We see a flat year ahead for the hospitality sector: Douglas Martell

Interview with Vice-President, Operations, IHG South West Asia

Intercontinental Hotels Group (IHG), after being present for five decades in India, has found its feet in the market with a pipeline of nearly 29 hotels till 2017. Douglas Martell, vice-president, operations, IHG South West Asia, says the market here poses challenges but is doing better than most other countries. He talks to Ruchika Chitravanshi on 2014 continuing to see flat growth in the sector, with new supply coming in. Edited excerpts:

The hospitality sector continues to reel under economic slowdown and poor sentiment. What is your sense of the situation?

Everybody is focusing more on the challenges in India and there is a lot of talk about political uncertainties. All these things do play a part but at the end of the day, India is still a fast growing market. You cannot get pessimistic only because of one bad year. When you invest in a hotel, you are investing for 15 or 20 years. We have been here since 1962. When the cycle is at a low point, it does not mean you stop doing things.

How was last year in terms of occupancy and average rates?

We cannot say the market grew in 2013. It definitely remained flat. Average rates have not grown but we have seen reasonable increases in occupancy. There are pockets of good performance. We had some challenges in some cities but in others, we did better than expected. Delhi has been more resilient than we thought. One thing we all learnt is that if India has five-six per cent growth, it is still better than in a lot of other countries.

What are your big openings for 2014?

Our next big opening will be Holiday Inn at Aerocity (close to Delhi airport). We have done everything we were asked to and are very close to getting the clearances. We are hoping to open by February-March. We don’t have any rooms sealed off, since we don’t face the runway. We don’t have the challenges some of our competitors are facing (there). In Aerocity, we are only two or three months behind our deadline. So, we are lucky compared to some others, who have been 12 months behind their deadline. The location has short-term challenges but long-term, it is a great location. Overall, in 2014, we are looking at opening three hotels in India with our Holiday Inn and Holiday Inn Express brands.

Those are both mid-market hotels. What is the plan for your five-star and premium brands?

We will grow the Intercontinental and Crowne Plaza but the opportunity in India is really in mid-scale. While opening luxury hotels in India, you have to be very selective and have the right location. It is very difficult for the owner to get a return on investment unless they really have a great location.

You recently converted the Hilton and Double Tree properties in Delhi into Holiday Inn brands. Will we see more such developments this year?

We will definitely see more conversions happening. It is a good opportunity to grow at a quick pace. We will see more local brands looking to hook-up with the international brands. Everybody recognises that in emerging markets, the power of brands is very important and even more when it is a flat market.

Sometimes, the current brand might not be delivering up to the full potential of that location. The Eros group thought using the Holiday Inn, which has a lot of brand awareness in this country, would deliver a lot more for them. We had to make very little of changes to the hotel. It had high standards, which was great for us, and it was definitely a perfect Holiday Inn.

With inflation becoming a cause of worry, how are you managing your costs?

Two biggest costs areas are power and personnel. Even I am completely amazed about the utilities’ costs in this country. One thing we do is a programme called Green Engage in all our hotels, to reduce our costs of power consumption.

This year, what is the biggest challenge you are gearing up for?

Cost, in general, will be a challenge for the sector. When it comes to managing a hotel more efficiently, there is definitely a gap there, and that is where our focus is going to be in the next one to two years. For instance, a lot of hotels have two or even three staffers for every hotel room here. Abroad, even a luxury hotel would have only 1.5. So, it is not a matter of reducing services; it is how you train staff to become more adaptable in the whole environment. We do a lot of multi-skilling.

Are you expecting a major turnaround for the sector this year?

We see a flat year ahead. There is an increase in supply but supply is outstripping demand. We will see more careful investment in the region. A good hotel would take three to four years to build. So, an astute investor is saying, let us build a hotel now because the market is going to be good. We are still signing management contracts at a healthy pace.

Is there any plan of bringing any of the other IHG brands to India?

For us, it is really about consolidating our existing brands. We want to get to a certain scale and we would definitely be looking at bringing our other brands. We feel our current brands are perfect for India. We don’t really need to bring any other brand. At the end of the day, there is still a lot of room to grow the Holiday Inn and Express brands.