Undeterred by the current challenges faced by the hospitality industry in India global hospitality firm InterContinental Hotels Group (IHG) is looking to scale up its presence in the country. The Group that offers four of its nine brands to the Indian customer in both luxury (InterContinental and Crowne Plaza) and mid segment range (Holiday Inn and Holiday Inn Express) says it is committed to having at least 150 hotels in India over the next 10 to 15 years.
It says 85 per cent of that inventory will be for its mid-segment brand targeted towards domestic customers. Currently, IHG has 19 hotels in India with a presence in 11 cities and another 45 hotels under construction. BUSINESS TODAY caught up with Pascal Gauvin, Chief Operating Officer, IHG, India, Middle East and Africa. Edited excerpts from an interview:
Q. What is your assessment of the India hospitality market? Is the end to the downturn round the corner?
A. That is not how we look at this market. We are in India for the long term. In all markets across the globe there will be ups and downs, some markets will be more challenging than the others…we did a study on India a few years ago and we know exactly what we want to do in India and how we want to do it.
Q. So what is it that you want to do in this market?
A. Our target is the domestic market. The brands that we are going to go for are mid segment brands and we want to go in for the Holiday Inn family brand - that would be Holiday Inn and Holiday Inn Express. Even if for couple of years the business is up or down or there is an election, there is always something happening. It's all right. We need to be absolutely clear - India is a great country and there is potential in this market, it's a country where people want to travel, do business and also where there are not enough hotel rooms. It is a country where the middle class is growing tremendously so we need these rooms. Today if the market is difficult or if there is some difficulty because there is more supply in the market it does not matter. We need to be focused on the long term. We are very determined, we are investing in India and we are clear that we move to India and be successful in India.
Q. You have an impressive pipeline. What is the split of brands like?
A. Eighty five per cent of our brands are Holiday Inn and Holiday Inn Express. We will have InterContinental in Delhi and Mumbai. That is not the focus now and that will come at some point. We are focusing on Holiday Inn and Holiday Inn Express because we have to be absolutely clear as our study told us that it is the mid - segment market that is growing and as you know Holiday Inn is the largest brand in the world and in the US it is 'the' domestic brand and the Chinese think Holiday Inn is a Chinese brand because it is completely localised according to their thinking and culture. So we are very clear in our mind that Holiday Inn Express that has to grow in the sector.
Q. What is the difference between the two brands - Holiday Inn and Holiday Inn Express?
A. They are brands from the same family. Holiday Inn is the full service brand and the Holiday Inn Express is the select service brand. So Holiday Inn Express is simple, efficient with limited service, Wi-Fi, good shower and is very effective at a good price point. Of course for India there is a restaurant on the side. But for people who need full service, room service and all other comforts the Holiday Inn brand is there.
Q. How do you plan to compete with local brands with the same low frill offerings in India, say for example Ginger?
A. Are there any local brands in the same category? There is no equivalent of (our) brand locally. Ginger is a very different proposal and I do not think there is any equivalent of Holiday Inn Express here in India and that is why we are very proud of that brand and are bringing it in India, to the India market. It is going to make a difference and our customer is telling us that already. We have one hotel in Ahmedabad, another one in Chennai and this year we are going to open in Hyderabad. We are really growing this brand and that is going to get us very loyal customer through IHG Rewards Club.
Q. What do the customers want from an operator like you?
A. We did a study a few months ago as to what the customers really need what is important for them - the international traveller and the domestic traveller. They said three things which were quite important - they want a global brand because that gives them the reliability and trust, they want it localized meaning in India they want to make sure they have Indian food, make sure it is more colourful. But they also want something else which is quite important and that is they want services to be personalised and this is quite different and quite new. Thorough IHG Rewards Club we do personalize services, we know the preferences and there is focus on more and more personalization and we are going to cater for what customer exactly wants. We also want to understand the purpose of the visit as the same brand can be used for different occasion. So occasion segmentation is what we have really worked on to make sure we understand customer and give them personalization. That came up new in the study and we have never done that before. Technology is also very important.
Q. What about the owners who select your brand how you convince about building a hotel with your brand to operate?
A. What is important is that our owners believe that it is great to invest in India in a hotel and then if they chose out brand we need to ensure that we understand their business well and we can really bring them the return that they want. When the owners come and tell us that they want to build this hotel and they want our brand, what is important for us is to understand 'what is the market', 'what are the margins'. When we sign a contract for a hotel it is for 20 years and it is like wedding and we want to stay married for long and do not want to get divorced before. The brands that we bring are successful brands globally and are successful in India and strong enough to move the RevPAR (performance parameter of hotel industry) up.
Q. How is the demand moving in the luxury segment? The mid-segment market is growing much faster for most of the businesses. What is it like for you?
A. We see the same it is no different that is why we are coming to India and developing in India. With Holiday Inn and Holiday Inn Express 85 percent of our pipeline is from this brand family. We will have InterContinental in Mumbai or Delhi but that is not critical for us this is for international traveller and this is not our target customer. We want to remain focused on what is our target customer. We want to build in India a network of Holiday Inn and Holiday Inn Express where people can travel across India in many - many cities and use this brand everywhere they can. We will go to every city where the airlines are landing or if there is a big network of trains we will go to that city. India is such an amazing and huge country we have to cover it.
Q. How is India mid-segment market performing compared with the Middle East or South East Asian markets?
A. What I think in India the difference is that it is one country. For example in the Middle East it varies from country to country and the Middle East started and is till now quite a luxury driven market like Dubai, Abu Dhabi, Doha. So we are there, we have our mid-segments there too but it is city by city in Dubai for example we started upscale properties like InterContinental and Crowne Plaza now we are moving with Holiday Inn. We will take another 10 - 15 years to go mid segment there when they move form luxury destination to more volume destination. The main difference for India is that we are talking about a billion plus people that is a huge market. It is totally different because it is one country; it is not about selling this destination a luxury and then expanding. Demography shows that more people will move from poverty to mid class level, the economy is growing and people will need to travel into India to do business. So when you put in the number of rooms today against the number of rooms needed tomorrow it is not enough. So it is clear that this is where the bulk of the market is for the next 15-20 years. Luxury is already present with the Taj, the Oberoi but it is mainly for the international traveller, we are in a different thinking. We do not want to go in for the international traveller, we want to go in for the domestic traveller and that is our focus that is what we do in China.