Interview

'Mid-market and budget hotels have maximum potential'

Nikhil Sawant, director (Hospitality & Healthcare), JohnsonDiversey India, speaks to Express Hospitality about the Indian hospitality scene.

How is Indian hospitality and tourism sector globally ranked according to you?

I would personally rank our hospitality and tourism sector low in comparison to many markets globally. Our five-star and plus hotel category is world class and I would rate our them amongst the best in the world. But below that the picture changes dramatically.

India needs world class mid-sized and budget hotels and this will only happen when this segment get it share of corporate attention. Only when organised hotel chains enter this segment and set new benchmarks in terms of guest service and cleaning/hygiene, the unorganised sector will be forced to follow suit taking the standard of the entire industry towards globally accepted norms. I understand that many hotel chains local as well as international are now entering this segment and this will help India move up its position in the global hospitality and tourism scenario.

What are the key drivers of growth in the Indian hospitality industry?

The key driver will have to be India's domestic demand. Domestic business travel, tourism and growing appetite for 'good things in life' will drive the Indian hospitality industry as a whole. Apart from this, international business arising due to FDI will continue to drive top-end segments of the industry.

How will the international brands and funds flowing into India impact the industry?

The impact will be positive. Firstly, these brands bring with them international experiences and set new standards when it comes to guest services or cleaning/hygiene or food safety. Their success drives others to follow their standards and therefore the entire standard of the industry achieves a new level.

Secondly, these brands are infusing additional room capacity in the market which will ease the unrealistic room rates prevailing today. High room rates are favorable for the industry in the short run but will have its effects on the long-term business and tourism prospects if they are not corrected by economics in the present.

What will be the long term impact of an 'overheating' Indian realty market on hospitality?

High realty markets translate to higher project costs which can lead to two scenarios; one in a demand exceeds supply situation, the hotels would charge high prices driving away the budget tourist away from visiting India. In the second scenario where supply exceeds demand, the hotels would have to sell their rooms at a lower price driving down profitability and decrease their spent on maintenance and cleaning/hygiene standards, which will drive out customers.

What is your strategy for expansion? What kind of partnerships will emerge as a result of the expansion?

JohnsonDiversey partners with the hospitality industry but is not directly a part of it and therefore this question is not relevant. But my interaction within the industry leads me to believe that a 100-odd room property format seems to be emerging in Mumbai, NCR and Bangalore. First, these hotels do not require a lot of land, second the investment in these type of hotels is far less compared to a larger hotels and have quicker paybacks and third these hotels can be up and running in 18-20 months against 36-48 months for a larger hotel.

In India currently there is scope for all kinds of partnership varying from simple branding to self-owned and managed hotels. Most five-star hotels will be owned by investors and run by a hotel company and most mid-sized/ budget hotels will see a combination of franchisee operation and self own-manage operations

What is your assessment of the potential of the following regions for development?

• North India: North India possesses the highest potential for luxury hotels, most FDI, especially the ones with expatriate population will prefer to be based in north given the infrastructure and the climate. Also the availability of ample land in the region increase the potential for development of the hospitality industry

• South India: South India also holds a strong potential for the hospitality industry in the luxury as well as in the mid size/ budget hotel segment. IT, bio-tech and other service/talent-based industries, would be the main drivers of this potential. South and North India will witness the highest development in the hospitality industry

• East India: East India possesses moderate potential. Development will take place a steady pace and in line with socio-political scenario. Major development will take place in and around Kolkata.

• West India: West India has been the back-bone of the hospitality industry for a long time. Cities like Mumbai, Pune, Goa, Nagpur, Nasik, Ahmedabad and Indore will continue to grow at a good pace given its industrial and financial center background. Though West India would be the most balanced in terms of hospitality industry growth but North India will soon become or may already have become the jewel in the crown of the hospitality industry.

What will the traveller of tomorrow demand from the industry?

The traveller of tomorrow regardless of the segment that if patronises, will demand value for the money spent from the industry. The rooms, guest services, F&B will have to identify themselves with the money the traveler is spending on them. Cleanliness, hygiene and safety are going to be key drivers of success for hospitality business like HACCP & Cleaning and Hygiene solution etc.

What according to you has the maximum growth potential and why?

The mid-market and the budget hotels in India have the maximum potential given the domestic demand from business and tourism. Hotels and timeshare have a strong potential provided that they create a quality product.

Companies opting for the management and franchise route opposed to ownership will have more growth. If one wants to grow quickly then they have to be asset light. Most hotel companies are in the hotel and not in the real estate business and therefore management and franchise route has maximum growth potential.

What according to you are the critical issues that the industry is facing at the moment?

Shortage of rooms, high real estate prices, lack of quality in the mid-size and budget hotel category, lack of food safety standards, limited support from the government are some of the serious issues facing the hospitality industry. These can be systematically resolved with focused attention from the industry and the government. As mentioned before, the entry of any international chains will help the cause and will play a strong role in taking the standard of the Indian hospitality industry to the next level.

What role do you think that the government can play in further developing Indian hospitality?

The government can play a positive influence on the hospitality industry in many ways and some of the important ones are, one, demarking land at reasonable terms for development of hospitality infrastructure. Two, by systematically developing tourism in India and three by introducing clean/hygiene, human and food safety standards which are in line with global norms and ensuring that they are implemented across the industry.

What strategies, partnerships and trends do you foresee emerging in the industry in the coming years?

Not being a direct part of this industry, I would not like to comment on strategies and partnership scenario in the coming years but one trend that I see is that the hospitality industry will sooner or later will take a strong stand on 'green'.

Environmental issues are becoming a big concern and most hospitality industry majors are taking keen interest on the same. In the future the hospitality industry will be more 'green' using environmentally friendly products and systems not only because its good for the environment but in the long run also good for the business.