Hospitality On A Roll

Capital View

Rabindra Seth

Burgeoning balance sheets, forays by big ticket foreign chains, promises of massive new investments and entry of new entrepreneurs have marked the hotel scene the last couple of weeks. Asian Hotels Ltd whose deluxe properties dot metros like Mumbai, Delhi and Kolkata has turned in a net profit of Rs 25.49 crore, a five-fold increase over 2003-04. Turn over rose from Rs 204.58 crore to Rs 258.92 crore. A dividend of 60 per cent has been recommended for the shareholders.

Asian Hotels is the first to declare its annual results. Analysts expect similar or even better performance from other big chains like Taj, ITC, Oberois, Leela, Bharat and so on signifying that 2004 has been a year of enduring recovery.

Sizeable growth in international arrivals and domestic movements and encouraging GDP projections are spurring overseas chains already in the country to spread their wings and bring in more brands. Others, waiting to enter India are seeing a huge potential in both inbound and outbound traffic. Some, who were content with franchises are now eyeing management tie-ups and event investment.

Among the potential entrants are the Swiss major, Movenpick Hotels & Resorts and the Hong Kong-based Mandarin Oriental group. Movenpick president, Jean Gabriel Peres, indicating a fast-track entry (‘We do deals fast and efficiently’) has told a newspaper that he is looking for strong partners in India for four-star hotels in major cities across India. “A quick expansion is possible,” he said, “since most of the firms investing in properties managed by Movenpick are keen to invest in India.”

The Mandarin Oriental chief operating officer, Nicholas Clayton goes even further. He is quoted as saying that ’We are seriously considering all possibilities from management contracts to 100 per cent equity stake’. Or, take the case of Starwood, another America-based group which already has a more than two decade old significant presence in India with its Sheraton brand in an exclusive arrangement with ITC-Welcomgroup.

Starwood executive chairman, Barry Sternlicht, in an interview to Express Hotelier & Caterer (issue date April 25, 2005) has said that his company wishes to increase its presence through the management route with a maximum of 26 per cent equity participation. Also, it will work in tandem with real estate enterprises rather than hotels. The other brands it has in mind for India include St Regis, Four Points, Luxury Collection and Westin. The first Westin according to Sternlicht, may be commissioned next year in Gurgaon near Delhi.

Shangri-La’s debut in India has been eagerly awaited ever since the Eros group signed up with the prestigious chain for converting the erstwhile ITDC-run Kanishka in the capital which it acquired in disinvestment. But the hospitality majors CEO, Giovanni Angelini took media persons by surprise when he announced on the sidelines of the WTTC Global Summit that not just one Shangri-La in Delhi but four more- three in Bangalore and one in Chennai would be commissioned in the next two years.

Shangri-La’s Bangalore hotel will open its doors in 2007 but the one in Chennai which will reflect the Traders brand has been launched already and the Shangri-La property in Delhi will be thrown open later this year. Shangri-La’s tie-up for the southern properties is with a real estate company, the Adarsh Group, headed by B M Jayashankar.

Among the new entrants to hoteliering the InterGlobe-Accor joint venture to build 20 Ibis hotels across the country was announced a few weeks ago. Close on its heels has come the Adarsh Group Shangri-La arrangement. And, waiting in the wings is the Bird Group (whose Amadeus now dominates the country’s CRS scene) which has hinted at a huge investment in mid-market hotels. Eight projects are said to be on the anvil and the first may be completed in Delhi in 2007.

With the Commonwealth Games due in 2010, Delhi is poised for another major infusion of investment in new hotels. Details of additional room requirements in the capital and allocation of land (as was done in the case of 1982 Asiad) are yet to be worked out. The city is already facing critical shortages and could easily do with five or six thousand more rooms without taking into account the Games’ demand.

Overall, according to the government’s own assessment, some 150,000 rooms will be needed in the next five to seven years. Small wonder both the chains, entrepreneurs and new entrants have announced massive outlays totalling over Rs 10,000 crore over the next five or so. Of this, the biggest amount will come from ITC (a figure of Rs 3,000 crore is being mentioned). The Taj, Oberoi and Bharat are talking of Rs 1,000 crore each. Asian Hotels and its arm Choice Hotels plan to put in Rs 850 crore and you can add the same amount from InterGlobe and Bird groups.

(The author is a freelance columnist and can be contacted at rabseth@yahoo.com)