March 24, 2011--An improving economic scenario and demand for more hotel rooms across categories is persuading international hotel chains to sign new management contracts with Indian developers and property owners, according to analysts. The industry will witness the announcement of a number of new hotels this year.

"Renewed interest shown by landowners and developers towards the hospitality sector is attracting hotel groups to get into partnerships," said Shreenath Shastry, national director (hospitality) at consultancy firm Knight Frank India Pvt. Ltd. "However, luxury brands will mostly come to projects coming up in the metro cities. Tier II and III cities will witness signing of contracts with mostly domestic hotel chains."

London-based Small Luxury Hotels (SLH), a subsidiary of Hill Goodridge and Associates Ltd, is looking for partners who own heritage properties and want to convert them into hotels. SLH chief operating officer Paul J. Kerr, who visited India recently, confirmed that the company was aggressively looking for such partnerships in Rajasthan and Bangalore.

Starwood Hotels and Resorts and Swiss"tel Hotels and Resorts are also looking for new tie-ups in the metro cities.

"During the course of 2011, we expect to open another nine hotels under our various brands, and in 2012, another 10 hotels, which will take us to a figure of approximately 50 hotels in India by end-2012," said Dilip Puri, newly appointed managing director and residential vice-president (South Asia) at Starwood, by email. "Our development pipeline is also very strong and we expect to sign up another 10-15 hotels by the end of 2011."

Starwood currently manages 30 properties in India under brands such as the Luxury Collection, Sheraton, Westin, Le Meridien, Four Points by Sheraton and Aloft brands.

Swiss"tel also has expansion plans. "For the two upcoming developments, Swiss"tel Gurgaon and Swiss"tel Bangalore, we are partnering with leading international private equity firm, Xander Group Inc. under its different investment companies," said Aiden McAuley, regional vice-president (Asia Pacific) at Swiss"tel. Both properties are scheduled to start in 2013.

The Indian hotel room market for 10 metros is estimated to expand at a compounded annual growth rate (CAGR) of 17% to '11,900 crore during 2010-13, according to a study by Knight Frank India. In terms of the number of rooms sought per day, the hospitality sector is estimated to grow at a CAGR of 10.3%.

But at 15% growth during the period, supply is expected to surpass demand. A total of 24,211, 8,709 and 3,057 additional rooms are expected to become operational by 2013 across upscale, midscale and economy category hotels, respectively, the study said.

Hotel chains are also looking at under construction and mixed-land-use development projects. For instance, Marriott International Inc. has partnered with Noida-based real estate firm Logix Group to set up a 5-star hotel under its Fairfield brand. The hotel will be part of a luxury project, La Premiere, that will come up as mixed-land-use development in Noida. Chicago-based Hyatt Hotels Corp. has signed a management contract with Gurgaon-based real estate firm Innovative Developers Ltd to manage a 140-room hotel in its 450,000 square feet under construction commercial project in the city outside Delhi. Hyatt didn't respond to queries.

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