NRI Real Estate and Property Investment in India
UKs Premier Inn to Open Its First Hotel in Bangalore
Tuesday, October 23, 2009

Premier Inn, the UK’s largest hotel chain, is popular among international travellers as a budget hotel. But in India, where it will open its first hotel in Bangalore early next month, Premier Inn is pitching itself as a value-for-money mid-market brand. “In India we realised that the consumers’ connotation of a budget hotel means something that might not offer quality. So we decided to term ourselves as value for money mid-market hotel brand,” says Aly Shariff, managing director of Premier Inn, which plans to build 80 hotels across the country for an investment of 300 million pounds.

It’s not an exception, though. As a rule, most international hotel chains are positioning themselves higher than their global equity in India, thanks to the country’s peculiar business model for building and running hotels that just can’t survive here without restaurants and banqueting facilities. For example, Park Inn, an international three-star hotel chain belonging to the US-based Carlson Hotels Worldwide, is branded as four-star hotel in India. “Mid-market hotels in the western countries do not have elaborate food and beverages options or room service since people tend to be select service hotels. But in India, food and beverages contributes significantly to the overall hotel revenues and so most international mid-market brands tend position themselves as 4 star,” says Ajay Bakaya, executive director of Sarovar Hotels & Resorts that runs Park Inn and Park Plaza hotels in India under a franchisee agreement with Carlson.

In India, where the concept of ‘select service hotels’ does not exist, food and beverages account for about one-third of a hotel’s overall revenues, according to industry estimates. Total ancillary services in a 5 star hotel, which also include renting of banquet halls, spas and night clubs, could constitute as much as 45% of a hotel’s business here. “In India, hotels are food and beverages destinations and host weddings unlike the western countries,” says Rajiv Menon, area vice president (India, Pakistan, Malaysia and Maldives) of Marriott International, a US based hotel company.

This has forced moderately priced brands like Courtyard by Marriott to offer elaborate in-house dining services, concept restaurants or banqueting services in India, while globally they have elaborate dining options outside the hotels, he says. Another aspect that’s making hotels to upgrade their positioning is the high real estate costs, says Siddharth Thaker, executive director of hotel consultant HVS India. According to him, real estate costs in India at 35-40% of total project costs is double that of global average. “This leads most international hotel brands to position themselves higher than what they are branded globally so that they can become profitable faster.”

This trend, however, can confuse international travellers visiting India and Indians traveling abroad. It can even lead to cannibalisation of brands, warns Larry Malarkar, an independent hotel consultant. The former Starwood Hotels regional director expects stricter branding standards in the future as most international hotel chains are now introducing multiple brands in the country. “If international hotel brands do not work towards uniform branding, it could lead to cannibalisation of brands,” says Mr Malarkar.

Some hoteliers have started doing that, by realigning hotel brands to position them as per global markets. For instance, ITC Maurya Sheraton in Delhi was recently rebranded as ITC Maurya-The Luxury Collection as the hotel offered far more facilities than what brand Sheraton offers globally. This made Starwood Hotels and ITC Hotels to rebrand the hotel, an ITC spokeswoman said. Single-brand chains like Premier Inn may not be too bothered about such confusion, but the Carlsons and Marriotts may go the Starwood way as India steadily climbs to the top of the world.



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