U.S.-based hotel companies are planning to introduce and expand a broad range of brands to the India travel market to capitalize on both increased international tourism and what's likely to be a boost in domestic travel within India.
Starwood Hotels & Resorts will boost its number of India hotels by more than 60% over the next three years, with much of those efforts concentrated on debuting luxury and upscale brands such as W, St. Regis and Aloft.
Meanwhile, Hyatt Hotels and Resorts is aiming more at the middle ground with select-service badges such as Hyatt Place and Hyatt House, and Wyndham Worldwide is making a play for economy guests with its planned launch of the Howard Johnson brand in India later this year.
The wide range of sectors represented by the new brands illustrates both the opportunities and challenges in India. The native India population that comprises most of the travel market is most likely to stay at economy and midscale hotels when traveling to see family or making religious pilgrimages, but high land costs and development expenses force many developers to aim for a higher sector to recover their costs, according to Chetan Kapoor, Mumbai-based research associate for travel-research firm PhoCusWright. Hence Starwood's agreements for its first two W-branded resorts to open in 2015 and for India's first St. Regis the following year.
"Many times, brands begin with the intention of developing midscale properties but end up building five-star luxury hotels," Kapoor said. "The major reason is the development costs. Paperwork, clearances and bureaucracy often delay projects, so the developers end up changing their strategy."
U.S. companies also are competing against a number of India-based chains that are already recognized outside of the country. Unlike brands from China, where travel is also rapidly growing, India boasts globally recognized brands ranging from economy and midscale, such as Lemon Tree and Red Fox, to upper-end chains such as Taj, ITC and Oberoi.
"U.S. brands will use their loyalty programs and the security of their brand to be attractive to visitors to India," said Konstanze Auernheimer, director of marketing and analysis at research firm STR. "This is one of the reasons why the pipeline in India has lately started to increase from the international side."
Either way, such U.S. companies appear to be following the lead of non-India based operators such as InterContinental Hotels Group, which has already established brands such as Holiday Inn and Crowne Plaza in India. And such expansion is helping feed an Indian hotel industry poised for growth. India's hotel supply will increase by 61,000 rooms over the next three years, STR said in a report released earlier this month.
And much of these efforts will take place outside of Mumbai, New Delhi and Bangalore, major cities in which land costs are highest and where many of the larger U.S. and India brands are already represented.
Pune, Chandigarh and Amritsar will likely see increased room supply from U.S. brands, according to Kapoor, while Gurgaon, which is about 30 miles southwest of New Delhi, will be one of the six global cities where Marriott and hotelier Ian Schrager will open hotels under their Edition boutique brand.
Regardless, the U.S. company that might be taking the broadest approach to India expansion is Hyatt, which operates eight hotels there and has 53 in the development pipeline. Of those, 23 will be either Hyatt, Hyatt Regency or Andaz upscale hotels, while 24 will be Hyatt Place and Hyatt House select-service hotels. Hyatt says about 40% of its customers in India are domestic.
"We expect the ratio of domestic customers in our hotels in India to increase over the next few years due to the growing affluence of the Indian customer," said Ratnesh Verma, senior vice president for real estate and development in Hyatt's Asia-Pacific region. "We believe that all segments have great potential for us."
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