Pan-India growth

Whether through franchise or management, Carlson Hotels Worldwide is slowly securing a foothold in the Indian hospitality industry. K B Kachru, its executive VP (Asia Pacific), considered by many as the driving force behind the group's steady expansion in Asia, examines the trends seen in the India market. By Dinkar Farwaha

K B Kachru Executive vice president (Asia Pacific) Carlson Hotels Worldwide

K B Kachru anticipates tremendous growth across all the regions of the country. In north India, a five-year tax holiday announced in the recent budget by the finance ministry for two, three and four-star hotels and convention centres specifically catering to the Commonwealth Games in Delhi, Gurgaon, Ghaziabad and Faridabad has initiated more hotel groups to venture into this real estate segment, according to Kachru. "With the advent of international players, the NCR market is expected to grow towards global standards and the rub-off effect will be witnessed by the neighbouring mini metros too," feels Kachru.

He continues, "Penetration of the IT industry in north India has given fillip to business tourism as well. A demand for business hotels with facilities such as convention halls equipped with presentation equipment, board rooms and lounges has been observed in the region. Moreover, better connectivity between the cities on account of low-cost airlines has led to increased demand of hotel rooms across the northern region." As far as the south is concerned, Kachru believes there has been a spurt in hotel projects with Kerala and Tamil Nadu topping the list."

According to Kachru, as many as 57 new branded hotel projects are on the anvil in the southern region, which added 2,382 rooms by 2007-end with development still on the fast track. In the eastern region, West Bengal (particularly Kolkata) is "seeing a spurt in real estate and hospitality development activity". He adds, "The service apartment segment in Kolkata has still not been explored, but as the market matures, demand for medium to long-term stay options would increase." According to Kachru, new destinations are being made popular in western India. "The hospitality sector is expected to emerge as a key area for investors over the next few years, due to a demand-supply imbalance and a lack of quality infrastructure in areas other than Mumbai." Pune and Nagpur are slated to add substantial room inventory within the next two years.

Foreseeing an enormous potential across the country, the group is aiming for a pan-India presence. "We would have 31 hotels operational in 2010 across the country and 38 under various stages of development," informs Kachru. He adds, "We want to be present in all tier I and emerging tier II cities of the country with as many hotels as possible." For example, in NCR alone, the group intends to develop 11 hotels under its various brands.

His point of view

According to Kachru, soaring land prices and substantial initial investments are no longer deterrents as the returns are equally promising. "Due to encouraging government policies like entitlement to duty-free imports and tax holidays, the industry has been able to avail considerable capital from the market," feels Kachru.

He adds, "Hotel plots in the recent past have been sold at prices which are three times the reserve price, showing growing interest of investors in Indian hospitality." He is of the opnion that the entry of international brands and funds, multinational companies setting up and expanding operations and international events has driven the growth of hospitality business throughout India. According to Kachru, not spiraling land prices but shortage of trained manpower, employee retention and skyrocketing salaries are the biggest challenge the industry is facing today. However, he feels that the issue can be resolved by training more staff in-house for all positions and retaining them by offering them incentives based on the time served within the company.

Kachru believes that the government can play a further role in developing the Indian hospitality industry by creating new tourist destinations. "The government can ensure a pan-India growth of the industry across all segments by providing adequate infrastructure such as roads, airports and most importantly land for budget hotels and liberalising the approval policy," he adds.

Prognosticating the future

"There is an enormous untapped potential in the country's leisure market and the emerging leisure destinations in the industry are the ones to watch out for in the future," feels Kachru. Given that the middle-class in the country is now travelling more than ever, budget, mid-market and no-frill hotels, he believes, will have strong demand in the future. The expectations of the traveller of tomorrow, according to Kachru, are likely to be far greater. "A product which will provide superior personalised service and not lose focus on the human touch will prove to be the eventual winner," he opines.

The hotel of the future, according to Kachru, will be more user-friendly and contemporary in design. "Also, Wi-Fi will become a necessity for any property. There will be free Wi-Fi service through-out every property. The sales and marketing strategy of the companies would be to focus on the value additions offered by that company in the particular segment," he adds. As far as future F&B trends are concerned, according to Kachru, fusion cuisine and Indian food will continue to have strong demand. "Hotels would also practice new innovations to conserve energy and water," he predicts.

The US recession has halted the growth of other economies. When asked about its possible impact on the Indian hospitality industry, Kachru replies, "Though there might be some impact, international brands and investment will continue to enter the market which at this stage is needed to fill the enormous gap between demand and supply of rooms in the country." Kachru believes that more and more international investors and brands will enter the Indian market across all segments and the joint venture and franchise tie-up model will continue to be the companies' expansion strategy. "I reckon that in future we will witness more joint ventures and franchise tie-ups with local companies," he says.

As far as the company's vision for the next decade is concerned, Kachru mentions, "Our vision is to take advantage of our portfolio of brands catering to every segment and to be right on top of the table in the number of hotels, product & service. In order to ensure that the service and product is standardised, we would like to manage all properties under our various brands."