Page 42 - IACC Newsletter March-April 2014 Issue 03

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Global hotel chains eye secondary, tertiary markets in India
As international hotel chains look to increase their presence in India, they are going beyond the metros and tapping into
booming secondary and tertiary markets.
Six months ago, Marriott International Inc. opened its entry level five-star hotel Courtyard at Bilaspur in Chhattisgarh-a city
with a population of just over 300,000 residents. Expected business from mining and power companies operating in the
mineral and coal-rich state was the reason Marriott went to Bilaspur.
Now, the group is looking at other such markets and says that it expects 25-30% of its portfolio to be in secondary and
tertiarymarkets in the next three to five years. Places where Marriott is expanding include Guwahati, Shillong and Katra.
"Some of these secondary and tertiarymarkets represent great opportunity becausesome of these markets have pent -up
demand for international branded hotels; demand not just for rooms, but also in F&B (food and beverages), especially
banqueting," said Rajeev Menon, area vice-president, South Asia, Marriott International.
Menon adds that the group has a reasonably strong presence in gateway cities, and would now like to expand the
portfolio across secondary and tertiarymarkets, "because that is growing even faster and that is where the natural growth
is".
According to a report released by HVS, a hospitalityconsulting firm, demand for branded/organized hotel rooms has risen
at a compounded annual rate of 17.6% in the last five years. Experts say that primarymarkets like the metros are growing
in single digits, while secondary and tertiary markets are seeing double -digit growth.
"Industrial clusters such as Neemrana, Vizag, Vijayawada, Baddi, Pantnagar, Manesar, Dahej, Asansol, Tirupur, Rajkot, etc.
are emerging as attractive destinations for hotel companies," said Chandni Sahgal, director, D'Essence Hospitality Advisory
Services Pvt. Ltd, a hospitality consulting firm.
As such, firms are looking to get the fi rst-mover advantage by expanding into these markets, she said. "Also, property
developers in these markets are aggressively seeking to tie upwith international brands; it is a matter of pride for them,"
added Sahgal. The Wyndham Hotel Group was an early mover in Neemrana, in Rajasthan, where it opened its Days Inn
midscale hotel three years ago. The high demand prompted the company to open a Ramada hotel there last year. It also
has a Days Inn hotel at Panipat in Haryana.
Deepika Arora, regional vice-president, Indian Ocean, EMEAI, for Wyndham, says expanding to secondary and tertiary
markets makes perfect business sense. "We have a portfolio of brands that fits well in these markets to cater to the
economy andmidscale segments," said Arora, adding that these markets are buzzingwith a lot of industrial growth, which
leads to a lot of corporate and banqueting opportunities. Explaining the attractiveness of a market like Neemrana, Arora
says the region has a special industrial zone dedicated to Japanese companies and another one is in the works. "...being
international companies, they look for international hotel brands," says Arora.
Almost 65% of Wyndham's upcoming properties are in the secondary and tertiary markets, she added. Some of the other
cities whereWyndham's brands are present or are under development include Jalandhar, Jamshedpur and Dharmapuri.
Whitbread Hotels and Restaurants International, which runs hotels under the Premier Inn brand is also eyeing these
markets. The company, whichwill have seven active properties in India by 2017, is now also looking to penetrate deeper
into the Indianmarket and is actively engaged in talks to open properties in secondary and tertiary markets, according to
David Vely, senior vice-president, development, Middle East, Africa and South Asia, Whitbread.
While these markets are attractive, they have their own set of challenges as well.