Alan Watts, executive vice-president and president for the Asia Pacific (APAC) at Hilton Hotels & Resorts, and Navjit Ahluwalia, its senior vice-president and country head, discuss their India plan with Shally Seth Mohile. Edited excerpts:
Hilton has charted an aggressive growth strategy for the APAC, what are your priorities?
Watts: As we speak today, one in every four hotels being built right across APAC, and one in every three in China, is a Hilton one. Like most in the sector, we are very focused on APAC. Asia leads the world in growth (here) and what it means is to bring the right brand to the market at the right time. We have 15 brands globally but only five are here. The idea is to bring these when the time is opportune and regionalise these. Making sure we provide best in class service will also be my priority.
Are there plans to introduce more brands in India?
Watts: We have been introducing Waldorf Astoria, most luxurious of the Hilton brand, and a direct competitor to the Ritz Carlton and Four Seasons. We have launched in Shanghai, Beijing and Bangkok. It’s a brand I am keen on bringing to India when the opportunity is right.
Your impressions of the Indian market?
Watts: India is art, not science. It’s a difficult market to understand from outside, one reason we have built a local leadership team under Navjit. There are a lot of reasons to be bullish on India. One is the government's infrastructure spending. The hotel industry eventually follows the infrastructure.
One can see a lot of it developing in India — new airports, regional airports, roads, etc. The fact that the goods and services tax (GST) has been implemented makes it easier for a foreign direct investor to understand this market.
All these factors, along with a relatively lower number of hotels in the country, bode well. All of India put together has a lesser number of hotels as compared to the number in tiny island of Singapore. In the long term, we believe India will be the world’s third largest hotel market.
Your expansion plans for India...
Ahluwalia: We are going to double the number of hotels in India in the next three years. We have just signed up with the Embassy group. This is the third project with them. We see India as a large market and we are in the initial stage. International hotels entered India only in 2004. Most hotels have come up in 15 years. With a fast pace of growth, what has happened in the past 15 years will now happen in five years. That is what makes us excited. We are getting into up-cycle. Till 2008, there were a lot of hotels under construction but today there is little supply coming into the market. There are really few constructions.
What are the reasons for that?
Ahluwalia: All India occupancy rate today stands at 65 per cent. In the past few years, the rate of growth has tapered off. The duration of time it takes to construct a hotel in India and the costs involved are huge. This is not the case, internationally. A low amortisation – 10 years versus 30 years in some of the markets, makes it tougher to construct a hotel and makes it work financially unless you have historical land. With no heavy supply coming in, prices will go up. While the project costs are high, returns are not proportionate. Having said that, it’s a good market for those who are looking at long-term growth potential.