How global brands are taking over India's hotel scene

Courtyard by Marriott, Raipur

Indian ratings agency ICRA is claiming that global hotel chains will likely account for half of India's hospitality industry in just over five years. 

Right now, these brands command 44 percent of the industry, but the compounded annual growth rate of nearly 10 percent (against industry growth rate of 6 percent) means that by 2020, international brands will have a 47-percent share of the country's hospitality market, and that percentage will jump to 50 by 2020. 

ICRA VP Pavethra Ponniah said that the hotel industry in India has been growing faster than other markets including China and Southeast Asian nations. "Occupancies have been growing over the past couple of years, (and) that has been attracting these players to expand with a longterm vision," she said. Pan-India average hotel occupancy stood at 62 percent in the six months ended September, up from 60 percent a year earlier. 

While average room rate has (for the most part) remained flat over the years since 2013-14, RevPAR has been on a growth path for the past 18 months, indicating revival in the industry. 

As such, domestic hotel companies are opting for "asset-light" strategies and are turning away from ownership toward operation. Taj, Oberoi and ITC are signing management deals rather than real estate transactions, which the report notes helps them to lower risks and expand faster. 

Bigger Footprints

In the wake of its acquisition of Starwood Hotels & Resorts, Marriott International is the largest hotelier in India, and plans to keep growing. The company is set to increase the number of hotels it manages from 84 to 165 in the next three years. 

Carlson Redizor's and AccorHotels' properties are expected to reach 120 and 80 hotels, respectively, by 2020, up from the current numbers of 88 and 45. As of November, Carlson’s Indian portfolio had 140 hotels open and under various stages of development across 60 cities, including 16 state capitals. This year, 14 are slated for signing and eight are expected to open by the end of the year.  

In October, Hilton signed a management agreement with Manyata Promoters Private Ltd., part of the Embassy Group real estate development company in India, for a 586-guestroom dual-branded hotel project, inclusive of a Hilton hotel and a Hilton Garden Inn.

"India is a potential market for us with improving GDP numbers and growth rate which has even surpassed that of China's," Neeraj Govil, area VP for South Asia at Marriott International, told the Economic Times. "Also, with demand for domestic leisure going up and very few branded hotel chains in the market, there's a lot of room to grow," he said.