Business Today

Overseas, Weakly

Indian hospitality groups have been making desultory acquisitions abroad. That may not be enough to produce an Indian Four Seasons.

     Print Edition: July 1, 2007

It's a delicious irony. While india is running short of hotel rooms, the country's hospitality majors are busy acquiring hotels abroad. Some would like to believe that it's happening because hoteliers in India want to maintain the capacity shortage to keep the room rates high, but that's a far-fetched theory.

As our previous stories show, there is more than sufficient money coming into the sector to reverse the situation in a few years.

 
Ritz Carlton, Boston
Ritz Carlton, Boston,owned by Indian Hotels; Inset view (below)
But given that buyouts abroad by Indian hotel groups have now become commonplace-Indian Hotels, for instance, bought the Ritz Carlton in Boston last November for $170 million-is there a method to the madness? "The mature markets are extremely important for us, as the UK and Europe generate 25 per cent of our business, while the us is about 15 per cent," says Raymond Bickson, Managing Director, Indian Hotels. "I think the idea is to establish a brand presence in the developed markets like the US, which generates a lot of inbound tourists for India," adds Manav Thadani, Managing Director, HVS International.

Indian Hotels' strategy hinges on combining the synergies of its properties on the US west coast and Sydney to cater to the travellers on this route. In contrast, the other big Indian hotel chain EIH, of the Oberoi fame, is avoiding the developed markets. "The US and Europe are developed markets with very little growth, so we don't have any plans of expanding there," says P.R.S. Oberoi, Chairman and CEO, EIH.

Oberoi says he goes purely by market economics regarding his overseas investments and is not averse to pulling out if the fiscals are jittery. "We sold off our Australian hotel (The Windsor in Melbourne) when the wage costs became too high," he states.

While India's big two have been at the forefront of overseas buyouts, other players are also loosening their purse strings.

 
While India's hospitality majors are making forays abroad, getting a foothold there has not been easy

The Suri family-controlled Bharat Hotels is developing a greenfield project in Dubai, The Grand Fort Dubai, while Club Mahindra Holidays has made its first overseas acquisition by buying the 97-room, 4-star Hotel Bon Alpina in Austria's Innsbruck region. "We invested m4 million (Rs 22 crore) for a 75 per cent stake in the property as we found it lends itself well as a family destination," says Ramesh Ramanathan, CEO, Club Mahindra Holidays. Ramanathan reveals that the company's next target is South Africa and it is also scouting for properties in West Asia and Europe.

However, getting a foothold in foreign markets has not been easy for Indian establishments, which probably explains their lack of brand visibility. Nakul Anand, Divisional Chief Executive, ITC Hotels, feels that Indian hotel majors have hitherto concentrated on the domestic market, which itself is nowhere close to saturation. "If you look at all the global chains, they have first established a presence in the domestic market before venturing overseas," he adds.

Oberoi says that the perception of people abroad about Indians was also a constraining factor in Indian brands going abroad. But India of the new millennium is seen very differently by the world. Perhaps, that will embolden hoteliers like Oberoi to conquer markets overseas.

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