What are the features currently dictating the pace and location of new hotel builds in India?

By December 5, 2016INDIA

There’s rarely any sense fighting over a bone with no meat.

So this month’s well-publicised manoeuvrings of the board at Indian Hotels Company (IHCL), currently playing themselves out over the front pages of the financial press, ought to come as no surprise: IHCL is one of the largest hotel chains on the subcontinent with a total room portfolio of 16,759, more than 5000 of which was added in the last year alone. The Group has inevitably found itself riding on the back of a buoyant hotel and hospitality sector.

But this is far from being a saturated sector; Manhattan has more hotel accommodation than the whole of India and is estimated to be running at some 250,000 rooms short of capacity. And of course, in a way, that’s why the sector is so healthy as it grows to meet this organic threshold, but where it grows and when is a more complex dynamic.

Take a look, for example, at the Powai Region, just outside Mumbai. The Region offers a complex mix of substantial infrastructure developments, connectivity and a social groundwork which has attracted a sizeable and growing expatriate community. It is also a favoured residential district and sits in close proximity to the Bandra Kula Complex, an ambitious development which is set to be an emerging hub for work and leisure outside South Mumbai. And then, of course, Mumbai International Airport is within easy reach and the combination of all those factors: joined up infrastructure, a substantial and increasingly transient business community and improved international logistics make the area ripe for hotel and hospitality investment.

On 11th November General Hotel Management (GHM) announced that it had entered into a new management agreement with Rajesh Life Spaces to build the Chedi Mumbai Hotel at Lake Powai; and the strategic location of this new, signature hotel is obviously no coincidence. It feeds off the local infrastructure, confident of maintainable footfall, in particular, from commercial and business travellers. The new hotel will have 316 rooms, five restaurants and meeting facilities catering for the needs of the well-heeled business traveller.

Hans Jenni, director and president of GHM, was in no doubt of the importance of this first footfall on the subcontinent for the Chedi brand:

We have always wanted to plant a GHM Flag in India and being able to establish the brand in Mumbai is a tremendous opportunity”.

GHM already has a strong track record of operating luxury hotel resorts in important strategic locations across Asia and Europe; so it would be rash to ignore the significance of what Hans Jenni says for the Indian hospitality sector.

But, of course, it’s not just hard investments that matter, bricks and mortar infrastructure; you need to look at policymaking too, and things are looking bright on that front as well.

Leading players in the sector are adapting and strengthening their eco credentials, which can so often act as a honey pot when commercial and business travellers are choosing where to stay. Take the policy initiative announced last month by the Federation of Hotel and Restaurant Associations of India (FHRA); starting November and for the next year (at least) there will be a concerted drive to reduce energy wastage in Indian hotels as well containing water and food waste.

These things matter.

There is strong evidence that business travellers, in particular, have a preference for hotel space which is provided in an Eco friendly manner; so it is good to see the sector responding to that demand.

Whatever the outcome of the boardroom battle at IHCL, and it is doubtful many would bet against Tata getting their way, the likelihood is that India’s leading hotel Group will continue to chart a path of growth for the sector generally.

There’s still plenty of meat on the bone.

Red Ribbon CEO, Suchit Punnose said:

We all know that India is under-resourced in hospitality; the whole of the subcontinent has less hotel capacity than Manhattan, so there is a lot of surplus capacity still to be taken up; but on the flip side of the coin, that has to be a good thing for the hotel and hospitality sector too, because if there is capacity for growth there is potential for profit as well.

It’s just that it is sometimes hard to see where the growth will come and so I found this article interesting in its analysis of the various features of a highly localised economy that can act as a stimulus to growth. It gives us something to watch out for in the future given you can hardly say India is short of infrastructure hot spots at the moment.

And I agree so much too with the emphasis the article places on Eco-friendly capacity. That is such an important issue for business travellers in particular so I’m heartened to see the new energy saving initiatives coming on stream across the sector. We should all be winners from that.

 

Sarah

Author Sarah

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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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