Udaipur-based Evershine Exports owns marble and granite processing plants in Rajasthan and Karnataka. It has been supplying marbles to palaces, embassies and international hotel chains for 45 years. The company, however, was flooded with requests for a hospitality alliance when it spread the word it was seeking an alliance for a management contract for a hotel on a spare piece of land it owned in Jaipur.
“We finally signed an agreement with Accor Hotels for the Novotel brand after talking to all the leading hotels. Construction will begin shortly after our loan requirements are settled. The hotel should be operational in 2014,” said a senior executive of Evershine Exports.
With more than 15 companies planning to have about 600 new properties across 50 brands and more, ranging from budget brands to ultra-luxurious hotels and resorts, India is on the cusp of a hotel boom.
About 50-60 per cent of these properties are in various stages of planning and development. Estimates say India currently has about 100,000 rooms across upscale, mid-scale and economy categories. The next three years would add nearly 25,000 rooms in the upscale segment alone, stated a report by Knight Frank India published recently.
Anil Goel, Executive Director Finance, Indian Hotels Company, said, “We entered into contracts for hotel development with new companies. These entities have had no exposure to the hospitality segment earlier.”
IHCL is on an expansion spree, with one new property to be added every three weeks over the next few years. The company, which recently shifted tack to employing an ‘asset light’ model, had been converting its existing Taj properties into the Gateway and Vivanta brands.
“Even though borrowing for new projects may be a problem for established players, there are plenty of people who want to invest in the hotel segment,” stated a senior executive from Intercontinental Hotels Group. However, while hotel companies are eager to set up new properties, joining forces with new players has its own set of challenges, believe hoteliers. For instance, IHCL’s new Gateway properties are running behind schedule because the developers faced financial challenges in their core business activities.
In many cases, stand-alone properties have other challenges such as a shortened management period as desired by the developer and shallow budgets. For instance, Evershine Exports decided to go ahead with a relatively new brand such as Novotel in Jaipur because Accor agreed to a term of 15 years as against 30 years proposed by IHCL.
Simon Cooper, president and managing director, Asia-Pacific, Marriott International, said, “It is always better to have a developer who is into the mixed use of the land but stand-alone hotels can be a challenge, especially in an environment where things are slower.”