With most international hotel chains making a beeline for the Indian market, the world?s largest hotel operator by number of rooms, InterContinental Hotels Group (IHG), sees India as a key growth market and has firm plans to expand its footprint in the country. Its chief executive for Asia, Middle East and Africa, Jan Smits spoke to FE?s Vishakha Talreja about expansion of its mid-scale brands in the country and how an acquisition might be on the cards. Excerpts:
What are your expansion plans for the Indian market?
By 2020 we will operate 150 hotels in India, up from 12 at present. We have 47 hotels under construction. We want to expand our mid-scale brand Holiday Inn and select services hotel Holiday Inn Express since India has great potential for budget and mid-market brands.
Holiday Inn Express will debut with the Ahmedabad property scheduled to open by September this year. While foreign tourist arrivals to India are only about 6 million, domestic tourism is burgeoning with 804 million visitors. That?s the reason we are developing our mid-scale brands and budget brands here, targeted at the domestic market.
Most international hotel chains are not investing in India, they are only signing management contracts…
That?s not true in our case. We entered into a joint venture partnership with Duet India Hotels Group last year to develop 19 Holiday Inn Express hotels by 2016. We have invested a 24% equity stake, making a multi-year investment of $30 million.
These 19 Holiday Inn Express hotels will add approximately 3,300 rooms to our current development pipeline of over 10,000 rooms. We will do more strategic investments if there is an opportunity to do so.
But essentially our model remains the same, we will take up management contracts as that?s how we work globally too. We signed six management contracts with Amrapali Group last year to add two Holiday Inn and four Holiday Inn Express hotels to our India pipeline.
Are you looking at any acquisitions in the Indian market?
We have looked at few hotels that are on the block. Till now we haven?t found a portfolio that has hotels that can be converted into Holiday Inn or Holiday Inn Express. But we are planning to buy a group with say four to five properties that fits our folio.
We are not long-term investors in real estate, so if we do acquire we are likely to partner with a fund or some other player like we did with Duet India Hotels Group.
Do you plan to get any of your other brands to India from the existing portfolio? Also IHG has recently introduced two new brands ? Hualuxe for China market and fitness hotel chain Even for the US market. Will we see launch of an India brand sometime?
We already have three of our brands here ? Intercontinental, Crowne Plaza and Holiday Inn ? and will be introducing Holiday Inn Express. We are focussed on mid-scale brands. Around 75% of our development pipeline here is already Holiday Inn and Holiday Inn Express Hotels. We don?t have any plans of bringing any of our other brands to India right now.
Plus a brand like Staybridge Suites won?t work in India because land costs are very high. In India it is early days for the hotel market. It?s only in last five years that the industry has grown. In China, looking at the sheer numbers it made sense to have a brand exclusively for that market. Ditto for the US market. India is way behind with only 150,000 hotel rooms of which only 55,000 are of international players.
How do you see competition from the home-grown players in India?
You have a very strong luxury hotel market here. Players like Taj Hotels and Oberoi Group are strong competitors in that segment. We, in fact, had a long relationship with the Lalit Hotels. Later they wanted to build their own brand and we supported them in that endeavour ending the relationship. But in mid-scale segment there are not many strong players in the Indian market.
