Foreign check-ins at old hotels

International hotel groups are replacing brands that have not worked well for different hotel properties

Hong Kong-based luxury hotel chain Shangri-La Hotels and Resorts had made its entry in Mumbai last year when they took up the management of a 324-room property in mid-town Lower Parel. However, nine months later, the luxury chain and the property owner - the Ruia family - parted ways despite a 20-year agreement. The Ruias now are in advanced stages of negotiating with the US-based Starwood Hotels and Resorts to bring its luxury brand St. Regis for the upscale property.

While hotel properties do undergo changes in the brands that adorn their facades, the frequency has risen in the past few years. The influx of foreign hotel groups is at play. The new foreign brands are looking to stay ahead of the hospitality explosion expected in India.

Of course, 5-3-star hotel brands would lead the expansion drive of any hotel company with multiple brands, as they can be put up quickly. Three-4-star hotels outpace luxury properties by a 5:1 ratio as hotel brands don't rush with luxury brands since they are flagship and more high-stakes.

In Mumbai, Starwoods, for example, has its 5-star business-travel brand Westin, in Goregaon, 'W', its 5-star business and leisure brand, is scheduled to open in October, 2017, again in Lower Parel.

The 400-room Emporio Hotel in Dwarka, New Delhi had got affiliated to the Bangkok-based premium hotel chain Lebua Hotels and Resorts before being taken up by the ITC Group for its Welcome brand, late last year.

Zuri Hotels, a leisure 5-star hotel, formed by a consortium of investors from West Asia, took over management of Varca, south Goa-based property, which was run by Country Inn and Suites, a brand of Carlson Hotels and Resorts.

K B Kachru, chairman (South Asia), Carlson, Rezidor Hotels says, "One of the reasons is the delivery and comfort levels with each other. India is culturally very sensitive and both parties need to be extra sensitive to each other. Sometimes there are realistic expectations and other times unrealistic".

"The discord between the owner (Ruias) and the operator (Shangri-La) was visible. They mutually agreed that it was in the best interest of both parties to dissolve the relationship", says a former employee of the hotel. The promoter decided to take up the operations, last September, and renamed the property as Palladium hotel.

The prolonged economic slowdown had led to less room occupancies, which in turn led to pressure on room rates. Fine-dining at its tax-laden upscale eateries also took a hit with inflation punching a hole in the pockets of its patrons. Even then, almost each of its four restaurants (including bars) appeared full on most weekends. With room-rates upwards of Rs 9,500 per night, the new property had 60 per cent occupancy, at best, according to the promoter.

Erik Stuebe, a hospitality consultant, in a column in Hospitality Net says, "Rebranding a hotel is a lot like creating a new hotel by using the same staff and structure but with a new belief system. New rules, policies, marketing strategies, distribution and customer base are all essential elements in making a new brand a reality."

So what is the reason behind properties switching brands? Hoteliers and developers agree that the only determining factor in this relationship is the performance of the hotel. Developers, who are often real estate players lack patience during the gestation period, complain hoteliers.

According to estimates, in India a five-star or luxury hotel takes four-six years to turn profitable, depending on investments and location, while a four-star or mid-scale property takes three-four years to break even. The break-even points are lower for economy and budget hotels.

InterContinental Hotels Group, world's biggest hotel chain, changed the brands of two properties last year. It rebranded both properties in New Delhi, from Hilton to upscale business brand, Crowne Plaza and business and leisure brand, Holiday Inn from Double Tree by Hilton.

Vijay Thacker, director, Horwarth HTL, says, "If it is a planned transition from brand to another then it is fairly smooth because everybody is aware of the marketing plans to be executed. The system has to change, reservation system undergoes a change and advertising changes are done as a new brand takes over. If it is not planned then the transition is quite severe. Whether the hotel will be able to maintain its market positioning, retain employees, maintain the property will have an impact on the daily business and in the long term."