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India Mid Market Hotels - Red Ribbon Asset Management Plc

How and why mid-market hotels are taking over India’s branded sector

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In the late 1980’s Esso commissioned a survey of its UK customers and found less than 7% travelled onto Mainland Europe with their cars. Why this reticence on the part of families clearly capable of making their way from Poole to Provence in an overcrowded Metro? And no, it’s not what you think: back in those days we hadn’t even thought of Brexit. As Esso found out, there was a more homely explanation: the Continent simply had far fewer automated pumps on its forecourts, so drivers were in danger of having to talk with an attendant and you know how the English are with languages. Better leave the car behind than risk the unseemly spectacle of sign language on the forecourt with a Frenchman.

And when you think about it, that’s all quite interesting. It’s the reason petrol stations have gradually come to look exactly the same all over the world: with the pumps all roughly in the same place, all self service and roughly the same kind of shop to pay in. It’s why you can now buy a burger (from a screen) in identical McDonalds outlets from Vienna to Vladivostok without once having to speak a word of German or Russian, and it’s why Esso long made sure you can buy your petrol the same way. There’s simply no need to leave the car at home anymore…so we don’t. We buy more petrol instead and everyone’s happy.

Economists call this phenomenon Brand Synergy and until recently India’s mid-market Hotel Sector was widely perceived to be more or less dead to its charms. A senior analyst on the subcontinent memorably (and anonymously) put it as follows: “…it was like an airline that uses a Boeing 747 for travel between Delhi and Mumbai, a Dakota for Kolkata-Delhi, and a Dornier for Bengaluru-Pune”. The poor old travellers never knew what to expect when they got there. Just like trying to buy petrol by word of mouth.

But not anymore…

The subcontinent’s mid-market Hotels including Ibis Styles, Lemon Tree Hotels and Eco Hotels have all made progress over the last decade in adopting a much more uniform approach to product profiling, achieving a consistency in specification that has now seen the mid-market secure nearly half the branded hotel sector: spurred on, no doubt, by an increasing number of private equity investors, none of whom are noted for being slow in recognising brand synergies when they see them.

All of which has made the mid-market uniquely well placed to take advantage of the surge in India’s middle class and increasingly urbanised travellers that has doubled airline occupancy rates over the last seven years.  And with the average cost of building a mid-market room coming in at between Rs 3 Million and Rs 7 Million, breaking even within six years, it all makes bottom line economic sense too. Compare that with the larger branded chains where average construction cost for each room is Rs 15 Million and break even takes 15 years: more than twice as long.  In the past 10 years alone the mid-market has expanded at more than 15% annually (according to Howarth HTL) and now accounts for 43% of total branded stock.

Having got away its successful IPO earlier this year (raising Rs 311 Crore from key investors), Lemon Tree Hotels last week took the trend a stage further by launching its brand overseas: signing a deal for the first of its hotels to open in Dubai next year. It will be the first mid-market hotel on the luxury studded Al Wasi Road, sitting literally in the shadow of the Burj Al Arab and Al Waleed Real Estate’s CEO didn’t miss the significance:  “There was a need for a mid-market hotel of this calibre in this location and India has been the largest source of tourists into Dubai, as well as the UAE as a whole, for over three years now.” To save you Googling it up, the exact figure is 13%: India now accounts for a whopping 13% of total tourist numbers into the Emirates, which shouldn’t come as a surprise to anybody given the subcontinent’s wealth and proximity as well as the population’s found mobility.

And now they’ll recognise at least one familiar, distinctively Indian hotel brand when they get there…Plus ca change.

Red Ribbon Asset Management is the founder of Eco Hotels, the world’s first carbon neutral mid-market hotel brand, offering “green hospitality” as part of a progressive roll out across India which intended to take full advantage of current market opportunities on the subcontinent. The brand offers sustainable living without compromising on standards of hospitality and is designed to cater to commercial and recreational travellers alike.

Red Ribbon CEO, Suchit Punnose said:

Working as part of the Eco Hotels Project has certainly taught me the importance of branding and product profiling in the hospitality sector, so I was pleased to read about the renewed emphasis on branding generally and unsurprised to see that it has now increased the mid-market share to just shy of 50%. Monolithic 2000 room hotel chains are no longer the first choice for travellers, especially given all the evidence suggests they are increasingly looking for accommodation that also complements their preference for sustainability.

And that’s important because the boom in Indian tourism (domestically and internationally) is playing a significant part in driving forward the subcontinent’s resurgent hotel and hospitality sector. It’s certainly an area that cannot be overlooked when seeking out the best investment opportunities over the coming years.

That’s why I’m very proud that Red Ribbon has played such a significant role in the creation and development of the Eco Hotels Project, spearheading the response to that demand in an environmentally friendly manner.

Smart Eco Hospitality - Red Ribbon Asset Management Plc - Eco Hotels

Better Smart than Big: India’s Eco Hospitality Sector

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The problem with global conglomerates is that they have global reach but monolithic thinking. Look how long it took Facebook to respond to high profile data breaches, with the hardly media shy Mark Zuckerberg virtually disappearing from the ubiquity of his own platform for weeks on end. Think of IBM: slow to the point of near extinction in responding to software innovations in the market, and poor old Kodak, slow to the point of actual extinction in meeting challenges posed by a blizzard of new, digital based technologies. So it should be a sobering thought for our current crop of global empire builders that big certainly doesn’t always best, because all too often great size comes with an inbuilt decision making stasis …in business, it’s always better to be smart.

Even so the thickest commercial hides can sometimes let in a little oxygen, which is why economists still like to look at the interesting conundrum of scaled decision making: big companies deluded into thinking they are fleet enough of foot to react on time to critical and fast moving trends, rather like an elephant finding a discarded pair of tweezers and thinking they must be good for something.

The latest example is Hilton Hotels, which this month unveiled its “Travel with Purpose Campaign” designed to reduce the group’s global carbon emissions by, wait for it, reusing old bars of soap left behind by its guests. Good luck with that: the Hilton Hotel chain on the subcontinent has properties with in excess of 1000 rooms pumping out as much carbon as a Victorian glue factory, so you might be forgiven for thinking the odd bar of soap is unlikely to make much of a difference. But the Hilton monolith is simply reacting (monolithically) to the unsurprising revelation that most of its guests are now placing environmental concerns at the top of their list when deciding where to stay. Hilton knows this because it conducted an expensive survey of 72,000 of its guests in May this year.

Of course it could have saved its hard earned cash and had a look instead at earlier newsletters on this site (amongst other places): sustainability concerns have been a key trend in the Indian Hospitality sector for at least the last decade and are becoming progressively more important. Hilton’s laborious, too little too late response is yet another example of big not being better. Big, in this case, is positively bad.

The companies that are instead best placed to make the most of eco trends are not operating out of densely occupied concrete blocks. They are strategically positioned in India’s mid market hospitality sector, with Lemon Tree Hotels and Eco Hotels being prime examples: smaller in scale and with sustainability ingrained into the fabric of their buildings (rather than in last minute memoranda urging staff to pick up discarded soap). As a result Lemon Tree Hotels is currently valued at 17 times EV/EBITDA and since completing its successful IPO in March of this year the company’s shares have risen in price by an impressive 28 per cent.  

Both companies find themselves carried forward by a relentlessly upbeat market outlook, typical of which is JLL India: “The hospitality industry is witnessing a new buoyancy” and Anarock Capital, where Shobbit Agarwal had this to say: “Stocks of listed hotel companies are on a new high due to improving fundamentals increased occupancy levels, higher revenues and average room rates seeing 5 to 6 per cent year-on-year growth”.

Quite so, we don’t need an expensive survey to tell us that.

And it also has a great deal to do too with a recent surge in India’s domestic and overseas tourist numbers as well as an increasingly affluent middle class demographic prepared to put their money where their heart is…Hilton Hotels might take note.

Red Ribbon Asset Management is the founder of Eco Hotels, the world’s first carbon neutral mid market hotel brand, offering “green hospitality” as part of a progressive roll out across India which intended to take full advantage of current market opportunities on the subcontinent. The brand offers sustainable living without compromising on standards of hospitality and is designed to cater to commercial and recreational travellers alike.

Red Ribbon CEO, Suchit Punnose said:

I’ve always believed in the essential flexibility and virtue of smaller business platforms, capable of responding quickly and effectively to market opportunities as well as medium term market trends. Because, to paraphrase Keynes, over the medium term a business that finds itself rooted in a fixed strategy can also all to often find itself dead. Just look at the object lesson provided by the once all powerful Kodak Corporation.

And the sheer pace of change and market innovation in the subcontinent’s hotel and hospitality sector at the moment makes that lesson all the more compelling. Mid market groups like Lemon Tree Hotels and Eco Hotels are quite simply better placed to respond successfully to rapid innovation and key demographic changes. Not least because they have both been positioned from the outset to anticipate a sustained and progressive move towards sustainability based tourism and business travel. Sustainability is built into their DNA.

That’s why I’m particularly proud of the part Red Ribbon has played in founding Eco Hotels and helping with its strategic development, anticipating exciting developments in Indian markets capable of generating above market rate returns for our investors. So, whilst like the Hilton Group, I’m sure Eco Hotels will be encouraging guests not to waste soap, the company has a lot more to offer in the future.

Hospitality with Responsibility - The Explosive Growth of India’s Mid Market - Eco Hotels

Hospitality with Responsibility: The Explosive Growth of India’s Mid Market

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Jawaharlal Nehru famously championed “hospitality with responsibility” and riding high as it is on the crest of an unprecedented surge in tourism, India is holding hard to the father of the nation’s message. Not least because public awareness of environmental imperatives has never been higher on the subcontinent, leading Prime Minister Modi’s Government to respond (characteristically) with a programme of market driven “green hospitality” initiatives that embrace everything from streamlined Visa procedures through to water sustainability programmes and everything in between. The result is a striking pattern of explosive growth in India’s important mid market sector where the bulk of those initiatives are currently taking root.

And it’s not all about the environment either, with most analysts also pointing to the importance green hospitality is having on financial performance as well, and not just on the bottom line either where reduced energy costs and leaner waste targets have an obvious potential to cut operating costs. Environmentally friendly policies also have an almost unique potential to attract the new generation of business and social travellers who are placing sustainability at the top of their checklists, with even the hardest nosed business travellers supporting the trend: Deloitte’s, scion of the pinstriped traveller, has published polling results taken from 1,000 businessmen and women, no less than 95% of whom wanted more green initiatives with 38% admitting to checking whether their chosen hotel was sufficiently green before deciding to book.

Put it another way, in less desiccated language not favoured by Deloitte, Eco Hospitality has now become an essential part of Mid Market’s success story on the subcontinent… and there’s no sign of it losing any of that importance any time soon.

Just look at Lemon Tree Hotels and Eco Hotels both of which are blazing a trail in making the most of the opportunities India’s mid market hospitality sector has to offer, each of them pursuing ambitious expansion programmes and delivering above market rate returns for investors.

Red Ribbon Asset Management is the founder of Eco Hotels, the world’s first carbon neutral mid market hotel brand, which has “green hospitality” built into its genetic structure. The company has embarked on an ambitious programme to roll out a chain of new facilities across the subcontinent, designed to take full advantage of market opportunities currently available in India’s mid market segment. The brand offers sustainable living without compromising on quality and will cater for commercial and recreational travellers alike.

Red Ribbon CEO, Suchit Punnose said:

India has become something of a crucible to test out trends in the hospitality sector. As most of us will have observed over recent years “green tourism” and “green hospitality” have become increasingly dominant in determining the choice of hotel for business and recreational travellers alike: part of a global environmental trend that seems, ironically, to have picked up pace even more following Donald Trump’s withdrawal of the United States from the Paris Climate accords.

But what makes India different from other bellwether economies worldwide is the sheer pace of the change that is currently taking place on the subcontinent. Number of travellers choosing to travel to and across India has reached an all time high, carriers are reporting exceptional volumes and occupancy rates and the mid sector is picking up a larger percentage of these travellers than ever before. I’m sure that will all in lead to an acceleration of the rate at which the trend for “green tourism” evolves in India as opposed to other markets across the world, meaning we can expect to see green tourism’s importance on the subcontinent before anywhere else.

As the article also points out, Eco Hospitality is an essential part of this trend so I’m very much looking forward to seeing how things develop, especially with Red Ribbon’s Eco Hotel project playing such an important part in the market.

India - The case of Investment - Red Ribbon Asset Management Plc

India: The case for Investment

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United Kingdom is the gateway to many investment opportunities, of which India is one to take notice of. India’s economy and business landscape are changing, ushering in a period of growth, prosperity and investment opportunities.

Let’s look a little more closely at just a few of the more compelling reasons why investing in India is an opportunity you can’t afford to miss:

The Indian economy is the fastest growing major economy in the world. It surpassed China in 2015 and is forecast to expand by 7.7% in 2018, before accelerating to 8.3% in 2019. India’s population is also expected to increase from 1.34 billion and exceed that of China, within the next five years.

As 10 million countryside inhabitants move into India cities, per annum, urban society across the country is increasing. Those new and growing societies are increasingly wealthy, sophisticated and technologically literate, providing a platform for growth, fuelled by demand.

India also has an incredibly supportive government that’s working hard to facilitate economic growth and a fundamental change in the way the population lives and interacts. PM Narendra Modi has introduced a single tax base across India’s 29 states, while the regulatory environment has also radically transformed.

United Kingdom – gateway to India

United Kingdom is an economy that has a proven track record at identifying areas and regions that have a lot to offer. That’s why India is already among the countries where investments and partnerships can be easily accessed via United Kingdom.

As a UK-based business, Red Ribbon Asset Management Plc is an obvious partner to access those Indian investment opportunities.

Not only do we understand what is driving India’s economy and investment boom, at Red Ribbon we know how different areas of investment are performing. Our well-connected Indian-based team, provides hands-on support to our UK-based investment specialists. It’s a successful partnership, that ensures we identify the right investment for each and every investor we work with.

Red Ribbon has been involved in numerous major projects in India and the UK, that have proven successful in both execution and from an investment perspective.

But, that’s not all. At Red Ribbon we believe investments should offer benefits to everyone involved. Aligned with our philosophy and core values, all our investments are morally acceptable, provide measurable social and environment impacts and deliver strong financial returns.

As you can see, Red Ribbon Asset Management Plc has been quick to recognise the potential in India and through us you can access an array of investment opportunities.

Red Ribbon brings you a gateway into investing in India, offering bespoke services in wealth management, private equity and real estate. Our strong network of contacts means we know India from the inside and outside. That’s just one reason why we’re ideally placed to identify the best opportunities as they arise.

Red Ribbon CEO, Suchit Punnose said:

India is more than just an exciting investment opportunity, it’s also a driver to global economic growth and that’s why Red Ribbon has long held the view that no investment portfolio can be considered properly balanced unless at least 10% of its holdings are deployed in Growth Markets and, of course, for us that has always meant India in particular.

And of course this vindicates Red Ribbon’s decision in 2008 to place India and its fast growing markets at the heart of our investment strategies from the very start. Our expert advisers now have an insight into what makes the subcontinent’s markets tick, what makes them so profitable and where the best opportunities for above market rate returns are likely to be found.

The Phenomenon of Eco Hospitality - Red Ribbon Asset Management - Eco Hotels

The Phenomenon of Eco Hospitality

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This year’s Sustainable Travel Report has reinforced the continuing momentum of Eco Hospitality in India: 84% of business and recreational travellers now confirm a preference for sustainable destinations, and as the saying goes, “sustainability starts where you stay”. Two thirds of travellers are willing to spend 5% more on accommodation if it meets sustainable criteria, meaning everything from water and energy consumption through to macro environmental management systems. But to get a real feel for the importance of those findings, you have to place them side by side with tourist and business statistics on the subcontinent and, in particular, for the first half of this year. It helps explain why India is currently experiencing an Eco Phenomenon.

The subcontinent will be the fourth biggest tourist economy in the world within the next four years, bigger than Italy, the United Kingdom and Australia put together and a major factor in this explosive growth is internal demand. In May alone airlines in India reported a 16.6% growth in passenger numbers, carrying 11.9 million customers with 80% occupancy (Spicejet reported an astonishing 94.8% occupancy rate). And with tourist numbers on the subcontinent riding at such an all time high with 84% of tourists preferring sustainable destinations (they have to stay somewhere when they arrive), even the most rudimentary of economists could spot an emerging trend.

Certainly Lemon Tree Hotels and Eco Hotels haven’t been slow to pick it up: both companies are currently spearheading key innovations in India’s hugely significant mid market hotel segment, with eco hospitality at the heart of each of their business models.

No surprise then that JP Morgan reported Lemon Tree in June to be delivering better than average cost control and execution ratings as well as higher return rates on room occupancy. Better Eco credentials aren’t just a honey pot for prospective travellers, they make sound business sense too with reduced commodity use (and costs) delivering straight to the bottom line. JP Morgan have also pinpointed enhanced operating leverage as a driver for future growth for at least the next three years, which is likely to deliver improved capacity for better pricing and capacity structures.

Lemon Tree and Eco Hotels continue to roll out new hotel units across the subcontinent, with the former last month investing another Rs 850 Crore into its aggressive expansion programme. Interestingly enough, Lemon Tree’s President Vikramlit Singh has also again highlighted a continuing mismatch between demand for hotel rooms and availability as a likely source of future profitability, so there’s no sign of those capital programmes losing their momentum anytime soon.

Red Ribbon Asset Management is the founder of Eco Hotels, the world’s first carbon neutral mid market hotel brand, offering “green hospitality” as part of a progressive roll out across India, designed to take full advantage of market opportunities available on the subcontinent at the moment. The brand offers sustainable living without compromising on quality and will cater for commercial and recreational travellers alike.

Red Ribbon CEO, Suchit Punnose said:

Market changes rarely come about in isolation, with one revolutionary event: the iPhone would have been an expensive mirror without something to plug it into. And the same goes for economic trends generally where we should look for the confluence of a number of key factors before drawing any conclusions. That certainly applies to the Indian Eco Hospitality sector where a huge uptick in business and recreational travel on the subcontinent has coincided with a surge in demand for sustainable destinations. With mid market hotels already roaring ahead, added eco credentials are giving the platform a turbo charger.

And I would add a third factor too. As may not be generally known the whole, vast expanse of the subcontinent currently has less hotel rooms that the island of Manhattan alone. So the point mentioned at the end of the article also has considerable importance to my mind: demand for hotel rooms is in any event seriously outstripping supply and that is bound to make for a more profitable outlook. A turbo charge for the turbo charger perhaps?

Eco Hospitality India - Red Ribbon Asset Management Plc

Eco Hospitality as part of India’s Climate Change Agenda

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What exactly do we mean by Eco Hospitality? McDonalds has its own unique take on things, announcing plans to serve rice at tourist resorts on the subcontinent: rice with extruded cheese or spicy packet sauce. Take your pick. And PepsiCo India has a global sustainability agenda as well, planning to reduce the size of its Lays and Kurkure snacks in a valiant effort to “limit the company’s global footprint”. No sign yet of any plans to reduce the price of the smaller bags though. But beneath these slightly risible gestures there is a serious point. We have all witnessed the cruel after effects of the recent monsoons in Kerala, which have displaced hundreds of thousands and claimed the lives of hundreds more. And global warming is widely identified as a key factor behind the unusually heavy rainfalls.

So its welcome news that with or without extruded cheese on our rice and smaller bags of crisps, the subcontinent is already working at the forefront of global climate change policies, especially since the United States withdrew from the Paris Climate Accords last year, and India certainly knows what Eco Hospitality means because Eco Tourism is now an integral part of its economy.

Take one small example: operating at the epicentre of this month’s flooding in Kerala, the Tourism Department announced an initiative last month which will literally light up tourist spots by installing solar powered street units, including along the entire length of the beautiful Kovalam Beach where LED lighting systems link the seashore to local thoroughfares. The solar units are also hooked up to the Internet through a mobile app that will monitor power usage and report in if units are damaged or tampered with. It all costs Rs 31 Lakh but will save the State much more in electricity costs and, much more importantly, will help preserve the State’s precious environment for the future. There are also plans to extend the project to Varkala and Akkulam.

It might seem slight and insignificant given the scale of the recent disaster, but when Kerala recovers (as it will), it is one step further forward towards addressing the environmental issues that contributed to last week’s events. And on any basis it’s a lot better than extruded cheese and a bag of crisps.

Another good example of an Indian business looking to work in harmony with its environment is Lemon Tree Hotels where every hotel in its chain on the subcontinent will now adopt a stray dog from the local area and give it a home in the lobby. As history tells us, small steps can make a difference if we take them together. And as Eco Hotels has also demonstrated with its innovative “green hospitality” brand, the concept doesn’t just make environmental sense: it makes good commercial sense too, with lower operating and capital costs factoring into a leaner business model. Lemon Tree’s shares jumped 2% in a single day on 17th August, so the model is obviously working.

Red Ribbon Asset Management is the founder of Eco Hotels, the world’s first carbon neutral mid market hotel brand, offering “green hospitality” as part of a progressive roll out across India which is designed to build and expand on economies provided by the platform in conjunction with explosive growth in the Indian tourism sector (and mid market hotels in particular). The brand offers sustainable living without compromising on standards of hospitality and will cater for commercial and recreational travelers alike.

Red Ribbon CEO, Suchit Punnose said:

I think we were all shocked to witness the scale of the devastation that has unfolded in Kerala this month, and our best wishes and sympathies go out to all of those who have been so severely affected. But it is right too that we try to understand the reasons behind this, the worst monsoon flooding in India for more than a hundred years and its difficult to resist expert suggestions that global warming and avoidable harm to the environment could well be a major cause. So it is obviously important that we should try to do something about those long-term trends as well.

I am proud that India is working at the cutting edge of climate change policies across the globe and, in however small a way, those policies will I am sure help to make Kerala a safer and more secure, even more beautiful place to live in the future. Eco hospitality is a vital part of that equation for an area which is so heavily dependant on international and domestic tourism. As the article says, small steps taken together can change the world.

Sustainable Tourism - Hospitality - Eco Hotels - Red Ribbon Asset Management

Sustainable Tourism: Balancing the needs of the fastest growing hospitality market in the world

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The World Travel and Tourism Council predicted this month that within the next decade India will be the fourth largest tourism economy worldwide, snapping at the heels of China, the United States and Germany. The Report makes a particularly interesting finding that this trend is not just driven by increasing numbers of international business and tourist travelers: significant growth is being driven from within the subcontinent itself, fueled by India’s rapidly expanding middle class and an increasingly technology literate young population who are quicker than ever to reach for their smartphones to book a holiday. Domestic travel is now the real catalyst for change in a burgeoning hospitality sector with a striking 90% of travelers being Indian Nationals.

No surprise then that In May of this year domestic airlines on the subcontinent reported a 16.53% growth in passenger numbers compared to the same month in 2017, with the Directorate General of Civil Aviation confirming that Indian carriers had transited no less than 11.9 million passengers during that single month. Across the board scheduled carriers flew to an impressive 80% occupancy with Spicejet leading the way at a 94.8% load factor.

These are hugely significant trends for the future of India’s economy, with the hospitality sector having already accounted for more than $230 Billion of the subcontinent’s GDP in 2017 (up from $209 Billion the previous year) and no suggestion that current unprecedented rates of growth in the sector are likely to slow anytime soon.

This pattern of exponential growth shouldn’t come as a surprise to anyone: India has 36 world heritage sites, 103 National Parks (with the Taj Mahal thrown in for good measure) as well as Goa’s beaches, the foothills of the Himalayas and an astonishing breadth of wildlife from tigers and elephants to snow leopards. All of that is bound to attract tourists in large numbers, but such rapid tourist growth can of course bring its own problems, as anyone struggling through St Mark’s Square in mid August can testify. Growth of the wrong kind can threaten the fragile ecostructure of the very locations proving to be so popular with tourists, to such an extent that some of India’s tiger reserves no longer have any tigers to see.

More than 30,000 plastic bottles are left behind each summer by tourists in the high altitude Himalayan Ladakh desert of Jammu and Kashmir and on Mount Everest itself eight to ten tons of waste are left behind on the mountain every year: everything from empty oxygen bottles to rucksacks, tents and discarded climbing equipment.

So there is a balance to be struck: recognising the importance the hospitality sector now has for the subcontinent’s economy, but at the same time striving to support unprecedented growth within the sector in a manner that is sensitive to the needs of India’s precious ecosystem. This is the principal reason for the success of Eco Hospitality as a key driver of India’s mid market hospitality sector: not just because it is the only model striving to get this critical balance right, but because the majority of those travelling on the subcontinent now recognise the risks greater tourist numbers are posing to the natural habitat and are actively seeking out accommodation that supports its preservation.

Red Ribbon Asset Management is the founder of Eco Hotels, the world’s first carbon neutral mid market hotel brand, offering “green hospitality” as part of a progressive roll out across India which is intended to take full advantage of current market opportunities on the subcontinent. The brand offers sustainable living without compromising on standards of hospitality and is designed to cater to commercial and recreational travelers alike.

Red Ribbon CEO, Suchit Punnose said:

No surprise indeed that tourists are flocking in unprecedented numbers to the natural beauties and historic splendorous of the subcontinent, but it is still striking to learn just how significant a part internal tourism is playing in buoying up India’s resurgent hotel and hospitality sector. It’s certainly an area which can’t be overlooked in seeking out the best investment opportunities over the coming years and that’s why I’m proud Red Ribbon has played such a significant role in the creation and deployment of the Eco Hotels Project across the subcontinent.

As the article points out, tourists and business travelers alike are looking increasingly for hotel accommodation that is compliant with requirements of eco sustainability, and as the world’s first carbon neutral hotel brand, Eco Hotels are spearheading the need to meet that demand. It not only makes good sense for the environment, it makes good business sense too.

BSE Market Report - Red Ribbon Asset Management Plc

BSE Market Report: A Good Week for Tech Stocks, Hotels and Bears

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Beware the Chef who won’t eat his (or her) own food, but fear the food even more: on which basis the Bombay Stock Exchange (BSE) was certainly cooking this week. Tata Consultancy Services announced a second stock re-purchase in as many years, equivalent to some 2% of its overall share value, and India’s largest software exporter is now offering shareholders a premium of 15% on their holdings. So it was something of a statement of the obvious last week for its Chairman to characterise the move as “shareholder friendly in terms of dividends”. The Pope is still Catholic and Bears search for bosky restrooms.

But perhaps more importantly for the Bombay Stock Exchange at large, the move by Tata Consultancy is expected to prompt other listed companies to follow suit, with Cognizant already announcing last Friday that it is going forward with its own $600 Million accelerated share re-purchase programme, committing it to £2.7 Billion in repurchases by the end of next year.

These are not just isolated instances. The Indian Tech sector is white hot at the moment, with influential market commentator Amitad forecasting annual e-commerce revenue to rise by a staggering 20.2% by 2022, that’s $52 Billion or more than double the equivalent 2017 figure. Amitad’s Report also noted that 37% of the subcontinent’s population are now regular Internet users and 14% of them make regular on-line purchases, a figure, which is likely to grow exponentially over the next few years. Online consumers in India will constitute 90% of the population by 2020, and the subcontinent is already the second largest Internet user in the world, bigger than the United States … So Flipkart will be happy as well.

And it isn’t just IT and Tech Sectors that are looking strong at the moment. Taking advantage of an already resurgent Hospitality segment, FabHotels announced plans last week to open up new Hotels in fifteen additional cities across India (more than 1,000 units altogether). The company raised $25 million in 2017 through a Series B investment round led by Goldman Sachs and a spokesman for the company summed up its continued optimism this week:  “It is a sunrise moment for the Hospitality Sector. The mid market segment is driving the industry forward and more and more hotels will align with these new-age brands and improve consumer experience”.

The move follows the continuing success of EcoHotels, the World’s first carbon neutral hotel brand, which is also picking up business on the subcontinent at the expense of more traditional, chain operations.

Red Ribbon Asset Management Plc is the founder of Ecolodge, a key brand within the Eco Hotels Group, which has an ambitious program of developing a £1 Billion premium value hotel network, supporting sustainable living without compromising on standards of service delivery. Eco Hotels is modelled to operate from a low cost and high return platform, working to deliver above market rate returns for investors.

Red Ribbon has been specialising in India’s Markets since the company was founded more than a decade ago, bringing an unparalleled expertise to its investment policies on the subcontinent with specialist sectoral advisers working from it’s Head Office in London in conjunction with more than a hundred local experts on the ground in the subcontinent itself. And by drawing on that body of expertise The Red Ribbon Private Equity Fund now offers an opportunity to secure above market rate returns in this, the fastest growing large economy in the World.

Red Ribbon CEO, Suchit Punnose said:

It’s impossible to overstate the importance of India’s Technology Sector at the moment. In conjunction the subcontinent’s burgeoning, increasingly urbanised and much more sophisticated population, India’s technology revolution is going to be a key driver for future economic growth. As the article says, Flipkart will certainly be happy!

But we mustn’t forget that economic growth is continuing in other critical areas of India’s as well, and these same demographic trends are currently delivering unprecedented growth in the hotel and hospitality sector as well: and the mid market hotel sector in particular is showing strong potential for sustained growth.

I’m particularly interested in that because of Red Ribbon’s founding participation in the Ecolodge Brand, where sustainability and environmentally friendly factors offer unique attractions in today’s market. And like FabHotels’ Chairman, I certainly believe that those hotels which are aligned most closely to what he calls “new age brands” will ultimately deliver the best returns in the long run.

India Green Hotel - Eco Hotels - Red Ribbon Asset Management

Going Green: India’s hotel sector is changing its complexion

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On average the phrase “Eco Hotel” is searched at least 4,500 times a day on Google, targeting businesses operating on the subcontinent: stark evidence (if evidence be needed) that travellers of every complexion are increasingly aware of the importance of environmental compliance in their choice of hotel accommodation. But the recent surge in demand for Eco Accommodation is still not wholly matched by supply in India (the subcontinent’s vast expanse currently has less hotel units than the State of New York alone). And it’s not just about the environment either, because Eco Hotels in India are more and more reaping the economic benefits of environmentally friendly operations through reduced room costs and higher occupancy rates.

 

With unprecedented numbers of tourists and business travellers, the Indian hotel mid market is naturally focusing on the need to meet this key demand matrix: making better use of energy, water and building materials whilst at the same time maintaining the highest standards of service and accommodation quality. This is the successful formula that lies behind the recent growth of India’s Lemon Tree Hotels Group (with a very recent and oversubscribed IPO now under its belt) as well as Eco Hotels, the World’s first carbon neutral hotel brand; both of which are now picking up business at the expense of more traditional, chain operations.

 

From the point of view of the hotel operator, eco compliance also reduces costs and potential longer-term liabilities, generating a higher return and lower cost investment platform, so it is safe to say that the current trends towards “greener” delivery are likely to continue into the foreseeable future: if only because they make solid business sense too. It helps, of course, that the eco model is also attracting sustained levels of high demand in a largely unsaturated sub continental market.

 

And the core concept of a truly “green hotel” starts (literally) from the ground up, as part of the original construction process: using renewable building materials and incorporating design features which will eventually make reduced energy and resource allocation part of the building’s DNA, an intrinsic component of its operating structure. Once completed, it comes down to recording current and chronological usage statistics, acting on them and establishing key baselines and targets for future consumption (70% of non compliance variables in the segment involve excess guest consumption, so accurate record keeping is crucial). Inevitably, therefore, most of the day-to-day procedures for “going green” take place behind the scenes of any hotel’s operations.

 

All of this is also helped (crucially) by a range of key policies and initiatives instituted by the Indian Government over recent years, favouring eco hotel and mid market operation: all of them designed to deliver eco hotels as sustainable business ventures with clear short term deliverables for the environment (and, not unimportantly, profitability too).

 

 

Red Ribbon Asset Management is the founder of Ecolodge, a key brand within the Eco Hotels Group, which has an ambitious programme of developing a £1 Billion premium value hotel network, supporting sustainable living without compromising on standards of service delivery. And given the Eco Hotels brand is also modelled to operate from a low cost and high profit platform, it also delivers above market rate returns for investors. What more could you ask for?

Red Ribbon CEO, Suchit Punnose said:

I am constantly struck by the fact that the Island of Manhattan alone has more hotel accommodation than the entire, seemingly endless expanse of India’s hinterland: but when you bear in mind that there is also now an unprecedented surge in tourist and business travelers on the subcontinent, most of them looking for eco friendly accommodation, it starts to look like a phenomenon with only one outcome…a resurgent Indian mid market for Hotels and Eco Hotels in particular. Not that we didn’t see it coming.  For several years now Red Ribbon has been the driving force behind the Eco Hotels project on the subcontinent, successfully meeting the unique challenges that this congruence of market economics and public demand has generated. But we aren’t just proud of our participation in Eco Hotels; we think it makes great business sense too.

IPO market India - Red Ribbon Asset Management

Getting to Market: India’s IPO Powerhouse

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We grow used to newspaper headlines barking out “the hottest April ever” and, perhaps oddly, “the coldest April on record” (both of which now seem to be true), because we live in a world of complex superlatives, most of which will be forgotten in a week. But here’s one you would do well to remember: 2017 was the best year ever for India’s IPO markets, with more than $24 Billion being raised from local and overseas investors. And 2018 is looking even more encouraging for the subcontinent. But unlike weather forecasts, it ought perhaps to be entirely predictable that the fastest growing large economy on the planet should also have a thriving IPO market. A powerhouse for its global economic ambitions.

Last year saw the highest ever number of oversubscribed offerings on Indian markets (a sure sign of pent up consumer demand: think back to BT and British Gas IPOs in the 1980s). Astron Paper and Board Mill were oversubscribed by more than 243 times when the company’s offering was taken to market, eventually listing on the Bombay Stock Exchange at an astonishing premium of 140% (the stags will have been happy).  The IPO of Salasar Techno Engineering also generated investor subscriptions running at 273 times value in July last year, making it the first company in over seventeen years to be oversubscribed on the Exchange by a factor of more than 270 to value.

But in the light of current trends, it certainly won’t be the last. Projections for performance across India’s IPO segment in 2018 all point to ever-stronger performance this year, despite a sluggish start with the ICICI Securities IPO last month (where market reaction was coloured- as generally within the Financial Services Sector- by key initiatives announced in the Union Budget). Operating in India’s critical mid market hotel sector, Lemon Tree Hotels saw its shares oversubscribed on offering last month by a factor of 114% (the QIB quota was subscribed 3.88 times to value). And of course we still wait with bated breath for the proposed mega IPO of the National Stock Exchange (NSE), India’s largest Bourse as well as a key platform for future market success in itself.

From this unique dual position of key platform and client, NSE’s Managing Director and CEO, Vikram Limaye is probably in as good a position as anyone to calibrate future trends, and he certainly wasn’t mincing his words last month when he reported on the progress of NSE’s IPO:

“We expect this year to be much better than last in IPO activity, both in terms of the number of offerings on our main Board and also in the SME Exchange”.

Red Ribbon’s Private Equity Fund aims to capitalise on these resurgent IPO markets, offering opportunities to participate in this, the world’s fastest expanding growth economy. And given India has always been at the heart of Red Ribbon’s investment strategies since the company was founded more than a decade ago, the company bring a unique level of specialist knowledge to leverage above market rate returns for its investors.

Red Ribbon CEO, Suchit Punnose said:

As was mentioned in last post, IPOs are more and more becoming a preferred exit route for private equity investment on the subcontinent, so it’s highly significant to note that IPO markets in India are now performing at an all time high. All in all it is very hard to disagree with Vikram Limaye’s prescient observation that nothing by way of market performance points to 2018 being any less of a record breaking year than 2017 has proved to be.

And as ever we will be keeping a close eye on detailed development in the sector too, in particular for the pointers which last month’s Lemon Tree IPO last month might provide for future trends in the mid market hotel sector, where Red Ribbon’s own Eco Hotels project is already making a significant market impact.

Red Ribbon

At Red Ribbon we understand that the transition towards a resilient global economy will be led by well-governed businesses in mainstream markets, striving to reduce the environmental impact of their production processes on society at large and on the environment as well.

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