Standalone hotel owners see better business though branded operators

Individual/family-run hotels rope in branded operators to compete with increasing number of hotels

Fourteen years ago, Malabar Group, well-known for its jewellery business, set up a hotel in Calicut. The group has now decided to go for a brand, aiming for higher occupancy and visibility for the 70-room hotel.

The group has brought in Keys Hotels to operate the hospitality business. Keys is a part of the New York-headquartered investment firm Berggruen Group and operates 25 hotels in India. “We have seen an average occupancy of 40-45 per cent in the hotel for most of the years. With Keys on board, we hope to reach an occupancy level of 80 per cent in the near future. The quality of service will go up and so will our returns,” said Iqbal M, director with Malabar Group.

More and more individual- and family-run hotels see value in being associated with a branded operator to compete with the increasing number of hotels in a given market. Standalone hotels find it difficult to increase occupancy. Other than corporate clients, they face challenges in getting repeat guests.

Anshu Sarin, the chief executive officer of Keys Hotel, told Business Standard competition is on the rise in the hospitality space. “It gets tough to increase occupancy unless your product is differentiated and you follow best practices that are at par with international standards. Once you have a brand, you can attract better talents and ensure improved standards to drive guest loyalty.”

While bringing a greater value to a hotel owner, branding also works well for hotel operators who want to have a presence in growth markets like India but through an asset-light mode. Most multinational hotel brands in India are expanding through this route. As an operator, one gets a fee from hotel owner and a share in top line as well as bottom line.

“The brand recognition is less for a single hotel owner with a 50-70 room property. Unless you have a strong brand and sales-marketing network, it becomes difficult to run a hotel. As the market is maturing, it is best to leave the business in the hands of an expert,” said Rohit Vig, managing director (India) for StayWell Group, which operates four hotels under the Park Regis and Leisure Inn brand.

The Sydney-headquartered group is in talks with an Indian hotel owner to operate a hotel that was being individually run. The same promoter is also in talks with StayWell for three new properties that are yet to become operational.

Branding is becoming a critical ingredient for success in the hospitality business. Owners now want their property to be differentiated as they seek to compete with the growing number of hotels in the market.