With 72 signed properties, 5561 rooms spread across 54 cities in India, Fortune Hotels which currently operates 48 hotels; plans to maintain its leadership position by following a balanced approach towards growth, expansion, brand extensions, and providing the same assured quality of product and service across the country.
How would you explain the emerging situation in the mid-market hotel segment in India and what is the growth prospect?
The value-driven market segment is expected to grow owing to infrastructure advancements, improved connectivity to Tier I and Tier II cities and increase in the burgeoning domestic travel. The recently announced initial list of 20 new Smart Cities would result in new development opportunities for the hospitality sector. New industrial clusters that are being developed in identified industrial corridors with connectivity to feeder markets shall also create new destinations for mid-market segment. We continue to maintain our fundamental belief that the industry will now continue to thrive on this segment since demand for these quality hotels at affordable price is gaining popularity. The industry is robust and the next few years will see more growth in this segment of the market.
Do you think that the pace of the growth is slowing down due to the emergence of disruptors like Oyo, Treebo and other players?
The entry of aggregators like Oyo Rooms and other such players has been a game-changer, giving birth to a whole new industry, and aggregating room inventories within this segment. This has helped guest houses/ budget hotels gain visibility on a common platform. The impact that these businesses have had on the industry is yet to be seen since they are dealing with guest houses/ budget hotels.
This new segment operates on the asset-light business model, and is a sure disruptor for the traditional capital intensive hospitality industry. However, going forward, these players will not only need to up their ‘scale and size’, but they will also have to bring in more stringent quality control mechanisms to manage customer experience and keep the brand growing. Without these processes being in place, an aggregation of inventories might lead to dilution of the brand.
How do you see M&A in Indian hotel industry?
The process of mergers and acquisitions has gained substantial importance in today’s corporate world. Like any other industry, M&A in hotel industry is driven by the restructuring need of business organisations in the face of increased competition in the domestic as well as global markets. It serves as a strategic choice for organisations to achieve larger size and faster growth in market share, thereby becoming more competitive through economies of scale. Though the trends in M&A in India have changed over the years, it definitely seems like a concept which is here to stay for a long time to come.
How has the performance been of ITC Fortune’s existing hotels in India in 2015 and what is the expectation from 2016?
2015 has been a good year for us with almost all hotels clocking in average occupancies ranging from 60-62 per cent. Despite the addition of supply in the market, Fortune Hotels managed to register a chain-wide room nights’ growth of 15 per cent in volumes with a marginal improvement in its average room rate (ARR). The RevPar trends, especially in the mid-market to upscale segment, should continue to grow at a healthy pace in the times to come.
How many hotels ITC Fortune launched in 2015 and what is in the pipeline for 2016? Where do you see ITC Fortune in the next couple of years?
Fortune Hotels added five new hotels to its brand portfolio in the year 2015, starting with the Acron Waterfront Resort, Fortune Resort in Goa, three more hotels in Gujarat in Dahej, Rajkot and Ahmedabad respectively and Fortune Select Grand in Chennai. In 2016, there are around six to seven hotels in the pipeline scheduled for opening including a hotel in Srinagar, Ajmer, Jalandhar, and Goa respectively.
We plan to work towards taking further our vision of unfurling a Fortune at every 180 km by concentrating on Metro, Mini-Metro, Tier I & Tier II cities across India. In the next few years we see ourselves consolidating our position as the top player in the ‘first class, full service business hotel segment’. The chain has extensive expansion plans and we are looking at being a 90 hotels strong chain in the next couple of years.
How do you see the franchise and management contract business model shaping up for the Indian hotel industry?
Both the franchise and the management contract are well established business models internationally, with each having its own pros and cons. However, operating a property through the management agreement route has been better accepted so far in India. Through this model, one gets the benefit of an established brand that has built a reputation and loyalty over the years, and is adept at handling the ups and downs of the business. And above all, the new property gets a kick-start when it opens under a known brand and has the Operator’s sales, marketing and distribution network supporting it from day one of operations. On the brand front, better management and standardisation result in efficient service and consistent delivery levels. Going forward, factors like ability to maintain standardisation at all levels, high service standards, strong sales and marketing network solutions and quality assurance will continue to offer management model distinctive advantages over its franchise counterpart and therefore, more and more hotels would go in for it.
How do you manage the relationship with your owners, given that you work on a management contract model?
‘Fortune Hotels’ continues to tread on the management route, by associating with individual promoters who have a desire to be a part of Indian hotel industry, by providing them with the technical and operational expertise under its ‘Land to Launch’ strategy. Owner relationships, quite like any other relationship, are as easy or as difficult as one makes them. The key for Fortune Hotels has been its ability to remain as transparent in its dealing as possible.
