds Ernst & Young’s Patel: “The whole development depends on how the promoter is going to do it. Technically, big hotel chains don’t invest in the property. Customer-wise, all international luxury hotel brands have their loyal customers who are entirely driven by their various loyalty programmes. These loyal guests always opt for their favourite hotel, even though they have to pay extra for it.”
Gupta says the new-age business traveller is different from a tourist. “The business traveller is very demanding. He wants value for his money; at the same time, he does spare a while to check under which brand does the hotel come? On the other hand, a tourist will do internet search to compare fares as well as to check the facilities. But the business traveller will see what stands convenient for him, how comfortable the hotel is, and how peaceful the hotel is. He is focused on what he wants. I don’t think he has the time to do a web search.” To make sure the service is prompt and full of energy, Gupta has gone for younger staff. “The average age in my organisation is not more than 35. I’ve brought youngsters on board. It becomes difficult to mould an employee when he crosses 35. So, it’s all the young mass in the team making the difference. Also, I’ve picked up the architects and designers from Singapore to save costs,” says he.
Gupta has moved fast ever since his company was carved out of Asian Hotels in February. IL&FS has bought 32.65 per cent in his company for Rs 80 crore. He is focused on the Delhi JW Marriott and the Pune Clarion, but wants to put up five more Clarions over the next five years in Tier I and II cities. These could give him another 600 rooms.
