Articles for Business

Thailand and China Top List of World's Most Connected Travellers

The Indian Hotel Industry is At a Watershed Moment!

By Vivek Narain THE GLOBAL travel and tourism industry provides employment to over 277mn people (1 in 11 jobs on the planet) and contributes almost 10 percent to world GDP. Travel and tourism in India accounts for almost 7 percent of GDP and there is no wonder that the industry is getting such a big policy impetus from the current establishment. In fact, out of the ten-point agenda for India’s economic revitalization laid out by the Modi led government, three of them have a direct impact on the Indian tourism industry. While the government seems sincere in its objectives, the impact of any policy will only be felt in the medium term at best. The Indian Hotel Industry is currently plagued by unprecedented financial woes, which have been compounded in the context of an unpredictable regulatory regime and the general challenges of project execution across India. Whether it’s the 100 odd permits needed to open a hotel or the very unique problem, recently experienced in Delhi’s Aerocity Hospitality Complex, of not being allowed to become operational because rooms overlook the runway (which incidentally was always part of the plan), getting a project off the ground and successfully completed in India is a monumental achievement. On the operations side, the issues are real and well known ’ poor last mile infrastructure impacting the potential of business, anaemic growth of international travellers partly due to archaic visa laws (which are now being addressed, albeit not without confusion in its implementation), rising input costs especially those related to payroll, weak demand in the face of significant room inventory additions, the list unfortunately keeps going on. This does not bode well for the financial health of hotels in the near term, especially those with severe capital structure dislocation. Ill-advised, poorly conceived, and under-capitalized from day one, a number of hotel assets today are under stress and unable to generate sufficient internal accruals to service debt. Several properties have been classified as non-performing assets, leading to chronic under-investment in operational hotels, and also resulting in a number of under development projects having either been cancelled or stalled. With the banks under increasing pressure from the RBI to clean up their balance sheets, and several assets already sold to Asset Reconstruction Companies (ARCs), the need for significant recapitalization has never been greater. Unlike other income generating real estate assets, hotels are unique as they exhibit characteristics of both a traditional real estate asset and an operating business, making them more susceptible to the business cycle. There are however, several global examples where companies have witnessed a reversal of their fortunes by adapting swiftly to changing market conditions. One of the most high-profile examples is Blackstone’s 2007 acquisition of Hilton. The PE powerhouse financed the purchase of the hotel group for about $5.6-billion in equity plus around $20.5-billion of debt from a group of 26 banks, hedge funds, and real estate debt investors. Due to the financial crisis that followed, revenues for the Group were running down 20 percent by the end of 2009, and the company foresaw an imminent cash flow crunch. Within a year, Blackstone corralled the lenders into a new agreement, invested $819-million of new equity into Hilton, which the company used to buy back $1.8-billion of its secured debt at a discount of 54-percent from the original borrowed amount. This decisive action bought Hilton sufficient liquidity to tide over and restructure its business, and resulted in one of the most profitable exits for a PE investment ever. On IPO day in 2013, Hilton was valued at an equity value of around $20-billion and Blackstone was sitting on a gain of almost $9-billion. This kind of turnaround is an important lesson for the Indian Hotel Industry which is at a watershed moment. Global appetite for investing ’equity’ in Indian hotel assets will re-emerge, despite the sub-optimal returns of the previous investment cycle on account of many factors including inappropriate underwriting and the collapse of the rupee in 2013. One such source of capital may come in the form of the under consideration REIT framework. There has been a lot of talk about how it might serve to be the silver bullet that saves the industry. REITs in India will take time to evolve before they can attract meaningful institutional capital ’ owing to challenges of taxation structure, price discovery, transparency and lack of scale. With the yield on the 10 year government bond close to 8%, one can assume that equity investors would expect a reasonable risk premium. Given current trading performance, this would imply that existing hotels would need to transact at a significant discount to replacement cost for an equity transaction to make economic sense. The price expectation of the seller - the Indian promoter (a unique form of business owner and investment syndicator), will hence need to recalibrate to the risk adjusted yield expectation of potential investors. Historically, borrowers have been bailed out by inflation in asset prices. If one were to assume that property prices in India cannot continue to defy gravity, the failure to recapitalize these troubled assets will lead to significant write downs. In order to avoid this, decisive action is required and there needs to be a coordinated effort on the part of bank creditors, promoters and financial investors to allow these assets to successfully realign their capital structures making existing hotels financially viable and resuscitate stalled projects. This much needed shot in the arm will benefit the entire Indian tourism ecosystem. There is light at the end of the tunnel. Revival of GDP growth, business expansion, continuing growth in the middle-income demographics and an increase in international visitors, will lead to the stabilization in the hotel sector with revival in demand coming from both the business and leisure segments. One can be assured, that the next few years promises to be an interesting phase for the Indian hotel industry. The author is an entrepreneurial executive with experience in real estate, hospitality, investment advisory and corporate banking. He is the Co-Founder and Director of Apex India Club, a new vernacular of by-invitation members-only business/city clubs and also a Director of DoiT Hotels & Resorts, an India focused hotel investment platform.

Accor Hosts 1st India Hotels Partner’s Expo in Delhi and Mumbai

By BW Hotelier THE ACCOR India Hotels Partner’s Expo, a new initiative from Accor India, was recently held in Delhi and Mumbai. An annual sales and marketing initiative that seeks to bring together business partners across all market segments with the hotel group’s associates; it showcased over 31 hotels based across 17 key cities in the country and spanning over 7 brands. This is the first programme conducted by any international hotel chain that allows Indian hotels to congregate. All kinds of hotels, ranging from those catering to luxury, mid-market to economy sectors, were present at the event. ’The Accor India Hotels Partner’s Expo provides an ideal platform for us to engage with our meetings, corporate to explore potential business developments. It also gave us an opportunity to update our customers on the key growth areas of our footprint and brand innovations not only in our region but also on Accor globally. Customers were also-given an insight to understanding our brands and new developments within Accor,’ said Nikhil Dhodapkar, Regional Director, Sales and Marketing, Accor India. The basic aims of the expo were updating partners about the latest developments in the group and help strengthen existing relationships while developing relationships with partners and customers alike. Dhodapkar adds, ’The Expo aims at showcasing various brands of Accor in the lucrative weddings, MICE, luxury and leisure segments. With the recent announcement of Accor’s appointment to manage the Jaipur Exhibition and Convention Centre, it further reinforces the importance of MICE business in our corporate strategy for-the Indian market.’ The expo drew 300 key partners in Mumbai while the Delhi chapter saw a turnout of more than 350 key partners. It also attracted global corporate organizations, local MNCs, DMC, travel agents, PCO, event management companies and OTAs.

The Potential for Us in India is Enormous, says RCI's Badwal

By Bikramjit Ray PALI S BADWAL, Managing Director of RCI in India (see photo) spoke to BW Hotelier in an exclusive interview about what his company was planning for the sub continent. He started by telling us that RCI was like a glue which connected with the developer (hotel owner) and through them to the customer. So it was a b to b to c business. ’We are the glue with 4500 resorts around the world which gets from A to B,’ he said. RCI has around 3.7 million members globally and the next largest player globally is Interval International with some 2 million members, but they are not present in India. When it comes to global footprint in timeshare, RCI is pretty much the best choice for the Indian market, according to Badwal. ’In terms of an Indian consumer’s ability to work with an exchange company via their developer, we sort of become a one-stop shop. Part of our aim is to make sure we do show value in terms of your timeshare, for you as a consumer, as well as you as a developer who sold it,’ he said. RCI has nearly half of the market share of around 9 million time shares around the globe. ’The potential we see in India is enormous. India has the youngest time share purchaser in the world. You are purchasing in your 30s. By buying earlier, your desire and ability to consume increases significantly,’ Badwal told us. Quoting a global study which took place In 2012, Badwal said, ’When asked how positive they were about time share, Indian consumers were placed third worldwide with 70 per cent saying they were positive. When asked again whether they would buy a time share, 40 per cent said they may. This is still the third highest in the world.’ One of the things you need to look at is also the size of the market, coupled with the penetration. The market has to be big but it can't be a mature market. In a mature market of a 1000 potential consumers, 80 will buy. In India it’s running at 3 out of a 1000.- So the size of the piece of the pie is 25 times what we have already sold plus the actual overall size of the market, he said expounding on the scope of business in India. ’Typically a time share purchased in Europe of North America is $ 20,000. India is roughly at about a 3rd of that price. 30 to 35 per cent. The value to an Indian who is buying at an exchange capacity, the same product for about Rs 4,50,000,’ he explained. We asked Badwal what hotel owners or as he calls them developers get out of the deal. ’It depends on what that developer wants, is he a new build? Is he an existing property? Is he looking for expansion? Is he looking for refurbishment? Probably the best example on a small scale resort would be to look at Orange County in Coorg. They started off with five cottages. One became reception. They started to sell time share. With that money, they built more units. They have used the money to expand and invest. Orange County spoke to RCI, who assisted in the production of the collaterals to make sure it got the right messaging and then they will sell to a member, for whatever their prices. They will enroll the member into RCI and we will get the details. When they come to exchange and to use our products i.e somebody else's week in India or abroad, is that member then transacting with RCI’, he said. How does it make sense. we asked. ’Depending on their business model, existing hotels do not run at a 100 per cent except for some peak times during the year. They have spare capacity. They do MICE, they do FIT, they can do time share. It’s all part of the mix. A sensible hotel is willing to sell x percentage of its inventory at a discounted price, but they will get the money up front. They may want it to pay off debt, or do a refurb, they may want it to build another wing or an extension. They sell and make money. Where does RCI make its money? We do it with member's exchanging, because we charge members an exchange fee,’ he said. ’We are looking at what our members are going to get. We don’t want something with five rooms. We have the gauge of around the 20-30 minimum units. If you have a really small set of units, the ability for you to have a swimming pool and a restaurant on your resort is going to be highly unlikely. We know the kind of things our members are expecting when they go.-Style is something that is different. Heritage can work, but don't give me heritage if the mattress is made out of foam and there is no air conditioning and the room needs air conditioning. So, most people have thought about all of that. You can have a look and a feel, but it has got to have a certain amount of mod cons,’ he goes on to say explaining what makes the cut as far as RCI affiliation is concerned. In India, RCI has 120 live operating properties and they are bulling about increasing, but only in specific areas. ’One can always take more Goa because it is so strong. Kerala is another area we want to expand in and a number of areas where there is wildlife like the Jim Corbett National Park for instance where we already have a number of affiliations are areas of growth for us,’ he said in conclusion. The Author is Executive Editor of BW Hotelier.-

IHG to Open first Crowne Plaza Hotel to Phu Quoc Island

By BW Hotelier INTERCONTINENTAL HOTELS Group (IHG) will be setting up shop with its Crowne Plaza brand in Vietnam’s largest island, Phu Quoc by 2017. The brand’s third Vietnamese venture will be a 300 room property which will be developed by local real-estate giant, M.I.K Corporation. The property, christened Crowne Plaza Phu Quoc Starbay, will be a part of the new Star Bay/Green Hill development, which will also feature a lagoon, beach village and a range of shops, restaurants and bars. Leanne Harwood, Vice President, Operations, South East Asia, IHG said: ’Phu Quoc is going through exciting times. We've seen the positive impact that development of the new international airport has bought, and the upcoming expansion of the cruise terminal will also help drive tourism. The visa-free entry for a series of travellers has also helped growth in visitor arrivals." A wedding chapel which IHG says will be ideal for those looking for a unique wedding destination and a 240-seater ballroom will be one of the highlights of the hotel. The property will also host a business centre for guests on vacation and a dedicated meeting an events team to assist clients set up and transform any of the six places available for the same. Located in north-west Phu Quoc along the white sand Dai beach, guests would be minutes away from the waters and would also be able to enjoy a beachside experience at the all-day dining ’Surf Shack’. The IHG also plans for a 173 room Holliday Inn in Cairns, Australia. Located at a key access point for the Great Barrier Reef, the hotel is currently operating as the Mercure Carins Harbourside and will undergo extensive refurbishing before opening as a Holiday Inn later this year.

Vivanta by Taj Connemara Gets New Exec Chef

By BW Hotelier THE VIVANTA by Taj Connemara, Chennai has appointed Jaffar Ali as its new Executive Chef. Chef Jaffar started his culinary journey in 1992 when he joined The Taj Coromandel, Chennai as Chef Trainee. Almost two decades later he is back in Chennai with Vivanta by Taj-Connemara, and hopes to bring to the guests a world of culinary delights. Chef Jaffar worked in Maldives as Sous Chef and then Senior Sous Chef with The Taj Coral Reef Resort. He then went on to become the Executive Chef at the Denis Island Resort in Seychelles. On returning to India, Chef had a short stint at The Gateway Hotel Calicut as the Executive Chef and then joined The Gateway Hotel Ernakulam. Here he was in-charge of the re-launch of The Bubble Caf-, the iconic multi-cuisine restaurant, and also the launch of Sian, the Pan Asian specialty restaurant - the first specialty restaurant in Kerala offering Chinese, Thai and Japanese cuisine. Chef Jaffar loves western cooking and is always looking for avenues to explore and innovate regional specialities. A certified FSMS auditor, Chef Jaffar is very passionate about learning and updating himself.

India Records 7.8 Per Cent Growth In Hotel Occupancy

By BW Hotelier DATA COMPILED by STR Global has indicated that hotels across India are experiencing an average of 58.3 per cent occupancy. This means that there has been an incredible growth of 7.8 per cent when the occupancy rates of May 2015 are compared with that of May 2014. This figure is also puts India at the top of the table in the Asia-Pacific region in terms of growth, although it still lags behind China, Australia and Singapore in terms of average occupancy percentages. China has not registered any growth this year according to the report. The region itself reports a growth of 1.4 per cent for the month and the average occupancy across is 68.1 per cent. This puts India behind the Asia-Pacific average, but the growth rate seems promising. In terms of percentage change in revenue per available room India once again leads Asia-Pacific with a 7.3 per cent rise, when calculated in local currency. However, there has been a fall in the average daily rate in terms of hotel room pricing which has be estimated to be INR 5,197.76, which is a decline of 0.5 per cent from last years rates. This could be what has contributed to the high growth rate in occupancy. Thailand reported the largest increases in occupancy (+22.9 percent to 68.3 percent) and RevPAR (+20.9 percent to THB2,151.01). ADR in Thailand was down 1.6 percent to THB3,150.54. Thailand’s performance continues to improve in year-over-year comparisons, most notably in Bangkok, as the country is further removed from last year’s coup d'-tat. Myanmar experienced the steepest decline in occupancy (-27.4 percent to 41.4 percent) and RevPAR (-26.4 percent to MMK69,522.58). The country continues to be affected by a significant amount of new supply in the market. French Polynesia posted the largest increase in ADR, rising 16.2 percent to XPF40,657.53. Japan followed with a 12.9-percent rise in ADR to JPY14,666.02. South Korea reported the largest decrease in ADR, down 6.9 percent to KRW184,206.00. Japan (+16.2 percent to JPY12,223.56) and French Polynesia (+15.8 percent to XPF28,762.75) also posted double-digit increases in RevPAR. According to STR Global analysts, the devaluation of the Japanese Yen has made Japan a cheaper option for travellers. South Korea (-13.4 percent to KRW129,804.99) and Maldives (-10.6 percent to MVR5,257.00) were the two markets in addition to Myanmar to report double-digit drops in RevPAR. Highlights from key market performers for May 2015 in local currency (year-over-year comparisons):Bangkok experienced the largest occupancy increase, up 31.6 percent to 71.6 percent. Three additional markets saw double-digit increases in occupancy: Hanoi, Vietnam (+22.8 percent to 72.3 percent); Sanya, China (+16.1 percent to 52.8 percent); and Phuket, Thailand (+14.1 percent to 60.5 percent).  

Kochi: A Market in the Cusp of Change

By Vineet Mishra GEOGRAPHICALLY AND demographically, the port city of Kochi is well endowed. In many ways this trade and financial hub of Kerala is in the cusp of change and morphing into a destination where economics, leisure and culture fuse seamlessly and offer it’s a patron a dynamic social milieu. The most fascinating change comes from the millennial generation of Kochi who are challenging the status quo of the previous generation and stemming the brain drain that Kerala has endured in the last few decades. The start-up village in Kochi is only such business incubator in India which nurtures and channelizes the entrepreneurial zeal among the youth. Kochi has been traditionally viewed as a gateway to many tourists destination like Kumarakom, Thekkady, Munnar and more. However in the wake of continued investments in the IT and logistics sector and high impact projects like Metro rail, Smart city and Medi city, Kochi has the potential to be catapulted to the league of Tier 1 Metropolitan city. Events like the Kochi Muziris Biennale, Medical conferences, MICE movements further augment the image of Brand Kochi. International arrivals have seen a 13% year on year growth in 2014 making this the fourth busiest airport in India. A brand new international airport terminal is being built with a staggering budget of USD 95 Million. All these indicate the immense opportunity that remains to be unlocked. Kochi Marriott hotel is an emerging landmark within the emerging destination that is Kochi. Kochi Marriott sets out to be the hypermarket of hospitality services. A one stop shop that offers a whole gamut of services ranging from an exquisite candle lit dinner, a team meeting in a fish farm, a boat cruise in the Kochi Backwaters, rediscovering the spice route in Munnar, a theme dinner, a designer mega wedding event to multi-national conferences. The hotel has seasoned event specialist, who provide customised packages to frequent travellers including multiple Itinerary proposals and sight-seeing options, half/full day tour packages and recommendations. For our MICE clientele we provide dedicated check-in counters and exclusive dining arenas, enhancing the overall experience. At Kochi Marriott, we understand that in an emerging destination like Kochi, we need to be a travel partner and not just a hospitality partner. Marriott International concepts like Meetings Imagined provide event solutions beyond expectations by ideating and innovating every event differently. The Mobile check-in app reinvents the check in experience and caters to the new millennial generation. Guest rooms, re-designed keeping in mind guest needs, endeavours to make every travel brilliant to our guests. The trade hub of Kochi has shifted and the hotel’s strategic location is at the centre of this focal point within the Lulu mall campus. This unique feature delivers convenience to guests showcasing a range of shopping outlets, to family/ kids entertainment options. Kochi Marriott also offers buggy services to the mall. The biggest challenge and opportunity for Kochi Marriott hotel remains in its ability to seamlessly blend into the life and times of the dynamic city of Kochi. The author is General Manager of the Kochi Marriott Hotel.