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Modular Construction

Saving Time, Money and the Environment through Modular Construction

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Saving Time, Money and the Environment through Modular Construction

Modular construction methods are often hailed as a more cost-effective option, but that’s far from the only benefit pre-fabricated buildings can have. We take you through how modular construction firms can save on time, the environment and money, while also delivering a return on investment many would be happy to receive.

It’s no secret that global real-estate related costs are rising. The value of property is broadly on the up. Meanwhile, the cost of materials is also climbing, while skilled construction professionals are becoming more scarce, pushing their value up, too. But there is a solution to this problem: modular construction.

Just like many other countries, across India, many people still have a dream of owning their own home. However, with more people moving into urban areas of the country from the rural regions, that’s not always an easy achievement, even for those with stable, well-paid jobs. Indeed, research suggests some 110 million additional housing units will be required by 2022. That’s a tall order and once that is simply unachievable through traditional construction methods alone.

However, major advances in modular construction techniques mean homes can be built quickly, in an environmentally friendly way, while also proving a more cost-effective option.

Saving you time and money

Much scepticism remains over how reliable and practical modular construction techniques are. Although, there are signs the opinion of the sector is improving as more businesses opt for it over traditional building methods.

One major factor that’s encouraging more businesses and home-buyers to choose a modular property is time. Once you gain permission, finalise plans and pay deposits, the fabrication of a modular building is much quicker than one constructed on site, in a more traditional manner.

That’s because templates and machinery in an established and regulated factory can create the specified shell of your building quickly and to approved safety standards.

Once those elements of the building, be it a home, a commercial office or even a hotel, are created, it’s then checked and verified through a reliable, tech-based system. This ensures all the required parts are there, of the right size and structure and are ready to be transported to the previously prepared building site.

This is where the costs savings come into play. Where a traditionally built property can require up to hundreds of on-site construction professionals to build up walls, ensure measurements are perfect and all the materials are as they should be, a pre-fabricated construction team is typically much smaller. That smaller team will also need much less time on site to construct the unit and ensure its safely in situ as planned, ready for the next step.

Again, with so much of the required works already done, the modular building requires only a little additional work on site, before the owner can get to work on the inside and make it habitable.

This means that while the cost of the materials used to construct a modular building aren’t particularly cheaper than for any other property, costs are saved through the shorter period of time skilled construction professionals are required on site. Meanwhile, the requirement of fewer construction professionals is also a financial benefit.

Environmental benefits

We then move onto the environmental benefits of the modular construction sector. First of all, the question of sustainability is one the massive global construction sector is increasingly being asked to answer:

  • Are the chosen materials sustainable, eco-friendly and long-lasting?
  • Can the pre-fab factories use sustainable energy sources?
  • Are the pre-fab factories sustainable and energy efficient?
  • Can they construct increasingly eco-friendly modular homes off-site?    

These are just a few details that require a positive answer from those modular construction companies who are beginning to gain support, momentum and business across India.

Modulex Modular Buildings PLC is one modular construction firm that can answer in the affirmative to the above questions and many more. It’s the world’s largest and India’s first, steel modular building factory.

Like all Red Ribbon investment projects, Modulex was created with three essential pillars of sustainability in mind:  Planet, People and Profit.

At a time when we need to find more economical ways of providing everything the huge population of India needs, in a way that protects their environment, while also delivering on profit to the investors who support those businesses, Modulex delivers on all three and is well-placed to do so for many years to come.

Red Ribbon CEO, Suchit Punnose said:

India’s Modular Construction market is expected to be worth close to $130 billion by 2023 and at Red Ribbon we think its imperative that as much of the growing industry as possible, is created with sustainability in mind, from the outset.

Providing the answers to India’s housing and construction needs is one thing, but doing it in a way that future generations can benefit from it on multiple levels, is something every investor in the industry should aspire to. That’s why we support Modulex and strive to ensure its green credentials can match its productivity and investor returns.

Eco Hospitality benefits India economy - Red Ribbon Asset Management Plc

How Eco Hospitality provides a double benefit for India’s economy

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How Eco Hospitality provides a double benefit for India’s economy

The World Bank’s January 2019 Global Prospects Report shows that the United Nations institution continues to expect economic growth across India to expand in 2019 and beyond. The group’s estimate for full-year GDP growth in 2018 is for 7.3%. Meanwhile, the World Bank is also anticipating that level to rise to full-year GDP growth of 7.5% in 2019, 2020 and 2021.

There are many details that go into a forecast like this, which means it is an absolutely achievable and likely outcome. However, if some of the assumptions made in those forecasts don’t proceed as expected. Or, something completely unexpected occurs, then India’s economy could either exceed or fail to achieve that forecast rate of growth.

Another interesting figure that has recently been published about India’s economy, comes from the Indian Government’s Ministry of Statistics. According to its 2018 Environmental statistics, the natural capital in 11 of India’s states has declined. Natural Capital “refers to all types of environmental assets existing in the environment” according to the report.

Once again, a lot of work and details go into creating these data and stats to produce reliable and correct information.
The figures in that painstakingly generated report suggest that, at least in some parts of India, pure economic growth is being achieved at the expense of the country’s natural capital, or native environment. And that’s not something that can be allowed to continue unchecked. At least not if the economy is to remain on a long-term and sustainable, positive economic growth path.

 

Sustainable, eco-industry

With that in mind, we now turn to a specific part of India’s growing economy, the Eco, or green sector. While much thought is being put into how to ensure residential building and consumer habits are increasingly sustainable and Eco-friendly, another key area in which India is already developing an Eco-footprint in, is hospitality.

For a country that welcomed over 10 million overseas tourists during 2017 – an increase of 14% in number and 15.4% in income generation – it’s a sizable industry. In GDP terms, the total contribution from travel and tourism across India made up 9.4% of India’s GDP in 2017, likely rising to around 17% in 2018, according to the World Travel and Tourism Council.

If, however, efforts into supporting and growing the eco-hospitality sector of the travel and tourism industry continue, or even gain pace, not only will green hotels, eco holiday destinations and sustainable tourist hot spots generate welcome income for the economy, it will also help improve and even expand the country’s natural capital. That’s something that’s a double boon for the sub-continent that consistently strives to develop, advance and improve.

Eco Hotels is among the green businesses that are investing in India’s economy, in a sustainable way. The world’s first carbon neutral, mid-market hotel brand has been operating since 2012 and is a popular option, for businesses, investors and also among those travellers who include Eco credentials in their search for holiday accommodation.

Growing India’s eco-hospitality sector is something that is will undoubtedly help ensure the country’s travel and tourism industry will contribute to both the financial GDP figures and its nature capital. But, even better, positive eco changes in one country actually contribute to green credentials and work towards stopping climate change on a global basis too.

With so many benefits to be gained from Eco hospitality, there’s little doubt as to just how valuable it is to India’s economic, business and green ambitions.

Red Ribbon is the founder of Eco Hotels, the world’s first carbon neutral hotel brand which offers “green hospitality” as part of a progressive roll out across India designed to take advantage of current market opportunities on the subcontinent. The brand meets all key sustainability criteria without compromising on either quality or standards of hospitality and is designed to cater for commercial and recreational travellers alike.

Red Ribbon CEO, Suchit Punnose said:

Understanding the full implications of the way in which a country achieves economic expansion is an essential part of working towards maximising that country’s growth potential, while also making sure all the ingredients required to continue growing and innovating remain available. While the 11 states experiencing a decline in their nature capital account for fewer than half of India’s regions, its not something that should be ignored.

With Eco Hotels, Red Ribbon is putting both India’s economy and nature capital at the heart of its investment strategy. Combatting climate change, promoting sustainable industry and creating profitable carbon neutral businesses, is the right way to create an investment that will remain popular and relevant for years to come.

Modular Construction Housing Needs - Red Ribbon Asset Management Plc

Modular Construction: The Answer to Housing Needs

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Modular construction is the answer to housing needs

Modular construction is an option for building homes that’s been available for over a century. Its popularity has ebbed and flowed with various significant events and global developments. However, one thing that remains clear about the system of preparing a property in a factory and then constructing that same building on site, in a matter of a few days or even just hours, is that it’s one that builders and policy makers return to whenever a new crisis or real need for homes arises.

Modular homes quickly gained in popularity in the US when they were developed and then sold by Sears at the end of the 19th century. That was fuelled by increasing wealth and an abundance of land to live and build on. The Great depression which began in 1929 soon put paid to the growth of buy and build your own home. And by 1932, Sears’ modular construction home sales were down by 40%. That was enough for them to put an end to that particular part of the business.

World War II ends

However, it wasn’t so very long from then, until the end of World War II in 1945 when soldiers and Governments could fully take in the sheer size of decimation across the UK and Europe, following years of fighting, destruction and bombing.
Add to that the returning soldiers needing homes to live in with their families and it was clear new homes needed to be built. Quickly. Pre-fabrication proved popular once again, with several areas in the UK benefitting from this fast and economical construction method.
However, once things began to settle, the workforce was back in balance and skilled builders were willing and able to work and modular construction, fell out of favour once more.

Confluence of developments

Fast forward to 2019 and there are a broad array of developments that have combined to once again push modular construction to the forefront of residential home building, but this time on a global scale:

  • The UK’s housing crisis where a lack of building during the credit crisis means there aren’t enough homes for the still growing population – the Government is supporting modular construction options to quickly build suitable housing for Britons across the country.
  • Geo-political unrest and refugees moving from place-to-place with nowhere to live – the RICS recently awarded a young home designer its top prize for his low-cost bamboo home that takes just 4 hours to build, to help with the slum crisis in the Philippines.
  • Economic prosperity and demand for homes and commercial properties in rural and city regions – India’s economy is among the fastest growing in the world and the changing needs of the country for less rural workers, to more city-based jobs, means more urban homes are required, quickly.
  • More and more people have developed an eco-conscience, either through their own nature or the growing number of ecological changes and concerns the global population is faced with – home-buyers and developers around the word are actively seeking green homes that are built with sustainable materials and are also powered that way, too.

Together, these separate crises and changes have led to greater demand for modular homes from a wide variety of consumers and policy makers. Meanwhile, that demand combined with a larger business desire to consider sustainability and green options, has encouraged further investment in the sector, too.

Modulex Construction is the World’s largest and India’s first Steel Modular Building Company, setting out to meet the challenges posed by India’s urban housing shortages in a practical and dynamic manner. The company is at the heart of a project established by Red Ribbon to harness the potential of India’s markets and delivering opportunities for investors. Because, when it comes to investing on the subcontinent, nobody knows India and its markets better than Red Ribbon.

Red Ribbon CEO, Suchit Punnose said:

When we think about how modular construction has time and time again proved the right answer to a crisis, problem or change, it becomes a much simpler decision as to whether or not it’s the right investment choice. Add to that the fast-growing knowledge about the importance of eco options and sustainability and modular construction becomes an even more compelling proposition.

Modular construction is already part of India – and the world’s – property development needs. And that’s something that is only going to increase as it becomes a major element of the construction landscape. Not only due to its speed of delivering the finished, habitable product, but also its cost-effectiveness, green credentials and sustainable factors it brings.  That’s why Red Ribbon was committed to Modulex Construction from the very beginning of the project and we remain committed to it today. I’m convinced it is not only a vital element in meeting market challenges but will also deliver on the unprecedented opportunities currently presented by the subcontinent’s burgeoning economy.

Modulex is the answer to many of India’s immediate needs and beyond. By creating sustainable, cost-effective homes and buildings across the country, Modulex is part of a growing industry that will remain relevant and profitable for many, years to come.

India Economic Ambition Planning - Red Ribbon Asset Management Plc

Broad-based planning supportive of India’s economic ambition

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Broad-based planning supportive of India’s economic ambition

It may be a New Year, but in many countries, old worries remain.

Take the UK, for example. Brexit is as uncertain as ever and that’s unlikely to change any time soon. Not only have forecasts for economic growth in the country been tempered by the lack of a clear path for Brexit, the latest survey data from IHS Markit have served to underscore the worry felt by consumers and businesses, with the country’s dominant services sector close to stagnation during December

However, the UK isn’t the only country experiencing uncertainty as to how 2019 will unfold.

India has an interesting 12 months ahead as incumbent Prime Minister Narendra Modi must work hard to maintain his position, after recent state election results make the likelihood of a new leader a real possibility. However, Modi has begun 2019 with ideas and a plan to show his support of the large farming industry, which is unhappy with the lack of fiscal support from the Government.

Speaking at the India Science Congress this week, the India PM urged scientists to find low-cost solutions for ‘social good’, including the creation of a more affordable and balanced agriculture industry and using big data analytics to improve crop yields for farmers with smaller holdings.

Introducing this element to the PM’s broader outlook for India’s economic development may always have been the plan. Although, there will likely be many who will say its merely a move to encourage more votes in an election year.

Regardless of the truth, this latest step is a further sign that Modi’s economic ambitions for the country remain front-and-centre.

Economic outlook

Even before this latest speech, the outlook for growth in the country was upbeat, particularly when compared with global competitors.

Despite some GDP forecast downgrades from the likes of Fitch Ratings and the OECD – to a still healthy 7.2% and 7.3% respectively – India is assessed to have outpaced China during 2018 and to do so again in 2019. India’s finance ministry, meanwhile, forecasts economic expansion of 7.8% during 2019, which would likely be similar to the average pace of growth across 2018, despite the slowdown to 7.1% in the third quarter.

Indeed, it appears that the third quarter GDP number is partly behind most of the forecast reductions, although other details also weigh. They include:

  • Generally weaker global GDP outlook.
  • Global trade worries.
  • Liquidity squeeze.

Modi and his Government, however, are upbeat and standing firm on their positive outlook. Many would say, with good reason.

Despite the difficult global scenario, some developments have been in India’s favour. The high price of crude oil has receded, despite the sanctions against Iran. Meanwhile, the country has moved up the World Bank’s ‘ease of doing business’ rankings. And while there has been some disagreement over the Government’s demands for the Reserve Bank of India to relax some restrictions on weaker banks, inflation has remained under control.

The decision to remain firm on many fiscal elements of governance while creating a more supportive backdrop for businesses and consumers, has been a core driver of the strong level of economic expansion across India. It appears that focus on moving forward with policies designed to encourage start-ups and innovation is very much still in place.

Modi told delegates at the Science Congress that following on from its success of improving its ‘ease of doing business’ score, it must now work to improve the ‘ease of living’ in India. That requires a broad-based plan; working to support businesses across every industry, supporting innovation and new ideas, job creation across every industry and providing a stronger and more reliable infrastructure for consumers.

At Red Ribbon we understand the importance of introducing innovative developments into an existing industry, which is why we believe the Eco Hotel industry is one that can help ensure India’s economic growth ambitions will succeed and even exceed expectations.

Red Ribbon CEO, Suchit Punnose said:

An economy the size of India’s will only flourish if a broad-based outlook is in place that also supports innovation and allows every industry to move in an agile fashion, particularly when it becomes clear that a new approach is required.

India’s leisure and tourism industry is a case in point. It draws tourists from within and without the country to its variety of regions and attractions. Introducing a new type of accommodation, such as Eco Hotels, will work to add yet another string to India’s bow as the destination of choice for an even broader range of holiday-makers and business travellers, while supporting jobs growth and industry innovation at the same time.

As long as business start-ups and industry innovations are supported and encouraged, they will only have a positive impact on India’s economy, the standard of living and the global environment.

Eco Tourism Odisha - Red Ribbon Asset Management Plc

How Eco-Tourism is generating economic boost for India

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How Eco-Tourism is generating economic boost for India’s Odisha state

Eco-tourism is becoming an increasingly important part of India’s economic growth. Just take a look at the state of Odisha. Located on the on the Eastern coast of India, on the Bay of Bengal, Odisha’s investment into eco-tourism is beginning to pay off, as it’s expected to generate some Rs6 Crore (£ 700,000) in revenue by the end of the 2018-19 financial year and providing a boost to local Government coffers.

As the popularity of the sector continues to grow, so too will the India Government’s return on its investment.

Of course, this economic benefit hasn’t happened overnight. However, nor has it taken as long as one might anticipate. The Odisha State Government has invested some Rs34 crore (£ 4 million) during the 2016-17 to 2018-19 financial years, into 37 separate eco-tourism locations across the state.

The eco-tourism offerings, created and managed by Odisha’s Forest and Environment Department are expected to reach Rs 10 crore (£ 1 Million) in the 2019-20 financial year, according to the department’s chief conservator of Forests and wildlife.

As you can see, even though the end of the current fiscal period has not yet arrived, the region is already seeing notable revenue generation form its investments, with further growth anticipated. That highlights the popularity of eco-tourism and hospitality as a something that’s more than a passing trend.

For the Indian sub-continent, which is awash with natural beauty and a growing desire to enhance that, with green, eco-friendly and carbon neutral hotels and other hospitality sector developments, now is the perfect time to support that ambition. Not only does it give tourists – from both India and the rest of the world – the opportunity to retain their eco-consciousness even when they travel far afield. But it also provides an option for investors to make socially responsible and sustainable financial decisions, too.

That’s essentially why opting for sustainable and eco-friendly investments is a good decision right now; they provide an option for travellers, countries and investors, who hold to environmental ideals that are now possible.

But Odisha isn’t the only region in India to pursue eco-friendly tourism. There are a growing number of mid-market eco-hotels that are continuing to expand across India. We’ve previously highlighted how Lemon Tree hotels is already proving a success in terms of cost controls and room occupancy rates.

Our own carbon neutral hotel group Eco Hotels, meanwhile, builds on everything we’ve mentioned here – and more. Demand for hotels across India is strong and rising, boosted in part, by the increasing middle-classes of the region.

Creating an eco-friendly hotel chain fulfills all the needs that we have identified:

  • The growing number of hotels across the subcontinent.
  • Creating sustainable, carbon neutral tourism options.
  • Giving investors peace of mind that their decision to support Eco Hotels, is a socially and environmentally responsible one, as well as a sound financial one.

Red Ribbon is the founder of Eco Hotels, the world’s first carbon neutral hotel brand which offers “green hospitality” as part of a progressive roll out across India designed to take advantage of current market opportunities on the subcontinent. The brand meets all key sustainability criteria without compromising on either quality or standards of hospitality and is designed to cater for commercial and recreational travellers alike.

Red Ribbon CEO, Suchit Punnose said:

The quick and impressive revenue generation from the commitment of an entire Indian state to eco-friendly tourism, only works to highlight our belief that socially and environmentally responsible developments and investment decisions, are the right path for, not only Red Ribbon, but the broader investment community.

Eco hotels, that are created to provide business and leisure travellers with the accommodation they desire, in the location of their choice, is just one way we are supporting this view. With demand for such options growing both domestically and internationally, the Eco Hotels brand is proud to be built with carbon neutrality and green credentials as part of its fundamental core.

I’m proud that Eco Hotels have done just that from the very beginning of the project, and proud too of the part Red Ribbon has played in developing the brand and its ambitions in the succeeding years, spearheading an environmentally friendly response to India’ resurgent tourism demands.

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.

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?

Hospitality in India - Eco Hotels - Red Ribbon Asset Management

Mid Market’s Moment: Trends in India’s Hospitality Sector

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India seems to do everything on a bigger scale these days: the fastest growing large economy on the planet and the highest rate of GDP growth anywhere in the world (currently a shade over 8%). So why settle for just one reason when you can have five? Why settle for one reason to explain the explosive growth in India’s hospitality sector over the past decade, something to tell us whether current growth rates in the sector are sustainable? And in case you’re wondering, the answer to the second part of that question is “yes”, but we’ll come back to that in a moment.

First though the reasons for the sector’s extraordinary growth, and as promised there are five of them: a surge in middle class numbers as India’s population becomes steadily larger and more affluent (in other words, much more consumer led demand); an overall increase in absolute business and leisure travel numbers; rapid urbanisation of the population (meaning that you need more and bigger hotels in densely populated areas); progressive economic growth (the subcontinent’s rising population has more money to spend) and lastly (fifthly, as I’m sure you’re still counting), a doubling in domestic air travel numbers over the last seven years. All these factors have now come together in a perfect storm to booster mid-market hotel brands in India, and that means in particular mid-size business hotels and eco friendly hotels.

In 2002 less than 25% of India’s hotel stock was mid-market in that sense, but this year the equivalent figure was 43% (according to the global advisory firm Horwath HTL). Between 2002 and March 2017 the supply of chain affiliated hotel rooms grew at 11% annually, but this too was outstripped by the mid-market segment, which grew over the same period at an impressive 15%. On any basis that is a striking shift in the market demographic over such a relatively short period, and if it tells us only one thing it is that now is perfect the time for investing in mid market hotel developments on the subcontinent.

And not just because statistics favour the segment so strongly, because development makes more financial sense in absolute terms too.

The average cost of building a mid market hotel room in India is between Rs 3 Million and Rs 7 Million, compared with a major chain development where the equivalent figure is Rs 15 Million which means that a mid market unit will break even faster: within six years rather than twelve for a chain development. The variables are in favour of the mid market too, because these break even projections are based on historic demand and, as we have seen, there has been a recent surge across the sector with current occupancy rates running at higher than 65%. The average room rates have also grown by more than 8% in the last decade, so we can realistically expect break even times to start coming down.

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 its current roll out programme which is structured 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.

And the timing couldn’t be better with everything pointing to a mid market surge.

Red Ribbon CEO, Suchit Punnose said:

Red Ribbon is the founding force behind Eco Hotels, and continues to support the project’s current roll out across the subcontinent where we are very confident that it will play a key part in the all important mid market sector. Not least because we know that a combination of demographic factors (driven primarily by India’s burgeoning and increasingly urbanised population) as well as the current acute shortage of hotel stock, combine to make the subcontinent’s hotel sector such an extremely attractive sector for investment.

To illustrate that point graphically, it is worth remembering that there are currently more hotel units on the island of Manhattan alone than there are in the entire expanse of the subcontinent. And that supply deficit is bound to create fertile ground for new investment, not least because of the five factors highlighted in the article.

At Red Ribbon we pride ourselves on our in depth knowledge of Indian markets, and the hotel and hospitality sector in particular. With more than a hundred advisers working daily on the ground in the market’s hot spots, we are confident that we can identify the best investment opportunities as they arise, taking full advantage of the trends for growth in this, the most exciting growth market on the world.

India: A Sustainability Superpower

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The Government of Prime Minister Modi certainly can’t be criticized for a lack of ambition; indeed, when it comes to international policy-making and geopolitical influence, India is now up there with the best. Take last month for example, when Swedish and Indian Corporates together with leading Banks and a raft of high-powered non-governmental agencies met in Stockholm to review steps for future implementation of the Paris Climate Change Accords. India has taken its place at the top table, with an increasingly influential voice on the global stage.

It has become, in short, a Sustainability Superpower.

The Swedish talks took place against the backdrop of Nobel Memorial Week where, for obvious reasons, the future of climate change policies was high on the agenda; and there was a general  acceptance that the best place to see these policies in action is India given, in particular, that the subcontinent’s economy grew by 7.8% last year (making it the fastest growing large economy in the world). It also has one of the world’s largest populations (soon, indeed, to be the largest); and its major cities are growing at an unprecedented rate as the historically poor and impoverished population becomes increasingly urbanised and wealthy.

So the key question being asked in Stockholm last month was what cost will all of this growth bring in terms of future sustainability.

That’s not a question without its own particular difficulties in the context of the Indian economy.

For a start there is air pollution: the biggest current environmental challenge being faced on the subcontinent, with airborne particulate levels in the most densely populated of its cities frequently running twice as high as China’s worst megacities, with the root of the problem being largely attributed to historic and continuing dependence on coal-fired power generation.

This key concern was the subject of a wide-ranging discussion and debate at last month’s Conference in Sweden, which concluded (with a degree of obvious satisfaction) that whatever its historic problems might have been, India is now moving inexorably towards the full adoption of much more stringent energy efficiency policies, with renewable energy generation at their forefront.

The subcontinent is blessed with some of the highest sustained levels of sunshine on earth, perfect for solar power generation. So it should come as no surprise that it is now the world leader in solar and wind power generation technology. And getting all this power out to consumers has been high on the Government’s agenda too given that  at least 300 million people in India currently have no access to the national grid: so there is also a powerful and pressing need for the Government to make funding available so as to ensure these new resources are accessible to its population as a whole. That challenge has resulted in new funding commitments from Prime Minister Modi’s Government that would make most western governments shy away in terror.

In keeping with the scale and ambition of the Government’s hugely ambitious programme for new infrastructure investment, substantial spending plans are now being put on foot to support energy delivery, including key support for companies investing in construction projects through the new “Green Buildings” and “Smart City” initiatives.

All of which makes India a world leader in sustainability. Something the delegates in Stockholm were at pains to note.

Red Ribbon CEO, Suchit Punnose said:

Climate Change Policies were high up on the agenda in Stockholm last month during Nobel Memorial Week when top-level Indian and Swedish Governmental Officials met with Leading Companies and International Agencies to review the future of the Paris Climate Change Accords.
There was a general acceptance in Stockholm that the best place to see these policies in action is India.

The subcontinent’s economy grew by 7.8% last year (making it the fastest growing large economy in the world) and it also has one of the world’s largest populations (soon, indeed, to be the largest), with its major cities growing at an unprecedented rate as its historically rural and impoverished population becomes increasingly urbanised and wealthy. SEB, a key delegate at the conference, characterised India as a “Sustainability Superpower” In this week’s newswire, we take a look at what all that means for future sustainability on the subcontinent.

Read about Paris Climate Change Accords here

Read about Nobel Memorial Week here

Read about Smart City here

 

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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