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ITC, A Big Player in the Indian Hospitality Sector, Dropping Some Starwood
 and Marriott Brands in Favor of Establishing itself as an Independent Operator

By Reeba Zachariah, The Times of IndiaMcClatchy-Tribune Business News

Sep. 14, 2006 - MUMBAI, India -- The Rs 16,000 crore ITC group appears to be crowding out partners from its hotels at a time when the business is running housefull.

Its alliance with the US hotelier Starwood Hotels for the Sheraton brand is on a one-year life extension that ends this month.

Effective September 1, it has also broken off with Marriott International, the brand under which ITC managed its property in Saket in South Delhi. Marriott name has been dropped from the 220-room property and rebranded WelcomHotel.

The diversified tobacco-to-apparel ITC had purchased the hotel from Ansal Hotels in 2000 and also inherited the brand franchise and marketing agreement with Marriott.

Though the alliance with Starwood for the Sheraton brand was exclusive, the Kolkata company had to retain the Marriott brand for the Delhi hotel.

"The reason for ITC not cancelling the agreement (with Marriott) could be the penalty clause in the agreement. Now that the five-year term has ended, it has decided against renewing the arrangement," said an industry consultant.

An industry analyst said ITC, now one of the biggest players in the Indian hospitality sector, is aiming to cash in on the boom in the industry by establishing itself as an independent hotelier unlike its earlier strategy of riding on premium foreign brands.

A recent Morgan stanley report said the fast-growing Indian hospitality industry is attracting several global players as tourist arrivals as well as domestic travel intensifies. The World Travel and Tourism Council has pegged the Indian tourism industry at $5.7 billion.

It estimates that the Indian travel and tourism industry may grow at an annual rate of 8.8 percent over the next 10 years to become the third-fastest growing country after China and the Balkan republic of Montenegro.

Morgan Stanley said that the domestic business traveler accounted for 40 percent of total room revenue within India. As per industry sources, India currently requires a total capacity of 130,000 rooms to meet demand.

However, as of now the supply is only 103,000, falling short by 27,000 room. In comparison, Beijing alone has about 109,000 rooms, based on anecdotal evidence.

While tourist arrivals have risen by 20 percent in the past two years, the addition to room inventory has not kept pace.

Further, the Commonwealth Games in 2010 and the Cricket World Cup in 2011 should further increase tourist arrivals into the country.

Due to the paucity of rooms, average room rates (ARR) have been on the uptrend. Average room rates for 10 cities tracked by CRIS INFAC indicate that ARRs have grown by over 30 percent since start of this year.


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