Creating a platform for industry stakeholders, the 11th annual Hotel Investment Conference – South Asia (HICSA) envisaged fresh concepts and focused on the global changes in the hospitality industry By Archana Sharma
The 11th edition of the annual Hotel Investment Conference – South Asia (HICSA), 2015, held at JW Marriott Aerocity for the first time in New Delhi on April 7-8, 2015, brought together close to 500 delegates from across 21 countries and provided a platform to deliberate on the development and direction of the hospitality and tourism industry.
HICSA 2015 conference programme encompassed several fresh concepts and interesting elements, offering its participants something new from what they have witnessed in the past. The conference aimed to further the ‘Make in India’ vision and synergise the objectives of the government with the global and regional players in the tourism and hospitality industry. During his introductory address, Manav Thadani, chairman – Asia Pacific, HVS and chairman, WTTC – II, highlighted the presence of a large number of hotel owners, institutional investors, international delegates, and global CEOs of management companies at the conference, despite the change in venue. He believes that the overall economic scenario in the country is positive with better GDP and inflation is at a downward curve. Highlighting the need for better air connectivity and more flights and aircraft, Thadani stated that the airline business will triple in the next 10 years. He also talked about the increasing importance of outsourcing in the hospitality industry, from asset management, reservation, security and even the F&B outlets to labour and training.
During his keynote address, Amitabh Kant, secretary, department of industrial policy and promotion, ministry of commerce and industry, Government of India, talked about how the current government has been able to change the six-decade old ‘socialist mindset’ in the last 10 months. “The government has been able to simplify the business framework by scrapping the rules and regulations and most of the paperwork. Also, with the help of e-biz platform, almost 14 services have been integrated in 10 states and will be done all over the country,” he stated. Kant informed that various sectors of the economy like railways, defence, etc, have opened for investments and the Foreign Direct Investment (FDI) has increased to about 40 per cent in just the first 10 months. He also talked about making India a hub for research and development with many major MNCs already present in Bengaluru and Hyderabad. Emphasising on the challenge of managing the increasing urbanisation, Kant stated that by 2050 more than 700 million people will be in the process of urbanisation. “To manage the urbanisation trajectory, India will need to create new cities, recycle and renew heritage cities and undo the legacies of the past like the labour and land laws which need to be re-written to achieve a nine-10 per cent growth trajectory.” Highlighting the connectivity factor, Kant said, “Initiatives like the Delhi-Mumbai corridor, which will reduce travel time from 14 days to 14 hours and development of new smart cities with a better and more rational taxation system for hoteliers will create major growth and employment opportunities.”
Governmental support
Highlighting the increasing dissatisfaction from the government, in the discussion on ‘Engaging Governments’, the panel concurred that the occupancy rate, hotel rates and business continued to slip down over the last year. Stating the inability of the government to not being able to match up to the expectations, Priya Paul, chairperson, The Park Hotels, felt that the longstanding demands like infrastructure status and licencing policy are still unresolved. Also, highlighting the lack of synergy within the government especially in the light of the biometrics issue which created havoc for electronic visa, Arjun Sharma, managing director, Select Group, stated that the government needs to adapt a radical, dynamic and ‘out of the box’ thinking and advocate for an open sky policy. Sharma also believes that the PPP model could be the future of the sector. Also highlighting the need for more international promotions and participation in international events Vikram Madhok, managing director, Abercrombie & Kent, stated that since a lot of states are promoting themselves as a solo destination, steps should be taken to combine them and enhance the seasonal nature of Indian tourism. Sharma also hopes for the entire marketshare to increase rather than individual business.
Addressing the concerns of the various stakeholders, Dr Suman Billa, joint secretary – tourism, Government of India, stated that the government is working on a ‘forward looking’ Tourism Policy and an action plan with a responsible and sustainable approach. However, even he understands the importance of a strong social awareness and educational campaign and believes that the country needs to take a macro perspective. Discussing the increasing tourism opportunities, Ankur Bhatia, executive director, Bird Group, stated that he would prefer to invest in hotels (and not build them) and theme parks-cum-tourist attractions. Bhatia was keen on international markets where he owns land, and added that in India theme parks on the lines of Sentosa Island in Singapore could do wonders. Siddhartha Gupta, managing director-India, Blackstone Advisors, stood strong on the concept of luxury hotels and preferred brands that made sense at the given location and circumstances. “The investor mindset has changed with the new government, and they will continue to remain bullish on the India market,” he said.
Understanding the complexity of the India market, Thomas Heneghan, CEO, Equity International, stated that it took seven years for Equity International to find the ‘right partner’ in SAMHI since the execution is essential for creating a brand standard in the India market. While highlighting the significance of the hotel’s investments for attracting the tourists, Gerald Lawless, president and Group CEO, Jumeirah Group, stated, based on the locations, they will soon be coming up with more properties in China, Maldives and Bali.
Industry insights
Talking about the reasons for low room volumes in India, despite talk about growth and high potential, Steve Rushmore, founder, HVS, believes that mature markets like the US have one hotel room for 65 people, and an emerging economy like China has a hotel room for 542 people, India has a room for 12,000 people. Adding to the same, Arne Sorenson, president and CEO, Marriott International, attributed this situation to India’s rather late integration with global economy and said that India carries the image of a country with numerous infrastructural concerns. However, he stated that while the major chunk of the US’ hotel investors are Indians, the same kind of investment is not happening in India. Highlighting the various initiatives taken by the government, Rakesh Sarna, MD and CEO, Taj Group, stated, “Before creating more room supply, the infrastructure in terms of roads and cleanliness should be created and maintained.” He also believes that the growing spending power of the Indian middle class is much lower compared to the middle class in developed markets and since hotels, airlines and other institutions are dependant on the middle class spending power, they should be developed first.
Explaining the statistics, Achin Khanna, MD, Consulting and Valuation – SA, HVS, stated that the ARR was similar to last year with stable rates pan India. “At present, almost 80 per cent of the rooms are catering to the business class and by 2020 there would be over 156,000 rooms from the current 113,158,” he said.
Highlighting the importance of better understanding the market demands, Nisha Purushothaman, vice chairperson, Empee Group, said that brands should focus on better communication and has to be understood by the owner, thereby leading to a more conscious call on investments.
Emphasising the gap between the ‘hard promises’ of the brands and ‘cute intentions’ of the owners, Ashish Jakhanwala, managing director and CEO, SAMHI, said that operators give high projections to win contracts and look for excuses when they fail to deliver returns as per the projections. Expressing similar opinion, Hari Mohan Dangayach, chairman, Dangayach Group felt that the brands ask the owners to invest as per their specification, even when the revenue returns never match with the investments.
While focusing on the leader’s perspective, Thorsten Kirschke, president-APAC, Carlson Rezidor Hotel Group, opined that the fundamental challenges haven’t changed, only the long term and short term realities. Adding to the same, Vivek Badrinath, deputy chief executive officer, Accor, stated that, the demographics are changing and there is more focus on mobility with the advent of social media which are driving the sales. Highlighting the role of the new government, Jay H Shah, chief executive officer, Hersha Hospitality Trust, feels that the government is operating at a macro level and being pro-tourism, the industry should focus on tapping the tourism trails.
Expanding on the importance of value and economy hotels, VV Giri, regional director operations – SA, Premier Inn, felt that due to the bigger brands entering the mid-segment, the price lines are blurring and unlike the rest of the world, India doesn’t have a clear divide in terms of three, four or five-star properties. Adding to the same, Prashant Aroor, CEO and founder, Mango hotels, felt that the domestic market has a huge potential especially in the F&B segment but the industry will have to provide more amenities and options to the guests to achieve its true potential.
Highlighting the leisure destinations, Nitin Chatwal, chairman and CEO, Shrem Group, stated that accessibility and connectivity are major challenges at new destinations and the time taken to travel, if longer will reduce the traffic to the region. Talking about creating new destinations and hotel properties, Florian Linder, director development – SE Asia, Kempinski Hotels, felt that in newer and undiscovered destinations, the potential is for mainly the mid-segment and budget hotels rather than a complete luxury resort and even the mainline properties get mostly weekend demand and the weekdays are booked for MICE events.
During the session on understanding management contracts, Sudeep Jain, vice president, acquisitions and development, SA, Starwood Hotels opined that openness and transparency matter in owner management relationships going smoothly. Rajeev Chopra of Chalet Hotels, opined that management contracts aren’t given the proper realisation of the market factors and owners are not properly informed. Concerned about the mismanagement and hidden charges by operators, Ranjit Batra, president, Panchshil Realty complained about hidden costs and clauses in the contracts.
Discussing the CapEx Conundrum while building hotels, Rattan Keswani, deputy managing director, The Lemon Tree Hotels stated that there is a tendency among owners, operators, and consultants to blame each other for project-related problems. However, Chris Garrod, CEO, Chris Garrod Global said that the issues related to standardisation are uniform globally. With operators specifying the standards, the owner’s budget are bound to go high.
According to Arjun Thapar, senior project director- South Asia, Marriott International, “We give expert advice and value-for-money options for owners for different segments. However, in mid-scale hotels, owners have the tendency to over spend.” Vishal Shah, cost consultant, Gleeds Hooloomann Consulting India suggested proper value engineering of projects before the commencement of the project.
Given the option of savour, spend or splurge, a billion dollars, Atul Chordia, chairman and CEO, Panchshil Realty, stated that he would prefer to buy hotels instead of building them, as multi-tier approvals and running permits become a big issue in India. With a strong belief in resorts and wellness tourism opportunities, Binod Choudhary, chairman, CG Corp Global, felt that his method of conducting business will remain the same, but will plan to invest in strengthening the lobbying in the hotel industry and making business easier. Agreeing with the former viewpoint, Patu Keswani, chairman and MD, The Lemon Tree Hotel Company, elaborated that resorts will get good returns in the future. He averred to set up a 500-room hotel in key foreign markets focusing on an India-centric loyalty programme.
Recognising excellence
Understanding and awarding the best hotels in India and rest of South Asia, HICSA 2015 held the ‘Hotels of the Year Awards 2015’ with the winner for the Luxury/ Upper Upscale segment in India, awarded to ITC Grand Bharat, Gurgaon, New Delhi NCR and for Rest of South Asia, the Centara Ceysands Resort & Spa, Bentota, Sri Lanka.
The Hyatt Place Gurgaon/ Udyog Vihar, Gurgaon won the award in the category of upscale/ upper mid market segment while the Holiday Inn Express & Suites Hyderabad Gachibowli, Hyderabad and Cinnamon Red Colombo, Colombo, Sri Lanka, won in the mid market segment for India and Rest of South Asia, respectively. The Ibis Delhi Airport Hotel, New Delhi was selected in the best budget/ economy segment.