Hotel industry in India is set to grow rapidly to meet the rising demand. Indian Hotels is well-positioned to take advantage of this surge with its properties spread across geographies and spanning various price points. In this recent interview to Business Line at the company's newest property, Vivanta by Taj at Bekal, Kerala,Mr Raymond Bickson , Managing Director and CEO, Indian Hotels Company Limited, pointed out that Indian Hotels has been growing at rates much faster than its competitors.

Excerpts from the interview:

How are occupancy levels in the hotel industry today? How does Indian Hotels plan to take on the competition?

In 2003, India had 62,000 rooms, while in the beginning of 2011 there were 1,67,000. India has, at present, occupancy levels of 65-68 per cent. In the last 10 years, the levels have doubled. We are now sold out five days a week in a year.

India's hotel market has to grow to meet the increasing demand. We will need 400,000-500,000 rooms to meet this demand. To cite a few examples, China, which has 2.8 million rooms, plans to build 600,000 more; the US with 5 million rooms, plans to increase it by another 400,000.

Dubai has had 10 million tourists in the past year, and Singapore 11 million, compared to six million in India. The Indian Government expects the tourist traffic to increase to 15 million by 2020. We will probably hit the target before that. The country is still growing and, to accommodate that, we need more inventory.

In a new destination like Kerala, there is not much competition with just two players in the market. Some markets like Hyderabad, Pune, Delhi and Gurgaon are more saturated than others. Cities such as Mumbai, Delhi and Kolkata have several Central Business Districts sprouting around them, necessitating the need for more inventories.

As we are one of the oldest companies in the country, we have locations the new brands will not get. They can never get a Taj Mahal Mumbai or a Lutyens Delhi.

How have occupancy levels moved for Indian Hotels this year?

While the first and second quarters of 2011 were really good for Indian Hotels in terms of occupancy levels, the third quarter was rather flat. The fourth quarter has again been a busy one with improvement in the occupancy levels and average room rates compared with the previous year.

On the whole, the performance has been better than last year. The reason for this is that the western markets are recovering from the slowdown. Our hotels in the US have been growing; our numbers in 2012 are around the 2008 levels. Hyderabad has seen a drop in revenues per room.

Was that one-off or due to increase in room supply in the city?

In Hyderabad, we have properties only in Banjara and Begumpet. As of now, we do not have a hotel in the Hi-Tech city, though we plan a Ginger and a GVK Taj there soon.

With these properties in place, the revenues should regulate themselves in the next two-three years. What is of real concern is the market in Chennai. It has huge inventories in place like the Chola, New Leela, JW Marriot and Le Meridian. We need to get more aggressive.

Given this scenario, what are your expansion plans?

Expansion is mainly in the overseas luxury segment. In the last five years, we have opened hotels in Boston, New York, Sydney, San Francisco and Cape Town. We plan to open one in Morocco and one in Beijing this year.

You now have hotels positioned across price points. Has this helped? Is the pressure higher in the luxury segment now?

Positioning hotels across price points has indeed helped us. We had to do it because the market was changing and our products meant too many things to too many people.

There was no differentiation between what you pay and what you get in terms of service and product proposition. Each one has a price point and hence should have a brand promise.

We've been the most aggressive of all the players and we have shown the market that we have been growing exponentially better than our competitors. We have launched 24 Ginger hotels and 24 Vivantas. And, we are currently launching the fifth Vivanta in Bekal, Kerala. Positioned between Ginger and Vivanta is the Gateway Hotel chain, one of which is opening in June in Kolkata. We have 19 Gateways signed and will be opening 12 in the next three years.

The pressure is certainly on the luxury segment. During the market crunch of 2009-10, the Gingers and Vivantas showed growth in occupancy levels and average room rates. What really gets hit is the luxury segment which is difficult to turn around.

In bad times, it is this segment that suffers the most and, in good times, it is the one that grows exponentially and is the biggest part of our portfolio — that's where the largest part of our profits come from!

What are the key trends you see in domestic and foreign travel? Do you think domestic travel would be the growth driver going forward?

Domestic travel is the saviour for the market. Last year, there were 740 million travellers in the domestic market. International brands see a huge domestic market in India, which is appealing and lucrative.

Is the IPO plan for the Ginger Hotel chain, run by Roots Corporation, still on? Can you give us more clarity on Omega TC's investment in Roots Corp.?

It is too early for an IPO for Ginger. We need more critical mass; we need 80-100 hotels to do that. Ginger is in the sixth year and we have 24 hotels. Omega TC is a joint venture with Tata Capital. We aim to double the inventory from close to 30 to 60 hotels.

Can you give us more clarity on the licence agreement in Taj Mansingh?

The confusion arose on account of some misunderstanding by the market. When the hotel was being built, the government came to us for money.

One, we were part owners of the hotel and, two, we had a management contract.

We've had a great relationship for 33 years with an extension for one year. I see no difficulty in the licence being extended.

comment COMMENT NOW