All Indicators Are Pointing at Great Growth Potential in India: Stephen Holmes

Bikramjit Ray Oct 26, 2015

THIS IS the second time that Stephen Holmes, Chairman and Chief Executive Officer of Wyndham Worldwide Corporation, has been to India and he is happy with what he sees.

I enjoyed it then and I am enjoying it this trip as well. It’s an amazing marketplace. Amazing culture and great growth potential,” he told me during our interview.

“I think all the indicators are pointing towards great growth in India. If you look at the demographics, you have got a very young, very technology savvy, consumer base here. By 2020, you are expected to have a 20 million strong middle class,” he told me. It’s very similar to what the company had seen in China a decade. That kind of growth, in his view also fuels growth of the tourism industry.

“The biggest challenges for India have been infrastructure and regulation. If you talk to our hotel owners, who we have signed deals with (Wyndham has signed ten new properties during Holmes’ visit)--the biggest challenge seems to be regulations. I want to build more but it takes so long to get approvals to be able to. That is an area which I think still needs to develop in order to really fuel the continued growth of the tourism industry,” he elucidated.

According to Holmes, China recognised decades ago that they wanted to try to keep as many Chinese as they could within the country for their holidays, instead of seeing them leave with the money abroad. So, China focussed on developing infrastructure to make it easier to fly between different parts. They made the regulatory environment friendlier to development of hotels and time share resorts and that spurned growth, he said. “We saw rapid growth of our brands and brands all across the spectrum from Wyndham Grands, beautiful five star hotels, to economy Super 8 hotels, which is actually our largest brand in China. There was just an environment encouraging growth in China,” he added. Holmes said he had witnessed vast improvement in India compared to the last five years, but the change that you don't see that needs to happen is the change is the regulations. “It’s about making it easier for someone to build a hotel, without having to go and get seven different permits for seven different lifts in their hotel,” Holmes told me.

“For us, India is just a combination great growth potential and some growth disappointment over the last 20 years. You look at other markets like China, where we announced our 1000th hotel opening and we started in both markets about the same time,” he said.

Holmes, who has been serving in his current position from the time that Wyndham was listed in the New York Stock Exchange in 2006. At that time he was chairman and CEO. He is an an accountant by training and worked in Blackstone group while they entered the hotel space, with Wyndham being their first transaction, so the connection is an old one.

“Our business is the hospitality business. We are global, we are in different segments of the hospitality business. We are not just a hotel company, we also have time share and time share exchange. We are the largest renter of homes, villas and cottages in Europe,” he told me.

In India, specifically, the company has 25 hotels with four different brands of the group right now, this is expected to grow to 75 hotels within three years.

“We have a long range plan for India, for both the hotel and the time share business. If you look at the backlog, some of the hotels won't open up till 2019. We are planning out for continuing growth for this market and bringing out new brands like Super 8 to open one more avenue for growth,” he said.

When asked on how much attention Wyndham was paying to the mid-market segment of the hospitality pie, I was told that the industry had a total of 1,00,000 plus branded rooms in the market, with 56,000 under construction. Wyndham had 42 new hotels totalling 4700 rooms. As far as brand portfolio was concerned, most of Wyndham brands catering to the mid-market segment were already present in India.

On the subject of market disruptors who are also making their mark on the mid-segment, Holmes told me, “We are experiencing similar competition all around the world. In markets that have been established for quite some time, like the European rental market for example, Airbnb has been around. It is their largest market,” he began, adding that Wyndham was in fact, the largest renter of managed projects in Europe and hasn’t seen any decline in business. “I think this disruptor market as you define it, has been out there for a long time and people have accessed it in different ways. Lately it’s been more in the news because of Wall Street pumping it up,” he said.

On the time share side of the business, Wyndham had 130 resorts now affiliated with RCI and are expecting it to go up to 170 in the next three years, Holmes said. The RCI business is a different segment which Wyndham purchased in 1996. Club Mahindra is RCI’s largest customer in India. “It’s a very rapidly growing part of the business, but it’s totally under penetrated,” he said, explaining that penetration across the US is currently at 5 per cent of potential timeshare owners actually owning timeshares. In India, its 450,000 families out of a potential 200 million within the next five years. The growth potential is enormous.

“I think we will see the time share business explode here in India over the next five years,” he concluded.