Hospitality expansion in India

The global financial crisis may cause a temporary dent in demand for hotel rooms in India, but foreign hotel chains betting on the country’s long-term growth say their expansion plans remain on track.The crisis, some of them say, could even help draw more hotel investments to the country as demand for hospitality services in the US and other Western economies softens, freeing up capital.“People the world over are nervous because of the financial crisis, and investments are the last thing on their mind,” said Ray Stone, senior vice president of sales and marketing at Accor Asia Pacific. “In India that is destined to expand, it would be foolish not to invest.” The European hotel chain is partnering real estate firm Emaar MGF Land Ltd to develop 40 budget hotels in India by 2012.Accor Asia Pacific Corp. Ltd, which has committed $200 million (Rs908 crore) to set up hotels in India, has already invested around $82 million, more than one-third of it through a joint venture with InterGlobe Hotels for its economy hotel Ibis, launched in Gurgaon on New Delhi’s outskirts in August.To be sure, Indian hotels are experiencing a slowdown in demand as the US credit crisis rumbles through the global economy.

Carlson Hotels Worldwide, which runs some 1,000 hotels globally including the Radisson and

Regent brands, has experienced a decline of 30-35% in business coming to India from the US and Europe, said Randhir Gupta, associate director of sales for India.Still, Carlson, which has a decade-old franchise agreement with Sarovar Hotels and Resorts in India that lapses in December, receives funding from local financiers and foresees no impact on its expansion in the country, said Gupta, who spoke in an interview at a Pacific Asia Travel Association event in Hyderabad last week.India received 3.5 million foreign tourists in the first eight months of the year, an increase of 10.4% over the 3.2 million it welcomed in the same period last year. The pace of growth slowed from 15.6% in the first eight months of 2007.India earned Rs28,369 crore from foreign tourists in the first eight months of 2007, a 15.3% rise over the year-earlier period.

In January-August this year, tourism-related foreign exchange earnings jumped to Rs33,321 crore, a 17.5% rise.Several hotel chains have lined up expansion plans to tap India’s expanding economy. Arizona-based Tristar Hotel Management Co., which owns and operates 37 hotels in the US, plans to invest Rs400 crore to open properties in Bangalore, Kolkata, Pune, Mysore and Dehradun.Pride Hotels Ltd, which runs hotels in Pune, Nagpur, Ahmedabad and Chennai, has outlined plans to invest around Rs350 crore for expansion.India’s largest hotel firm Indian Hotels Co. Ltd has planned a capital outlay of Rs400 crore for expansion, which includes Taj properties, its joint venture with GVK Industries Ltd and management contracts.Hilton Hotels Corp. has a joint venture with DLF Ltd to set up 75 hotels in the country.UK-based InterContinental Hotels Group Plc., which has 10 hotels coming up in India through 2010, said its focus will be South Asia.