Cover story Cover story
2012 foretold F
From stable ARRs and cutting-
edge F&B to the rise of the
asset manager and increased
compensation, Cushman &
Wakefield shared its 2012
trending report with some of
the industrys game changers to
forecast the road ahead
By Raynah Coutinho
Photograph: Bajirao Pawar
L-R Anil Madhok, KB Kachru, Manav Thadani, Dilip Puri, Rattan
Keswani, Chender Baljee, Vijay Thacker, Dipak Haksar, Homi Aibara.
26 | December 2011 | Hotelier India www.hotelierindia.com www.hotelierindia.com
ollowing a year characterised
by cautious optimism, increas-
ing competition, mergers, ac-
quisitions and turnaround in
consumer behaviour, the hospitality
industry is better prepared than ever to
look up and keep abreast with the next
threat or opportunity that lies ahead.
Which emerging trends will sparkle and
which will fizzle out? Which depart-
ments in hospitality will require the
most investment? Which offering will
attract the most guests?
When Cushman & Wakefield pre-
sented us with their trending report, the
Hotelier India team could not resist the
opportunity to ask some of the biggest
names in Indian hospitality to react.
Going domestic
C&W says: Growth in domes-
tic tourism is poised to be a major
driver of occupancies, especially
in the off-peak season.
The challenge is to attract this
growing market to destinations in In-
dia and not lose them others in South-
east Asia and the Middle East.
This year as well, as domestic tourism
continues to drive occupancies, more
hotel companies in India are working
their offerings to suit the guest.
Dilip Puri, MD for India and region-
al VP for South Asia at Starwood Asia
-Pacific Hotels & Resorts, says: Gradu-
ally, the domestic market is beginning
to substitute the international market.
It is five to six million inbound tourists
versus 50 million Indian ones in the
upper-middle class.
In secondary or Tier II markets, the
domestic guest is the major generator of
occupancy. MICE will be the frontrun-
ner, followed by leisure, corporate, reli-
gious and medical tourism.
ITC Hotels division COO Dipak Hak-
sar says, We are also seeing aspiration-
al shifts, including utilisation of a higher
category of rooms.
Indian hotels are no competition to
their neighbouring counterparts, espe-
cially Thailand, the UAE, Hong Kong
or Singapore, in terms of rates and in-
frastructure. Trident Hotels president
Rattan Keswani says that the trick is
Hotelier India | December 2011| 27
 Cover story
to simply set up right. Inter-
national travellers always enjoy
great service but dont like it to be
personalised; they like to be left
alone. Most Indians who come to
a luxury hotel are accustomed to
help and receiving a huge amount
of attention at home. A hotel must
be multiple levels better in order
to command that rate, he says,
pointing out that India is on a
learning curve.
Increased
compensation for
retention
C&W says: Reten-
tion of talent will not
only be led by HR practices but
through improved compensation.
With supply expected to con-
tinue growing over the next five
years, other contributors to talent
retention would be increased mo-
bility, faster career-track growth
and training and development.
The battle for market-share in
the future will not be over guests but
over talent, is Puris prediction.
HVS chairman Manav Thadani
sees that 2012 will be stable in
terms of salaries and jobs due to
the recession. Compensation may
not go up during 2012 but will per-
haps rise in 2013-14, he says.
Hospitality consultant Homi
Aibara of Mahajan & Aibara says
that pay scales may climb up a few
The Oberoi Gurgaons green wall,
a symbol of its eco-conciousness
notches to to meet cost of living
and international benchmarks.
Earlier, expats used to earn much
more [than their Indian counter-
parts] but this is now being evened
out or even reversing, he says.
Being considered employers of
choice is an ambition most hotel
companies share.
Keswani says: We believe that
if you pay well and pay fair youll
attract the best. Of course, it is a
rising cost and that needs to be
factored in to revenue plans.
Hotels compete not only with
each other but with other industries
as well. The government allowing
100 per cent FDI in retail is going to
further affect the hotel sectors loss
of talent to retail, says Thadani.
It is not the salaries alone that
keep staff. Vijay Thacker, director
of Horwath HTL, says: Good tal-
ent stays for other reasons. Men-
toring and caring is important.
Hoteliers are trying to find an-
swers in rewarding loyalty and
training. Chender Baljee, chairman
and managing director of Royal
Orchid Hotels says: Offer a reten-
tion bonus to staff when they com-
plete two years with the company.
Particularly at an entry level,
hoteliers see training and hiring
locally as the differentiator.
Destination hospi-
tality products
C&W says: Travel-
lers are seeking des-
tination hospitality
products such as spas,
adventure retreats and sustain-
able resorts. Many unique prop-
erties are in the pipeline. This
seems to be a market developers
are cashing in on.
Hoteliers say that they are wit-
nessing big bucks in resort busi-
ness but the key to this piggybank
remains location-linked.
KB Kachru, executive vice-pres-
ident for South Asia, Carlson Ho-
tels, Asia Pacific, cites an example
of his companys vastly success-
ful Radisson Blu in Alibaug. It is
accessible within two-and-a-half
hours by road both from Pune
and Mumbai and 45 minutes by
boat from Mumbai. People save
time and money, which would have
been spent on airfare, he says.
Destination resorts within a
200-km radius of a city centre
are already popular. At resorts
Cover story
The big budget-
economy story
C&W says: The math
for this is simple. These
hotels cost less to build,
get completed in less
time, cost less to maintain and are
considered value for money by
the majority of corporate clients
who have become more conscious
of spending.
They are practical and easier
to manage in Tier II and III cit-
ies. While luxury will never go out
of style, this has become the hotel
model of choice for developers
The Royal Orchid in Shimoga, which attracts a large number of domestic tourists
seeking high ROIs.
Budget and mid-market seg-
ments have been in hospitality
headlines for a year now and are Lobby of the ITC Maurya. The chain is seeing domestic travellers opting for higher room categories
Percentage increase in median salaries in 2010/11 expected to continue to dominate
over 2007/08 across hotel categories in India development pipelines.
Position Budget and midscale First class and luxury The Baljees have introduced
General manager 1% 13% Spree this year. But Chender Hospitality funds to be a big part of the hospitality Transaction-heavy,
Financial controller 37% 6% Baljee says that the focus on Pep- gaining ground picture in 2012. asset-light
HR manager* 38% 18% (HR director)
Front office manager* 75%
11% (Rooms division
permint, which is in the mid-
market segment, will continue.
C&W says: Despite
there being many in-
I think theres going to be very
few people out there who have the
C&W says: With
the majority of local
director)
Executive Similarly Sarovar has around dependent developers money to invest into hotels next brands realising the
56% 20% 20 mid-market properties in in the market, hospital- year. They will be at an advantage benefit of being asset-
housekeeper
F&B manager* 20% 43% (F&B director) the pipeline. ity investment funds backed by because there is going to be a capi- light, the next few years should
Executive chef 70% 9% Kachru says: Well soon intro- global investors are emerging. tal crunch, he says. see many transactions in the mar-
23% (Sales & duce brands between economy and These funds are ROI focused Puri, who until the beginning of ket. A number of hotel companies
Sales manager* 3%
marketing director) first class hotels aimed at the do- and have initiated tie ups with in- this year was heading Duet, fore- would exist as pure management
Chief engineer 33% 25%
Source: HVS Hospitality Industry Compensation Survey 2011. *Positions valid for budget/
mestic market. Park Inn by Radis- ternational brands. The next year sees big changes in the way hospi- or franchise firms.
midscale column; positions for first class/luxury marked in brackets son will come in during 2012. should see aggressive acquisitions tality funds invest. Private equity Other reasons for transacting
Aibara says this is about a shift
from unorganised to organised
on the part of these funds.
Thadani, a founder of Samhi,
wants to get in at value and get
out really fast, but hotels are long-
would be for equity infusions to
complete projects/reduce debt,
in a three-and-a-half to four-hour the 600-room ITC Grand Chola in in the budget and mid-market which is focused on the develop- term play. Funds need to stay for and sale of assets to generate rev-
driving radius from a city like Ban- Chennai with an attached conven- segments. These segments are ment, acquisition and ownership the medium-term, which is 8 to 10 enue to promote future growth of
galore, for at least 180 days of the
year you wont find rooms avail-
tion centre.
Aibara cites the example of the
growing faster and the volume of
demand is quickly absorbing sup-
of select-service, business-class
hotels across India, says that insti-
years as against the current 5 to 7
years, which they are now starting
the local brands.
Right now funds are expen-
able. Rates have doubled in these Novotel Hyderbabad Convention ply, he says. tutional money is certainly going to do, he says. sive to get, so well focus on asset-
areas indicating the potential for Centre. It fills the whole city. light, Baljee says, adding that he
resorts, Aibara says. And its biggest contributor is wed- finds it is safe to do this now since
Baljee sees a culture- and wild- dings, he says. the group has built up a critical
Deluxe room at the Ashtan Sarovar
life-driven property in Mysore Backed by numbers, Indian ho- Portico. The chain is seeing more of its mass with 20 operating properties
succeeding because of the possi-
bility of day trips to neighbouring
teliers are awakening to the po-
tential of spa offerings. According
partners asking for LEED-certified hotels and 10 more in the pipeline.
The changing structures of bank
cultural sites and national park. to a study by HVS founder Steve loans along with high interest
ITCs response to niche demand is Rushmore, a 200-room, Marriott rates are said to be pushing ho-
the opening of a classic golf resort. type hotel operating in India at 71 teliers towards dilution, sale and
Untapped potential for MICE is per cent occupancy and an aver- joint ventures.
another driver for destination hos- age room rate of $250 could make Ive seen more deals crossing
pitality products. ITC is opening $950,000 per year on its spa. my desk in the last six months
Madhok is seeing partners ask- than I saw in the year before that,
ing for destination spa develop- Aibara says.
Niche developments ments for the first time. Radisson
Cardamom County by Blu Alibaug is working towards
Major recent transactions
RaxaCollective destination spa status in the com-
Orange Country ing year. Sale of The Leela Kovalam
Coorgand Kabini However, a word of caution from Purchase of a hotel in
Le Colonial Fort Kochi Thacker, who says that a prolifera- Gurgaon by the Munjals
La Villa Bethany Landor, tion of hotels calling themselves des- The Taj Groups
Mussorie tination products should not dilute acquisitions in Morocco
the concept.
www.hotelierindia.com www.hotelierindia.com Hotelier India | December 2011 | 29
 Cover story
The rise of the asset
manager
C&W says: The equation
is fairly straightforward.
Higher-value assets will sell
for more in the market. As a re-
sult, asset managers will play a
crucial role in increasing the total
asset value of hotel developments
to allow them to gain a higher
price in the market.
Mahajan & Aibara has recently
forayed into structured asset man-
agement. Owners should be will-
ing to pay for these now. Many
third-generation hoteliers dont
need asset managers but a first-
time real estate developer might
not push the right buttons to get
sufficient juice out of his invest-
ment without the help of an asset
manager, says Aibara.
Thacker agrees: It has started
happening and it will grow. Indi-
vidual owners are seeing the need
for asset management and the val-
ue for it. And I see that it is a need
that will grow.
Cutting-edge F&B
products
C&W says: F&B is
expected to be a major
revenue generator in
hotels not just in Tier-I
cities but in smaller ones. The suc-
cess of strong international res-
taurant brands and chefs, such as
Megu, Morimoto, Le Cirque and
Hakkasan, will provide the incen-
tive for others to follow.
Thadani, who is launching F&B
services at HVS next year for stand-
alone and in-house restaurants,
says: Well do everything from
concept planning to development.
The Westin Sohna focuses on the wellness niche
32 | December 2011 | Hotelier India
The Radisson Blu in Alibaug benefits from being within
a three- to four-hour driving radius from Mumbai
Right now, on many of our projects,
owners want their hotels LEED-certified. They
are willing to put in that extra money
Other concepts include fran-
chising. Aibara says: At the MGM
Grand in Vegas, for instance, half
the restaurants are not their own.
Were negotiating a contract for a
new beer concept though not a
micro-brewery for 2012 that will
pay a franchise fee and stay in the
operators hotel, says Aibara.
The Westin Gurgaon has eight
F&B outlets. F&B is a $4-billion
business at Starwood. It contrib-
utes to 35 to 40 per cent in Gur-
gaon, says Puri.
Even for Sarovar, with its pre-
dominantly mid-market offering,
Madhok says F&B is important.
Our brand Geoffreys has been
very successful. Weve been fo-
cused on developing hotels rather
than spending time on expanding
the F&B brand further. But now
were going to take it nationwide.
Whether it is ITC or the Oberoi,
hotels are creating differentiated
offerings. Keswani says, keeping it
simple, like mom cooked it, is his
philosophy whether you had an
Indian mom or an Italian mom.
Stability ARRiving
C&W says: Major
cities in India are
poised to see an expo-
nential growth in sup-
ply. Demand is also poised
to grow albeit at a slower rate to
supply. In the short-run, ARRs
will drop. Once most of the supply
has entered the market, ARRs will
rise marginally and stabilise.
This time, the hotels are pre-
pared. Post-October, the kind of
growth weve expected hasnt re-
ally panned out. Rates are either
flat or seeing only a marginal in-
crease, says Haksar.
Keswani pegs the growth, if
any, at 5 to 7 per cent, while Puri
says: Holding on to rates will be a
good thing.
The good news is that supply is
being absorbed, Aibara says: In
Mumbai, The Trident BKC, The
Westin, The Courtyard by Marri-
ott, the Holiday Inn and 300 ad-
ditional rooms at the Renaissance
came in at the same time. But all
of that has been absorbed.
According to Thacker, Well
continue to remain short-supplied
in the medium term, meaning
that rates will rise again. But not
to the levels we asw in 2007-08,
he cautions.
CSR
C&W says:
Going green,
sustainability
and eco-friendly
are the buzz words in the indus-
try. Initiatives range from green
building certifications to reduced
carbon footprint of purchase, to
employment opportunities for the
under-privileged.
Responsibility, saving or USP,
CSR is becoming important
enough for people to invest in.
In many of our projects, owners
want their hotels LEED-certified.
They are willing to put in that ex-
tra money, says Madhok.
At HVS, Thadani is set to re-
mind hoteliers of the cost benefits
of going green. Aibara shares an
anecdote about an investor decid-
ing to forgo an opportunity with a
big private equity fund company
on the basis of CSR alone. He
didnt get the money. The point is
that now he will do CSR, he says.
The growing sentiment is that
CSR must go local. We encour-
age each hotel to work within the
needs of its own neighbourhood,
with orphanages, blood banks,
and educating street kids rather
than the corporate office attaching
itself to a big NGO and publicising
that, Kachru says. HI
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