Amidst an economically challenging time, head honchos of leading hospitality brand are looking cautiously optimistic. BY BABITA KRISHNAN
Travel trends across the globe have shown an upward projection across the categories of leisure, corporate and family travel. It is imperative for the industry to recognise the changing dynamics of today’s travellers and gain insights on their various demographics. India’s vast size, emerging middle class, growing domestic economy, cost-competitiveness, massive talent pool and increasing aspirations of its people, means that the scope for growth is tremendous.
The hospitality industry has built on the growth momentum that began last year and is estimated to grow by 7.5% in 2015, according to World Travel and Tourism Council. ICRA has estimated the revenue growth of the Indian hotel industry at between 9-11% in 2015-16. The major stakeholders – the owners/developers and the operating brands, are hence bullish about the future and this has resulted in more signings, new contracts and more properties to look forward to.
A successful partnership between hotel owners and operators is a delicate balance that requires trust, open communications and shared goals. And everyone agrees in unison that a meeting of minds, a common or shared objective, respect for what each partner brings to the table, are really the reasons for success or failure in relationships between owners and operators.
“We choose our partners very carefully, and this is buttressed by our commitment to only do green-field projects. We believe that the owner and the operator must share the same vision to make experiential luxury delivery happen,” reveals, Kapil Chopra, president, The Oberoi Group.
“At AccorHotels, we understand the challenges faced by developers today, so assistance and counsel requirements specific to each hotel are often provided to our prospective partners, across all our brands and services,” shares Jean-Michele Casse, senior VP-operations, AccorHotels India.
The brands under Starwood Hotels & Resorts umbrella are differentiated from a lifestyle perspective and not from a price point, explains Dilip Puri, MD India and regional VP South Asia for the brand. “We believe in “right partners, right properties and right places.” Each of our brands has a distinct personality and a unique DNA and caters to a certain lifestyle. This distinction of our brands also helps our potential partners in identifying opportunities and understanding what we bring to the table. We work with partners who are equally invested and believe in what our brands stand for,” he says.
For Raj Menon, COO, Southeast Asia and Pacific, Marriott International, it is really about working with the whole community in understanding their capital return requirements, partnering with them in building a brand that is appropriate for a location and then delivering the returns to it.
The Taj Group has a clearly defined brand architecture that demarcates the brand strategy, brand standards and service levels for its four brands – Taj, Vivanta by Taj, Gateway and Ginger Hotels. “To ensure adherence to each brand, we have a Brand Council which monitors and reviews every brand standard and brand decision,” explains Rakesh Sarna, MD and CEO, Indian Hotels Company Limited.
While Apeejay Surrender Park Hotels believes that a healthy portfolio of owned hotels and management contracts is the key for growth, IHG’s asset-light business model-based growth requires the right partners and “our strategy involves developing strategic partnerships to expand in India,” explains Shantha de Silva, head of South West Asia, IHG.
Partnerships apart, an important key to success is understanding the market and ensuring occupancies. “Indigenous brands have a deeper understanding of the local preferences and needs of the domestic traveller. Customers share a deeper emotional connect with homegrown brands that give them an edge over global brands. Building market penetration is always a difficult task. We are going to face similar challenges in other countries that global brands face in India with the domestic traveller having their allegiance to the homegrown brands,” concurs Sarna.
Chopra feels that an indigenous brand is always more culturally contextualised than a global brand. Yet, the majority of global brands entering India do have an advantage because of their established loyalty programmes. “Though these players are yet to create a strong foothold for themselves amidst tight local competition and diminutive market penetration, they are backed by the loyalties of their own residents staying in or travelling to India,” Sarna admits.
Giving the international perspective, Menon believes that there are a couple of things at play in their favour. “Foremost is our distribution. Then the global expertise of how we run our businesses, deliver returns, drive the topline using our distribution channel, etc. And being a management company, we only grow if we deliver exceptional results. All these combined with our loyalty programmes for the guests come together to work for us.”
One of the biggest boost for the industry has been the introduction of the Visa on Arrival, which is a step in the right direction and will be a game changer in the long run, feel the industry leaders. They believe that this will help improve India’s positioning as a short halt destination. “Early signs from the government to drive tourism through several strong policy initiatives such as the introduction of visa-on-arrival, e-visa and specific funds for developing tourist destinations will bring in a stronger demand to support the industry over the next 12 to 18 months. India is on a strong economic rebound and remains the market of choice,” feels Sarna.
“As domestic and global travel continues to grow with the rise of the middle class, we particularly see growth emerging in tier-II and -III markets. Given the current demand-supply dynamics, stable political situation and the likelihood of overall economic growth, the hospitality sector is on the begining of a much expected growth trajectory,” says Casse.
“Indian hospitality industry is on the cusp of a disruption,” declares Chopra, “Conventional businesses today are prone to get dislodged with the rapid pace of technology that all of us operate with today. The successful companies will be those who are nimble and harness the technological advances to the benefit of both their guests and the organisation. I also believe that strongly differentiated players like The Oberoi Group which only operate in the luxury segment of the market will definitely see an upward trend in 2015-16, as undifferentiated multiple brands will not be able to get a rate premium. This may further compromise their profitability margins. Being an expert and a niche will help certain brands who are in that league.”
The long term outlook for the Indian hospitality industry continues to be positive, both for the business and leisure segments. Improved infrastructure, better connectivity, etc. will help the growth. “I feel the hospitality industry will see business innovations. Joint ventures, management contracts and conversions will become more popular. Use of technology, innovation in brand experiences and dynamic pricing strategies are all trends we shall see in the near future,” feels Puri.
“With an improved domestic economy, people will be encouraged to travel for recreational activities, entertainment and events, short duration trips, fun trips etc. leading to a growth in emerging destinations. Our ‘design-conscious, price-conscious’ new brand ‘Zone by The Park’ represents the new face of modern India,” says Vijay Diwan, MD, Apeejay Surrendra Park Hotels Ltd.
“As a whole, the travel and tourism sector in India is booming and we’ve been seeing increased business confidence as the industry is expected to grow four times to exceed US$400 billion by 2022 and we are confident it is well on track to achieve this,” says de Silva. The development of new airports in smaller cities and towns will certainly encourage air travel across the country and the 200 low-cost airports planned for development to connect tier-II and tier-III cities will benefit domestic travel across the country.
With India slated to be one of the fastest growing economies contributing to the total travel and tourism GDP, the future of the hospitality business looks promising, which augurs well for both the indigenous and global brands.
There are, however, a number of growing trends which will impact guest experience over the next couple of years. Digital influence will permeate their engagement with brands, increased curiosity to try new cuisines will lead to new culinary concepts, and the presence of global brands means that loyalty programmes and services will need to become more dynamic and agile to compete in a larger market. With guest tastes becoming more discerning and demanding, the hospitality industry will need to keep up with their expectations.
