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Major Hotel Groups Expected to Expand Mid-priced
Hotel Market in India to Diversify Risk

By Moulishree Srivastava, Mint, New DelhiMcClatchy-Tribune Regional News

Oct. 05, 2011--Carlson, Marriott International Inc. and other foreign hotel chains are expanding mid-priced properties--considered the least vulnerable to an economic slowdown--in India, targeting local leisure and business travellers as overseas companies cut travel spending in anticipation of another global recession.

Mid-priced hotels bridge the gap between luxury and budget hotels with room rates of '4,500-7,000 a night.

As the demand from international business travellers softens in India amid the European Union's debt crisis and economic slowdown in the US, foreign hotel operators are targeting local businesses.

International luxury hotel brands get 40-50% of their revenue in India from overseas visitors, according to hotel operators and analysts.

The accelerated expansion plans of foreign brands in the Indian mid-priced segment are to an extent aimed at providing a cushion against a slowdown in the luxury segment, said Subrata Ray, a hospitality analyst at credit rating company ICRA Ltd, the Indian unit of Moody's Investor Services. These chains are also expanding because the segment was unorganized and largely untapped till recently, Ray said.

Hyatt, InterContinental Hotels Group Plc, Carlson, Marriott and Hilton, which started expanding in India after the global recession in 2010, trying to fill the shortage of branded rooms in India, particularly in the mid segment, are set to continue with their plans.

A Deloitte report said the tourism ministry puts the shortage of hotel rooms in India at 150,000.

"In case of an economic slowdown, we believe the strongest growth will be across the budget, economy and mid-scale segments," said Jean-Michel Casse, senior vice-president of operations at Accor India.

The group operates three hotels in the mid-market segment and has 19 more in the pipeline. "Our plans have not and will not change with the present macroeconomic scenario," Casse said.

The mid-priced segment accounts for 30% of the organized Indian hotel industry, according to consultant Grant Thornton.

"With a slowdown almost always lurking at the horizon, there would be renewed interest in providing quality hospitality options in the mid-tier market," said Vinamra Shastri, partner and practice leader, business advisory services, Grant Thornton.

Corporate business has already started to shift towards serviced apartments and mid-priced hotels, he said.

The Hyatt group plans to start its first 14 mid-segment hotels by 2012 under the brand Hyatt Place. Carlson, which operates 15 hotels in the segment under the Country Inns and Suites brand, is set to add 38 hotels by 2015.

InterContinental plans to open 32 mid-priced hotels between 2011 and 2015 under the Holiday Inn brand, taking its number of such hotels to 37.

"There would be an acceleration to creating more facilities in smaller cities, thereby diversifying the risk and at the same time creating brand awareness," said P.R. Srinivas, India head for hospitality at Deloitte.

There were 740 million domestic tourists in India in 2010, an increase of 10.7% from a year earlier.


(c)2011 the Mint (New Delhi)

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