The wide gap between demand and supply needs to be reduced, but hotel owners and developers feel the need for greater support in the wake of various challenges
By RASHMI NAICKER
Leading developers in the hospitality sector, Vinay Gupta, VP, Asset management, SAMHI Hotels Pvt Ltd, Nirupa Shankar, director, Brigade Hospitality, Naveen Jain, president, Duet Hotels and Varun Chaudhary, executive director, CG-Corp Global, discuss the various challenges they face and what are the expectation from the government to ease the increase in supply.
With the government’s focus on developing tourism, how is this being reflected in terms of its development and expansion in the hospitality segment?
Vinay Gupta: The industry has definitely gauged interest from developers and private equity funds off late and attracted investments. While the current scenario of the hotel industry is expected to further strengthen towards the year end and over the next year, some investors are likely to commit slowly, given to the past distress in the industry. However, it will be right to say, that with time the sector has matured. The development of projects is carefully planned keeping in preference the choice of target audience – business or leisure travellers. The location of a property plays a key role and with the growth of business travellers, IT parks are the trending expansion hubs. During our recent discussions with most hotel operators, they have indicated growing demand and market expectation to perform better in the coming year. However, we need to get a few fundamentals right, like initiating new manufacturing projects, increased infra spend, greater liberalisation of tourist e-visas, better connectivity to sites of interest for international tourists, etc.
Nirupa Shankar: There is indeed an increase in the desire to develop hotels by the builder community. With the possibility of HREIT’s around the corner, developers who were previously not keen on owning hotels are now buying and developing them. The hospitality industry is doing well now and this is encouraging for existing and new developers to invest in hotels. More than tourism it is the increase in commercial and business activity that is spurring the growth of hotel activity.
Naveen Jain: The present Government seems more active towards tourism and wants to showcase India as a good, safe and clean tourist destination. We see certain states take this initiative forward and come out with various models to invite private participation to develop un-connected areas with inherent tourism potential. However, we believe these models will need to be fine-tuned or the state governments will need to put in more, in terms of incentives, to make them financially attractive to investors and strategic players.
Economic development is fundamentally a process of structural transformation and in the current scenario, where Indian tourism is witnessing a tremendous surge, these developments are dominantly visible. The technological advancement and connectivity has only brought all pillars of tourism easily accessible and bookable, thanks to the e-commerce awareness. The increasing flight connectivity, even to tier-II and tier-III cities, makes this infrastructure development even more evident. Tourism in itself has become a large scale commercial industry, where states like Gujarat, Madhya Pradesh, Rajasthan and Maharashtra propagate their tourism on celluloid to create awareness. Not only do we see developments in infrastructure, connectivity and marketing of tourism but we also see a trend, where a lot of information on tourist places is made available for general public reading online or via print media and books. This trend is new and awareness is the key focus only when there is a potential demand already existing which is clearly visible with the cycle that the tourism industry today in India is witnessing.
Generally, the key gateway cities are recovering well and have shown good demand growth in the past few years. However, it will take some more time for the supply to get fully absorbed. To that extent, development and expansion activity in these key cities has been muted and will take time to resume.
Varun Choudhary: We see the government walking the talk on tourism expansion. All related infrastructure to boost tourism is invested directly by the government; further private sector is incentivised by the government to invest in entertainment infrastructure, for example theme parks, at a rapid pace. This is helping rapid pace of current tourism growth become sustainable. CG Hospitality and Resorts, as a major hospitality investor, is looking forward to playing its part in this tourism growth.
What are some of the hotel development trends in emergence?
VG: There is a growing interest in tier-II and tier-III markets, though SAMHI will continue to concentrate more on tier-I cities. Infrastructure and accessibility of the location plays a prime role while developing a property. Besides, acquisition of displaced assets is another important emerging trend. Currently, most hotel development projects continue to be in the business locations. Industry has just started to come out of seven years of slow down. Most new projects continue to be in mid and upscale segment. Growth in new luxury projects usually is a good indicator of market confidence.
NS: There are a few emerging ones, namely:
NJ: Technology has become a tourism business activity in development of strategic resources and is considered as a tool to increase competitiveness. Effective use of information technology can make significant operational improvements – enhancing guest satisfaction thereby getting good rankings on review sites which help in driving the retail business into the hotels. Industry’s concern with security has increased greatly due to several terrorist attacks worldwide, tourists’ kidnappings, robberies and assaults. Security of all types of hospitality and tourism operations is critical and disaster plans are made for each kind of threats.
Over the years, hotel loyalty programmes have shifted and expanded to meet the ever-changing needs of their guests, more recently we have seen an epic shift in hotel loyalty programme offerings and rewards. Now more than ever, travellers choose their hotels through social channel chatter, customer reviews, and rewards, and hotels around the world are rising to meet the challenge of winning their loyalty by offering incredible perks for their most loyal guests and also attract newer ones. There is also a trend where large online travel consolidators like ‘makemytrip’, etc. run their own loyalty programmes to encourage repeat customers to book through their channels. It’s more a trend where we see competitiveness for even the best loyalty programme that becomes a selection criterion for guests to choose their travel offerings.
VC: Financial challenges have had its effect on occupancies and ADRs, not only in India but worldwide. However, we continue to see a strong growth in tourism numbers; so we are optimistic towards the long term trend.
Clearances, approvals and permissions render the biggest hindrance through the phase of hotel development. How do you think can these be resolved?
VG: Approvals and clearances are necessary to ensure consistent standards and public safety; however, I feel that once a project is approved for a hospitality venture by Ministry of Tourism, it should be provided all approvals through a single window. Regulation should be there to ensure that hotels are operated as per conditions and norms of these approvals and they can be terminated for breach. This will minimise the delays in hotel opening and reduce financial burden of debt service.
NS: Approvals should be given online and all submissions should be made online. A site visit by the authorities is required to ensure that what is being submitted is indeed true. However, the laws and documentation with the authorities should be updated to take into account current scenarios and the on-ground reality.
NJ: Standardisation and decentralisation of certain approvals is another tool that if implemented effectively by governments can make the process more predictable and help developers plan better.
There is a school of thought that in adherence to the global design guidelines and protocols, hotels are being stripped of their regional identity; especially in a country with cultural diversity as India. What’s your opinion on the same?
VG: I believe that there needs to be a balance depending on the segment and location. The location of a hotel plays a very large role in deciding the same. Having said that, standardisation can bring cost and design efficiencies for the economy and business hotels; however, upscale and luxury hotels need to reflect the local community and character. It also depends on the architects and designers, how they interpret the brand guidelines and intertwine with local character.
NS: The international operating companies do have a general design guideline for each of their brands, but most do allow for some amount of flexibility be it in the colour palatte or art work or materials used. This allows for regional elements to be included in the décor. What is more of an issue is the Facility Area Program (FAP) that hotel brands use across markets during the development phase – the development team of the global operators generally insist on not having facilities like banquet, swimming pool, spa, etc. as it is not part of the brand standards. However, in most business and resort destinations in India some of these facilities are essential to generate additional room business which impacts the performance of the hotel. Some flexibility is required in the FAP to be able to tweak it to each market.
NJ: While we believe universal guidelines are good for the development, we still have to work towards developing the supplier and vendor value chain in India that can capture local design in a cost effective way. And we think local culture can be captured in service as well and that’s something that we continually work towards with our brand partners.
VC: As a brand, we are all about revealing and framing a dialogue with the environment in which we are located. Each of the journeys is a connective story of discovery in some of the most alluring destinations of the world. Hence, it’s very important to find locations that will add value to our brand proposition and hospitality offering. Cultural uniqueness of a place can be retained by creating experiences of that region and through service delivery, people who deliver on the promise, and their training.
What are some of the ongoing and upcoming developments that we need to watch out for?
VG: SAMHI continues to be on a growth path, we have recently launched Sheraton Hyderabad, Courtyard and Fairfield Bangalore in last 12 months. We are also undertaking a refurbishment project in Vishakapatman for our Four Points and soon we will be re-launching Caspia Ahmedabad as an internationally branded upscale hotel. We have five under development projects – Nasik, Chennai and Kolkata under our Formule1 brand, Coimbatore and Sriperumbadur under Fairfield by Marriott brand. SAMHI will continue to seek opportunities to grow further.
NS: Brigade has recently launched a 146 key Grand Mercure hotel in Mysore. It’s a beautiful property with a heritage façade and interiors that pay homage to the city of Mysore. We have also launched a 45 room resort close to the Bangalore International Airport under the name of Signature Club-Resort. This property with its indoor temperature controlled pool and extensive sports facilities, is self-managed by Brigade Hospitality. Brigade will also be entering the Chennai market this year with the launch of Holiday Inn Chennai OMR IT Expressway, a strategically located 202 key hotel, with a focus on the business segment.
NJ: We have two under-development projects – in Indore and Navi Mumbai and these developments should take shape in the next couple of years.
