The recently conluded 10th edition of Hotel Investment Conference South Asia (HICSA) saw critical issues such as Investment, Debt & Equity, Development, Management Contracts, Owner-Operator Relationships, Revenue Management, Social Media, and Industry Outlook being discussed and debated. T3 brings to you main highlights of some of the business sessions at HICSA.
10 Years Later – Then and Now
Gaurav Bhushan, Chief Development Officer-APAC, Accor, Navjit Ahluwalia, Senior Vice President Hotel Development-India/Indian Subcontinent, Marriott International and Raymond Bickson, Managing Director and CEO, Taj Group along with Manav Thadani, MRICS, Chairman-Asia Pacific, HVS discussed the evolution of the Indian hospitality industry in the past decade.
On being asked to compare room inventory in the past 10 years, Bickson stressed upon the fact that International hotel brands are slowly taking over the hospitality space in India, “10 years ago, domestic brands accounted for 60 per cent of the room inventory but the trend has changed today with 80 per cent of the room inventory being international brands. The challenge we face today is to sustain our domestic brands,” he added.
Doing business in India is as good as running a marathon, it is not just a sprint, opined Ahluwalia. “International brands such as Marriot have a set strategy and we stick to that. Indian hotel brands keep changing their business model as they are on their home ground which confuses the consumer about their brand identity.”
Agreeing with Ahluwalia, Bhushan believes that times have changed, India is now being compared to the China market and it is very important for us to sustain our brands in the current times. Further talking about a complete different aspect of evolution, Bhushan highlighted the existence of the internet and how that has been a game changer in the hospitality industry. “The digital world namely the internet has delivered a transparency between the hotel brand and its customers. The internet has given us an edge in the past 10 years.”
Asian Spice
Moderated by Saurabh Gupta, Director Development, Accor, the panel witnessed Hiran de Silva, Project Consultant/Owners Representative, Canwill Holdings/Sino Lanka Hotels & Spa; Shaun Mann, Senior Tourism Sector Specialist-SA, International Finance Corporation and Soumitra Saha, Vice President Finance and Controlling-ME/SA, Mövenpick Hotels and Resorts highlighting the importance of investing in tourism marketing and promotion to further develop tourism infrastructure.
Focusing on India’s neighbouring countries – Nepal, Bangladesh and Sri Lanka, Gupta quizzed the panellists on why tourist inflow into these countries are not in large numbers in spite of being naturally well endowed. Countries need to understand that tourism can really drive the economy, opined Mann. “The Governments need to implement a body/committee and work towards a growth strategy,” he added.
According to Saha, the low visitor numbers discourage the private sectors to invest in these countries. “Due to lack of awareness and marketing activities in the international markets, these countries are not on the tourism map. A country as vast as India is not able to communicate its full tourism potential to the world due to which international investment is low. These countries have to buck up and if a possibility, the whole SE Asia region should work as one.”
Highlighting the fact that the countries need to portray themselves as a safe destination, De silva said, “Governments need to communicate that their country is safe and welcoming to its visitors. There needs to be a clean dialogue, no amount of infrastructure will attract tourists if there is an advisory against the particular country. Lack of strategic planning and dialogue makes it difficult to invest in countries such as Nepal, Bangladesh and Sri Lanka.”
Global Leaders – CEO Panel
Moderated by Nakul Anand, Executive Director, ITC Limited, the panel welcomed Gerald Lawless, President and Group CEO, Jumeirah Group; Richard Solomons, CEO, InterContinental Hotels Group (IHG); and Sebastien Bazin, Chairman and CEO, Accor. Speaking with Anand about the India market, it was clear that, across the board, hotel chains want a piece of the Indian pie. Lawless stated that Jumeirah is interested in development aggressively in India, and is even signing a couple of management contracts for properties in Mumbai and Goa. Solomons named India IHG’s third largest pipeline market.
When Anand threw the panel a question about recruitments and skilled manpower in India, Bazin stated that, the hotel chains owe it to the country they are developing in, to train the local recruits in the required skill set. “Service is part of India’s DNA. There is so much talent and ambition here, which is a big advantage,” he opined.
Anand went on to ask if the hotel chains had adapted in any way to fit into the India market. Solomons commented that customers now think of properties according to occasions and needs, not the economy and pricing, and the hotel business needs to be run accordingly.
Brands and Owners: Managing Expectations!
Dhruva Rathore, VP Development – SA, Hyatt Hotels Corporation; Paul Logan, Sr. VP Development – Africa and MEA, IHG; Ranjit Batra, President, Panchshil Realty; Sumit Guha, Deputy MD, Tata Realty and Infrastructure; and Ashish Jakhanwala, Founder & MD, SAMHI formed the panel for the discussion, while Kapil Chopra, President, The Oberoi Group acted as moderator.
Chopra opened the discussion with the question of whether hotel development was a result of Return on Egos or Return on Investments. Rathore opined that a lot of hotel owners are new and it is the bran’s responsibility to guide them about what development is profitable. Jakhanwala stated that ego and foolishness drove decisions during the weak years and led to an oversupply. “Hotels and long term assets and calculations are necessary before you begin development,” he said.
When asked if choosing the wrong locations is a problem being faced by hotels, Rathore stated that the markets Hyatt is present in will support the properties, but it is naïve to expect establishments to stabilise in the early years. Jakhanwala recommended a wait of five years for luxury Greenfield properties to turn into profits. Speaking about Pune, Batra opined that the entry of several brands have lain stress on ARR. Logan commented that it is a nascent industry and a volatile market, but in time it will stabilise.
Fielding Chopra’s question on whether owners are too interfering, Guha said that it is an owner’s role to be interfering, but decorum needs to be maintained. When asked if hotel contracts need to be changed, Jakhanwala said they need to be rewritten as times have changed, while Batra opined that they need more transparency in the topline.
Global Leaders Check-In
Moderating the session was Achin Khanna, MD, Consulting and Valuation – SA, HVS; while the panel comprised Abid Butt, CEO, Banyan Tree Hotels and Resorts; Peter Meyer, MD – APAC, Host Hotels and Resorts; Rajiv Kaul, President, The Leela Palaces, Hotels and Resorts and Simon Wan, CEO and MD, Staywell Hospitality Group.
Khanna asked the panel what they believed were the advantages and challenges of entering the India market. Butt stated that BRIC nations have shown majority growth and India is a big outbound market, making it a great destination to build brand presence. “The problem is, even before a project begins, it takes too long. You need a lot of money and patience to invest here,” he added.
Meyer opined that the country’s large population and growing middle class are advantageous factors, making the market’s long term potential tremendous. However, he believes that poverty, corruption, lack of infrastructure, efficiency and government gridlock all work against it. “If you are not ready to wait 10 years for returns, don’ think about investing her,” he stated.
When asked if the brands are looking to move to a mid scale business model, Kaul replied that, while it is not on the cards currently, Leela will have to make that move eventually. “It is not a question of whether, it is a question of when,” he said.
When Khanna asked them what their outlook is for 2014, they were unanimously hopeful of the period following the elections. “We will all have to work together and move forward,” Wan concluded.
How to solve development woes
Alan Benjamin, President, Benjamin West; Cyril Jacob, MD, Archetype Group; James B Salter, Founding Partner, CM&D Sila; LN Sharma, Director and CEO, Golden Jubilee Hotels; Omer K Isvan, President, Servotel Corporation and SC Shekhar, Sr. Executive VP Hotels Division, ITC Limited formed the panel for the discussion while Uttam Dave, Industry Expert acted as moderator.
Dave kickstarted the session with a question on single window clearance, to which Sharma replied that, the term has been a buzzword for the last 20 years. “When you open one window you have many others behind it,” he opined.
When asked about the strategies to calculate feasibility, Isvan stated that hotel developmers should not try to cost projects before the work starts as the budgets are generic and change by the time the construction begins. Echoing his views, Jacob revealed that they have been advising developers of the same.
Shekhar stated that they have begun to give the board a 48 month time period from the day construction commences for the hotel to be ready, vis-a-vis the day they approach the board as was the practice earlier. “People are penny wise and pound foolish, so we now create a design brief backed by HVS reports,” said Salter.
When Dave questioned the panel on hiring contractors v/s offsite construction as a solution in Indian hotel development, Butt opined that most of it should be done in the factory and installed on site. Salter recommended the use of structural steel systems, which are low on cost and hence save money back end.
Introducing New Brands in the Region
Moderated by Samir Kuckreja, CEO, Tasanaya Hospitality, the panel saw Aman Sachdev, Sr. VP – SA and SE Asia, Rotana; Cherif Hosny, Sr. VP Development – MEA and SA, Jumeirah Group; Eric Van Dijk, COO, MEININGER Hotels; Rohit Vig, MD – India, Staywell Hospitality Group and Tom Welbury, Director – South Asia, bloomrooms.
Introducing their brands, Dijk revealed that the focus of the brand was to get youngsters together. MEININGER Hotels, he said, will first establish an office in Delhi. Welbury stated that bloomrooms launched its first property in Delhi in June 2012, and is a new brand globally, not just in India. Staywell has signed nine management contracts in two years, and have two currently operational and three more to be ready by 2014. They aim 18-20 operational hotels by 2018. Jumeirah has upcoming properties in Mubai and Goa, while Rotana is aiming 20 hotels here I the next 10 years.
Kuckreja first asked the panel what challenges they faced as new kids on the block. Dijk stated that, with Cox & Kings as their parent company in India, MEININGER Hotels has had an advantage. The focus, he added, will be on business travellers and families. Vig opined that finding the right location is a challenge owing to traffic and lack of infrastructure.
When asked about tailoring and maintaining brand standards in a new market, Hosny revealed that the design factor appeals and affects customers, and that is their focus. Sachdev added that flexibility is a part of Rotana’s working.
