Cover Story

Paradise regained

There were certain geographical frontiers which the Indian hotel industry never attempted to breach. But a shift in the political climate, impacted by a change in business dynamics, and influenced by the wanderlust of intrepid travellers, has made perfect sense for hoteliers to open their shutters right there. By Dinkar Farwaha

In 1998, the late hotelier and visionary, Lalit Suri, did the unheard of in hospitality. Under his helm, Bharat Hotels invested in a luxurious royal palace in Srinagar, at a time when tourism had slumped to its nadir in the troubled state. Overlooking the Dal Lake, this hotel was converted to an InterContinental Hotel in April, 2001 to occupy the position of Jammu & Kashmir's (J&K) first international hotel. At that time, what was regarded as foolhardy was actually, foresight. Today, the property is reaping the benefits of this decision. And still stands tall.

Worldwide, amongst all industries, tourism is the most sensitive to political and economic events. Be it the oil crisis of the 1970s, the Gulf War, for that matter, 9/11 terror attack or SARS, tourism, and as a consequence, hospitality, bore the brunt. And regions afflicted with continual political turmoil, especially the northeast and Jammu & Kashmir, were ignored by the hospitality industry in favour of other lucrative destinations. The situation was exacerbated by the miniscule trickle of visitors to those regions. With negligent business opportunities, even occupancies of local properties too hit abysmal lows, and smaller hotels downed their shutters. As a result, these regions, bestowed with immense natural beauty and tourism opportunity, lag behind the rest of India.

From 1998 till now, things are a-changing.

Potent potential

Recent development trends indicate that the future in these regions is likely to be different. A tale of unfulfilled potential, stability is creeping in these regions. As business develops and as tourists pack their bags for these locales, pan Indian players have added the regions on their radar. "While tourism in most parts of the country is growing dramatically, some regions have a lot of catching up to do," says Sunil Mathur, director, International development, Indian Ocean and Middle East, Wyndham Hotel Group International.

The rich culture, beautiful handicrafts and unique heritage are just the tip of the iceberg of the region's vast potential. The 'mystery' factor of these unexplored destinations also acts to their advantage. "There is significant potential in terms of tourism in the north-east and J&K, as these regions are abound with natural beauty and have a large variety of flora and fauna," says Prabhat Pani, CEO, Roots Corporation. He adds, "These regions remain the only parts of the country that are largely unexplored. This usually works well with the avid traveller seeking 'new' destinations."

Taking cognisance of this, hotel chains are making a beeline to invest in the latent potential of this region, be it domestic players like ITC's WelcomHeritage, Root Corporation's Ginger hotels, Kamat hotels (India), Sarovar Hotels, or international groups like Wyndham Hotels and Berggruen Hotels.

Escalating supply

Room supply will swell in the near future, not by leaps and bounds, but cautiously and in certain key destinations. According to some experts, infrastructure pitfalls and insurgency are restricted only to some pockets of these regions, and pose no major barrier in the path of tourism development. The vital question that emerges is that which segment (luxury, mid-market or economy) has the maximum potential in these regions? Or in other words, which category of hotels has the most demand in these regions?

Pani is of the opinion that it is logical that the first category of category of hotels that will see action in these regions will be the 'budget' category. He adds, "Because of price factor, mid-market and economy brands are likely to have maximum demand initially." Ginger Hotels has forayed in this region. "We are quite convinced about the region's potential and the political climate in the areas that we have gone to. We already have a Ginger Hotel operational in Agartala (Tripura) and the upcoming Ginger hotel in Guwahati (Assam) is under construction," says Pani. The group is also looking at other states in the area.

Ravi Wazir, country manager of Dish Hospitality's Noodle House feels that upscale hotels too have a potential to do well. He adds, "Even first class hotels and premium hotels can cater to niche customers in these regions." Due to the complexity in logistics such as connectivity and infrastructure in these regions, it would take some time for the luxury and upscale segment to develop in these regions. One of the members in the higher echelons in the classification hierarchy have faith in the viability of this region is Kamat Hotels (India). It recently entered Jammu, tying up with Simmsamm Hotels to manage White Orchid, the first five-star Ecotel in the state, apart from keeping an eye open for other opportunities. Says Sanjay Sethi, managing director and CEO, Berggruen Hotels, "We are looking for acquisitions in Jammu, Srinagar and Assam." Sarovar Hotels, which is present in Tezpur (Assam) through its Portico brand, is looking for a presence in Guwahati and Shillong. Similarly, other chains like Wyndham hotels too are eyeing a presence in these regions.

Another interesting development is that WelcomHeritage, which is already present in Arunachal Pradesh, Assam and Meghalaya, is foraying into other states of north-east as well, developing driveable tourist circuits around the region. "We are looking at properties in Nagaland and plan to add another property in Assam (Kaziranaga). We are also looking at developing new circuits in untapped regions in the seven sisters - Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland and Tripura," informs Rakesh Mathur, president, WelcomHeritage.

Incentivising development

Sops, land banks and public private partnerships will set the tone for development, apart from infrastructure development. In the north-east, the government has recently accelerated development, setting up greenfield airports and while bringing into operation defunct airstrips in northeast. As connectivity increases, so will the consequent inflow of tourists. Pani sheds light on the sops available, "The government offers fiscal incentives and other concessions for the north-east under the North East Industrial and Investment Promotion Policy (NEIIPP), 2007." The ministry's Bed & Breakfast (B&B) scheme for the region is also expected to boost the numbers. "There is an enormous potential for B&B accommodation, which we are planning to encourage in the region," informs Ambika Soni, Union Minister for Tourism & Culture, Government of India.

In J&K, the story is somewhat similar. "Infrastructure development is of paramount importance to us. Our aim is look beyond the regular, well-known areas and offer new destinations that are also unique in their appeal. From our end, we are ready to provide total support to hoteliers who are planning to invest in the region," says Muzzaffar Hussein Beig, deputy chief minister, J&K. The tourism board of the state was recently promoting unexplored regions in the upper reaches of Kashmir, particularly to international tourists. According to Mohammad Dilawar Mir, minister of state for tourism, J&K, twenty tourist circuits have been planned. Authorities are also considering showcasing Kashmir during the spring season, according to Farooq Shah, director for tourism, J&K. He adds, "A tourism strategy is being formulated for nineteen high power development projects in order to regulate and facilitate overall development of the area and creating self-sustenance."

How do these all add up for the industry? "There is immense opportunity for new development in north-east and J&K, since the project costs involved are not very high," says Mathur, taking into account the sum total of sops.

United growth

In the proverbial chicken and egg situation, will hotel development follow tourists, or is it vice versa? While Lalit Suri had the vision to be in a market that had no customers for it, the situation today is different. For the time being, growth will be in tandem. As Pani puts it, "We are focused on contributing to the development of infrastructure in the region. Our presence in different cities in these regions will add confidence to other infrastructure partners to also participate in the process of development."

LCCs such as Simplifly Deccan have opened this nascent market to tourists, while PPP will bolster infrastructure growth. "The PPP model would be very effective, especially in regions like north-east and J&K, where it would make both parties accountable. It would also benefit both parties in terms of revenue earnings," says Naveena Guleria, general manager-sales and marketing, Lemon Tree Hotels. Adds Montek Singh Ahluwalia, deputy chairman of the Planning Commission, "Augmented government spending in the region is now required to be increased by a mix of private capital." What comes out clearly is that if the government can activate a public-private synergy and lend a helping hand to hoteliers, and the hotel industry in return can also participate in the development, the future in all probability will be bright. All that is needed is holistic development and effective marketing.