The room boom: Inside the mad, competitive race to dominate India’s hotel industry

The River Ganges is long, snaking across some 2,500 km of India’s heartland, enriching not just the soil, but the syncretic soul of a civilisation. Hundreds of thousands from all walks of life land up on its banks for solution and salvation, the numbers going up to crores when it comes to auspicious occasions, like this year’s Maha Kumbh.

 

Even a regular morning sees scores of devotees braving the vagaries of the weather to propitiate the gods, especially in Hardwar, one of the holiest towns in Hindu culture. Yet, until a few years ago, most of these pilgrims had to settle for budget guest houses, dilapidated hotels or dharamshalas where you get a space to rest your head for a small contribution.

 

The Pilibhit House, on the contrary, is plush and luxe, with a select few rooms overlooking the gushing river, bespoke food experiences and even its own private ghat and a pujari on call. A heritage property owned by a trading family from the Pilibhit region (hence the name), it was launched by the Taj group recently under its ‘SeleQtions’ branding.

 

The new trends, expansions

 

With room rents often exceeding Rs 30,000 a night, this luxury property is a harbinger of at least three trends sweeping across India’s hotel industry. One, the zealous and zippy expansion most of India’s top hotel chains have got into to cover what they call a market that they have just about scratched the surface of. Secondly, the post-pandemic boom in travel that is almost solely spawned by the domestic traveller, and thirdly, how Indians are setting their own criteria for travel, with spiritual tourism one of the biggest draws.

 

For the record, there is a mad scramble to either launch new hotels or sign up existing hotels to be added to one’s bouquet by almost all the big hotel chains. Indian Hotels or IHCL, owned by the Tatas and better known for its luxury brand ‘Taj’, has been almost on a maniacal expansion spree over the past year or so, announcing a new property almost every other day.

 

Earlier this week, CEO Puneet Chhatwal surpassed even his own frenetic pace by adding, in one go, 55,000 hotel rooms across 150 hotels, thanks to buying up with ANK Hotels (brands like Clark’s Inn), Pride Hospitality (Pride Plaza hotels) as well as a distribution agreement with Brij Hospitality (Brij brand of hotels in historical or pilgrim spots in Northern India).

 

“India’s hospitality sector has witnessed sustained demand momentum over last three consecutive fiscal years,” pointed out Chatwal, adding, “Our partnerships (are) a multi-pronged approach addressing India’s heterogeneous marketplace and in line with our five-year road map.”

 

That road map, billed internally ‘Accelerate 2030’, envisages Taj group becoming the biggest hotel group in the country, with a total of more than 1,000 hotels (it’s presently at 550+) by the end of this decade.

 

Not if Rajeev Menon can help it. The President of Marriott group of hotels in the region wants India also to reflect the hotel chain’s status as the world’s biggest (9,500 plus hotels). Marriott, conventionally a North American heavyweight, ziplined up the global sweepstakes after its 2016 merger with Starwood hotels, the custodian of the ubiquitous brand, Sheraton.

 

In May, Marriott also jumped into the fray, investing around 15 million dollars in the parent of Fern hotels, a group of 120 or so properties with a sustainability positioning. These are being rebranded and launched under the ‘Series by Marriott’ branding – latest reports say at least 10 independent hotels have come aboard this branding which will be standardised as per Marriott’s international quality, with the specialisation of Fern’s ‘eco-friendly’ concepts.

 

Marriott is not done. Earlier this month, it tied up with Bengaluru’s Brigade group, which runs hotels like Sheraton Grand Bangalore, to build six hotels totalling nearly a 1,000 rooms, including a Ritz-Carlton in the Kerala backwaters in Vaikom.

 

Menon of Marriott was reported to have described the rapid expansion as “a significant leap for our company’s growth story in India, a nation that is set to be Marriott’s third largest market globally.”

 

Across the board, India’s major hotel groups are on an expansion spree. ITC chairman Sanjiv Puri declared that ITC Hotels, which was hived off from the parent company last year, is expanding and will cross a target of 200 hotels by 2030.

 

“The Indian hospitality market is only at an early stage of its growth process and demand, and opportunities are set to expand substantially over the next few years. However, the market leadership will depend on each group’s ability to anticipate trends, innovate services, and maintain operational excellence,” said M.K. Ajith Kumar, former ITDC general manager and chairman of the India Tourism Forum.

 

“A rapid expansion is justified and likely to continue; the Indian market indeed has abundant and untapped potential, especially in Tier II and Tier III cities,” he added.

 

Even the Oberoi group, usually pretty picky, has 21 hotels in the pipeline, a mix of owned properties as well as tie-ups. This includes their eagerly anticipated super-luxury launch at Mumbai’s Jio World Centre, to be called Anant Vilas. Named after the younger Ambani scion, it will be Oberoi’s first city-centric hotel in its luxury ‘Vilas’ portfolio, and will be jointly managed along with Reliance.

 

“Look at consumption, growth of airport, aircraft, SUV sales increasing 6x, Vande Bharat connecting the whole of India,” said Lemon Tree Hotels executive chairman Patu Keswani, “India is at an inflection point, we are at the point where the US was in 1983, the golden years, and China in 2006.”

 

Huge demand for investment

 

A JLL report says there is massive demand for investment in the Indian hospitality scene, driven by high net-worth individuals, family offices and private investors. This includes the likes of Singapore’s sovereign fund, which tied up with SAMHI group (which runs hotels franchised from the likes of Hyatt as well as Marriott) with an investment of nearly a 100 million dollars.

 

Last year alone, this saw rooms in the branded hotel segment going up by 42,000 rooms – India now has a total of over two lakh branded hotel rooms, double that of 2014.

 

The fervent rush for new hotels is due to two factors – one, the amount of solid business that is coming in post-pandemic as holidays and experiential travel become a thing. HVS Anarock consulting said in a report in April this year how revenue per available room or RevPAR—the present industry standard metric which measures how much money one room rented spawns— not just from room rent but from other expenses like food ordered, spa bookings etc, went up a neat 20 per cent.

 

Second, is the whole India story, which believes that if India’s economy growth continues in the same trajectory, the present number of branded hotel rooms may be sorely inadequate. Chhatwal describes it as “reflective of the country’s growing economic prominence and rising discretionary spends. The outlook for the sector remains buoyant as demand outpaces supply and India continues to be an under-served hospitality market, especially in the mid-market segment.”

 

Therein lies the curious dichotomy of India’s ‘room boom’ – the affordability factor. Even while room rents went up by 12 per cent last year, many hotel groups are being careful by spreading out their eggs across the various baskets, from luxury to mid-market to budget.

 

Taj group, for example, just recently went in for a complete transformation of its ‘Ginger’ brand of budget hotels. Accor, the world’s second biggest hotel chain after Marriott, is focusing on giving a major leg-up to its premium budget brand ibis in its expansion plans in the country. Accor recently went in for a tie-up with the parent company of Indigo Airlines to speed up its expansion across India. The target? 300 hotels by 2030.

 

Also, most of the expansion is on an asset-light model, wherein big brands tie up with property owners across the country, give them specifications to adhere to, and then rebrand and launch the hotels under their umbrella by taking care of the sales and marketing. Take for example Lemon Tree, which is opening hotels in (generally) unheard of destinations like Pali and Chittorgarh in Rajasthan under this model.

 

Of course, the boom could take a new high once/if the big daddy of them all takes a more active interest in the sector. Reliance Industries has tied up with Oberoi to launch Anant Vilas in Mumbai, but it remains to be seen whether India’s biggest corporate will take a bigger plunge later, if not sooner. Reliance reportedly already has an agreement with Oberoi for two other hotels, one in Gujarat and the third in the UK.

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