The latest edition of HIFI provided a platform to recognise a more comprehensive and integrated approach to enable the Indian hospitality industry to deal with the challenges and enhance their opportunities By Archana Sharma
The seventh edition of the Hotel Investment Forum India (HIFI) was recently held at The Leela Ambience Gurgaon Hotel and Residences, Delhi (NCR). Hosted by Burba Hotel Network (BHN) and Horwath HTL (Hotel, Tourism and Leisure), HIFI 2015 was attended by over 350 delegates from the global hospitality and tourism sector, and focused on the upcoming trends and challenges that the Indian hospitality sector is undergoing. Elaborating on the theme ‘A positive Focus’ for HIFI 2015, James E Burba, president, BHN, believes that the last couple of years were difficult for the Indian hospitality sector. “However, with the new government in place and with the new initiatives taken to promote tourism in India, people are more positive about the future of this industry in comparison to the last decade,” he said.
Quoting the recently concluded Global Investors Survey for 2014 -15, Burba also stated that in comparison to last year, the Indian economy is trending upwards as India has categorically shifted. “With the growing middle class and increasing tourist arrivals to India, the supply for room inventory also needs to increase and as per trends observed so far, Indian hotel constructions have gone up to 47 per cent in 2014 and will keep on increasing to about 60 per cent by 2015 year-end.”
Indian perspective
Recounting the various forums at which Prime Minister Narendra Modi has mentioned the benefits of tourism industry across the globe, Lalit K Panwar, secretary, Ministry of Tourism (MoT), stated, “About 32,000 visas have been granted in just six weeks and with the new countries that we are planning to add to Tourist Visa on Arrival (TVoA) list, we should be able to host at least one percent of the total global tourism traffic.” He also informed that MoT is planning to re-look on the national tourism policy and in 2015 will be coming out with a more pragmatic approach and a detailed roadmap and guidelines for enhancing this sector better. Also praising the various initiatives taken by the Indian government, Vijay P Thacker, director, Horwath HTL – India, feels that India will gain global attention. “With initiatives like the TVoA scheme, Make in India, Swachha Bharat Abhiyan, etc, issues like labour and power capacity are being addressed and we are looking at long term attitudinal changes,” said Thacker.
Elaborating on the growing demand for more room inventory, Thacker informed that in another three-four years, another 30-40 thousand rooms will be added to the total room inventory while stating that about one lakh rooms were added in the last decade only. Elaborating on the various issues being faced by the Indian hospitality industry, Thacker also said, “We are facing funding issues with long term loans as they are inconsistent with the nature of the hotels because of the implementation and even the ramp up period is longer and hotels are already long term assets.” Requesting to implement a cash-cash approach rather than a cash-asset approach, Thacker also hopes to change the mindset of delayed payment of the Indian market. Talking about the untapped potential of the domestic market, Thacker said, “Large MNC’s are willing to establish their brands here but we need to have new destinations and attractions, with cultural heritage and events. We also need the Indian hospitality sector to be in sync with needs of the modern traveller.”
Deep Kalra, founder and CEO, Makemytrip.com, stated, “Online booking for flight tickets have reached 45 per cent penetration while booking hotels online have only a six per cent penetration in the Indian market. The macro issue is the lack of supply of budget hotels leading to unaffordable pricing for the masses and the sub-optimal presence of hotels in the online space.” Also talking about revenue management, Kalra believes that the room tariffs need to be dynamic to maximise yield with opaque pricing systems and with different rates for weekdays and weekends, for business and leisure travellers, etc.
Reminiscing his earlier efforts to get the TVoA scheme in place, Subhash Goyal, president, Indian Association of Tour Operators (IATO), mentioned that the Indian tourism industry will not be able to reach the 15 million figure unless additional measures are taken for opening up the skies and providing better accessibility and infrastructure to the tourism industry. He also requested the Ministry of Civil Aviation (MoCA) to bring down the ATF tax to a maximum of four per cent. “Fortunately the fuel prices have come down but not the cost of travelling,” he added.
Talking about the growing need of a holistic plan for involvement of local stakeholders as well as state investment for better promotional facilities, Nikhil Desai, managing director, Goa Tourism Development Corporation, believes that they are overly dependent on the leisure segment. Adding to this, Goyal asked for a cruise terminal to be operational in Goa as most of the cruise corporations are unable to provide seamless travel due to lack of infrastructure.
REIT initiative
While explaining and comparing the Indian Real Estate Investment Trust (REIT) with the US Model, Sanjay Bansal, founder and managing director, Aurium Equity Partners LLP, stated, “The SEBI guidelines for the Infrastructure Investment Trust and the REIT will not only impact the Indian hospitality sector but also provide benefits to the investors, as the Public Private Partnership (PPP) model followed by India is unlike other countries as they are better funded by the government sector.” He believes that in India, the role of the private sector is much bigger and even though international brands have maintained a steady presence in the hospitality sector in India, due to their long gestation periods, it becomes hard for them to get a decent Return on Investment (RoI).
According to Nirupa Shankar, director, Brigade Hospitality, “REIT can be huge success as an alternate source of funding for hospitality investments, as these assets are far more liquid than other properties.” However, talking about the issue of asset valuation, she also said, “We are not entirely sure about the evaluation process and therefore are concerned about the value of property the time of converting in comparison to the original asset value.” Adding to the same, Adil Engineer, partner, Brookfield Financial, stated the REIT model to be an easier and cheaper, alternate source of finance. “Indian assets can be valued in different ways, with different methodologies and so far we don’t have much clarity about how assets will be valued in accordance to REIT, therefore a specific set of guidelines are required to clear these doubts.” Engineer also believes that the REIT will firstly be implemented by the commercial sector and depending on its success, will be taken up by the hospitality sector. Talking about the success of the REIT model in India, Atul Chordia, chairman, Panchshil Reality, said that its implementation will be difficult in India as there are not that many multi-property owners in India and REIT guidelines require a major amount as the minimum asset value.
New growth opportunities
Talking about the emerging market of mid-scale and budget hotels and its requirements, Shwetank Singh, vice president-development and asset management, InterGlobe Hotels, stated, “The time taken to build hospitality assets reduces its valuation and thereby lessens the RoI.” Elaborating on the different requirements for different markets, Rajiv Sharma, vice president-development, SWA, IHG, talked about how they had to tweak down the the Holiday Inn Express properties for Tier II and III cities markets in India. “The room rates will not be able to justify the investment in Tier II and III cities as in the beginning, it is the brand building part that matters since the consolidation one is still far away,” he said.
Cyrus Madan, vice president- development and feasibility, The Lemon Tree Hotel company, stated, “Due to the shift in the preferences of travellers, places like Neemrana, Palwal, Bhiwadi, etc. are emerging as popular destinations. And even though there is a need for further development of some social infrastructure, the flexibility required for the same is present.” Adding to this, Lokesh Kumar, vice president-development and marketing, South Asia, Movenpick Hotels & Resorts, said that these areas are lacking leisure and entertainment points and therefore either the government or private stakeholders should look into strategically creating such regions.
Highlighting the strategies to succeed in this segment, Dilip Puri, managing director-India and regional vice president-South Asia, Starwood Hotels and Resorts, said, “With the changing market demands, there is a need for better alliances and dominant players to enter the mid-scale as well as the business segments, either through conversion of existing properties or through mergers.”
Discussing the various prospects for Andhra Pradesh, Telangana and Hyderabad, Suresh Kumar, CEO, Fortune Park Hotels, informed that Andhra Pradesh can develop more cities but Telangana only has Hyderabad to showcase itself as a major destination. Providing a different perspective, LN Sharma, CEO, Golden Jubilee Hotel, said that with the increasing business opportunities in Telangana, Hyderabad will benefit the most as with the increasing market demand, there will be more rooms for accommodation. Kumar also believes that Tirupati is emerging as a major tourism hub, not just for pilgrims but for the MICE segment as well.
Focusing on different segments
Highlighting the lack of infrastructure to lead India as a MICE destination, Michel Koopman, general manager, The Leela Ambience, Gurgaon Hotels and Residences, said, “The competition is with cities like Bangkok, Shanghai, Sydney etc. We need to build convention centres and plenary halls with the help of public and private sectors, especially in the key Indian metros cities.” He also remarked that more connectivity is required and infrastructure needs to be developed better not just for convention centres and halls but also their surrounding areas. Adding to this, Jean Michel Casse, senior vice president– operations India, Accor, said, “We need to undertake more international events and host global summits and conferences in order to showcase the MICE infrastructure and facilities available in India.”
Still in its nascent stage, Julian Ayers, regional vice president, Alila Hotels and Resorts, believes that the Indian market has a major potential for lifestyle hotels. “And since these hotels operate in a niche segment, people are willing to pay the premium required for the experience,” he said. Dhruva Rathore, vice president-development, Hyatt Hotels and Resorts, stated, “The target customer base is growing for lifestyle and boutique properties as people want more vibrant and experiential hotel properties.”
Focusing more on the food and beverage sector in the Indian hospitality industry, Naveen Jain, president, Duet India Hotels, hoped that the government will come out with more promotional videos and other marketing initiatives to promote the diverse cuisine for the leisure as well as business sector. Deepak Ohri, CEO, Lebua Hotels and Resorts, said that only about 10 per cent of the total standalone restaurants work whereas the rest close within a year of operations.
Recognising excellence
HIFI 2015 honoured many hotel properties with ‘HIFI Deal of the Year Awards’, on the basis of magnitude, size, sustainability, design, etc. In the category of Budget and Mid-Priced, the winner was Holiday Inn Express, Mahindra World City Chennai; For Upper Mid-Scale and First Class, the winner was Novotel Kolkata Hotel and Residences, Kolkata-West Bengal, and In the category of Upscale and Luxury, the award was given to JW Marriott Mussoorie Walnut Grove Resort & Spa. Nirupa Shankar, director, Brigade Hospitality, was also awarded ‘The Rising Star Award South Asia’.