The charge of the Asian brigade

In Europe and North America, there's hardly any more room to grow. So, it is battleground Asia today as hotel brands continue their relentless expansion into the region dubbed as the most lucrative hospitality market.

But Western hoteliers such as Starwood and Accor that are journeying into Asia (both have more properties under development in the continent than elsewhere in the world) now have to face stiff competition from local brands. Asian chains such as Shangri-La Hotels & Resorts, Peninsula Hotels, Six Senses Resorts & Spas and Banyan Tree Holdings are now not only defending their turf strongly, but aggressively expanding.

Take the Indian market. A slew of Asian brands from Indonesian brand Aman to Hong Kong's Shangri-La to Singaporean chain Banyan Tree Holdings have already made inroads. But it's now that the floodgates are really opening up, with brands such as Peninsula, Dusit, Lebua and Mandarin Oriental all signalling their growing interest.

All these brands are not just setting up hotels here but feverishly wooing the outbound Indian traveller to their properties scattered across Asia, Europe and North America. Many of them have carved their own spaces in Western markets, following the Asian traveller (especially the Chinese, 77 million of whom are expected to travel overseas this year), who they feel will be better served by their brand of hospitality.

More room to grow

Just recently, the top brass from Peninsula Hotels, the luxury brand from Hong Kong and Shanghai Hotels, one of the oldest Asian hospitality companies, was in town. Peter Borer, chief operating officer, Peninsula Hotels, not only made his intentions to open hotels here clear, but pointed out how the Indian traveller could enjoy the luxury chain's properties spread across cities such as Beijing, Shanghai, Tokyo and Paris.

Said Borer, “We have identified New Delhi and Mumbai as prospective locations to open our hotels in the country. We could look at a local partner.” The luxury hotel chain usually owns and operates its own hotels or buys a majority stake, and the buzz in hospitality circles is about how Peninsula has been scouting for buys in key locations.

Then there's Thai hotel group Dusit International, which through a joint venture with Ankur Bhatia-promoted Bird Group plans to open five hotels in the country. The first one called Dusit Devrana is expected to open in Delhi. Another Thai chain Lebua – famous for its Hollywood Hangover scene – has had a soft opening in Delhi. Lebua is also setting up a boutique resort in Goa. It will be a 14-room, 40-villa property that is scheduled to open in May 2013.

Even Shangri-La, which has so far been operating only one hotel in New Delhi, is set to expand. The company, which runs hotels under management contracts, is set to expand to Mumbai this year.

In 2013, it expects to open two hotels in Bangalore and another in Chennai.

Global luxury hotel brand Mandarin Oriental which has roots in Hong Kong has also been trying to get a foothold in India for the past few years. The hotel was reportedly in talks with real estate players in Mumbai.

Rising occupancy

Explaining the increasing trend of Asian hotel brands venturing into India, Bhatia says, “It works well for the Asian brands as they are better versed with the culture and tradition of India than American or European brands.”

It also makes sound economic sense for them to target India as profits from European markets are dipping while India has been one of the top revenue generators for several hotel chains. Both occupancy rates and room revenues have shown a rise in India. According to hospitality consultancy firm HVS, hotel occupancy across Indian cities grew at an average of 1.7 per cent during 2010-11 despite a huge addition of rooms, even as occupancy in Europe declined.

The other attraction is that the number of international tourists arriving in India has also been rising steadily – in 2011, there was an 8.9 per cent growth with 6.29 million foreign visitors as compared to 5.78 million the year before.

No wonder chains such as Banyan Tree are making a beeline for destinations such as Kerala, a favourite with high-end international travellers. By this year-end, Banyan Tree will open a lavish property in Perumbalam, Kerala with 61 villas, 19 deluxe villas, presidential villa and several houseboats.

“Since Indians contribute a huge chunk to our properties internationally, we decided to foray into India to make the most of the country's growing domestic demand," says Manas Sinha, Assistant Director, Key Accounts Banyan Tree Hotels and Resorts.

Bhatia says the growing demand for hotels in India, even as other markets are saturated, has put the country in the spotlight. This has led Asian brands from Singapore, Hong Kong and Thailand to look closer home for opportunities to grow.

And then there's the lucrative weddings market in India as well the growing spa segment that is luring the Asian hotel chains here. Banyan's Angsana spa brand has been in Bangalore for some time now.

India outbound

These Asian hotel brands are also keen on developing India as a source market for the growing outbound Indian population, who are big spenders when travelling abroad. Constance Hotels from Indian Ocean country Mauritius recently appointed representatives to grow traffic from India to its hotels. It operates seven hotels in the Maldives, Seychelles, Madagascar and Mauritius.

According to Ankush Nijahawan, who heads the Nijhawan Group that will represent Constance Hotels in India, nearly 75 per cent of the Indians travelling to destinations such as Mauritius and the Maldives opt for high-end luxury accommodations, a great opportunity for Constance Hotels.

Last year over 12 million Indians travelled abroad. And estimates suggest that the Indian outbound market has the potential to grow to 50 million by 2020.

Late-comers?

But some feel that the Asian hotels are waking up to the Indian potential a bit late. “India is still a hot market as it's under-served in terms of hotel rooms but the Asian brands are a bit late in entering the India market and I wonder what took them so long. They have been studying and analysing and maybe even over-analysing the Indian potential,” says Peter J. Leitgeb, President and CEO, The Claridges Hotels & Resorts.

He adds that for the Asian brands, this late entry could be challenging. “The boom cycle when hotels witnessed 90-100 per cent occupancies due to room shortage in cities like Delhi is over,” he says.

That was the time when hotels in the Capital could easily charge over Rs 15,000-16,000 per day, but now oversupply has meant that the rates are heavily discounted.

Meanwhile, even Indian hotel brands are waking up to the Asian opportunity. The Taj group has struck a joint venture with Yunnan Tourism to construct and manage two hotels in China. ITC Hotels has just announced incorporation of its subsidiary in Sri Lanka. The company is believed to be looking at developing a mixed land use development that would include a luxury hotel chain.

Similarly, Claridges and the Lalit Hotel have been exploring Sri Lanka. “We are keen on investing in Dubai,” adds Claridges' Leitgeb.

The cultural fit with Asian hotel brands is undeniable. As Banyan Tree's Sinha points out, Asian brands have similar guest hospitality value system.

“They have similar food and culture which gives them an edge over other international brands,” he says. Now to wait and see if the Indian consumer walks into their doors.

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