Hyperinflation in the Indian hotel market has disappeared
and is unlikely to return, an Accor senior executive told BTN Friday as he outlined the French hotel group’s plans to open 82
hotels in the country by 2015.
“We don’t see rates going back up like in the 2006-08
period, when they were unsustainable,” said Gaurav Bhushan, senior vice president
for development at Accor. “We have not planned our business based on those rates,
because they were crazy.”
A boom in international business travel combined with a
critical shortage of room supply drove prices to the highest levels in the
world in the middle of the decade. Since then, the global economic downturn and
a rash of hotel building has brought supply and demand in India into a much
more balanced alignment.
According to Bhushan, rates in business destinations like
Bangalore and Hyderabad are 10 to 20 percent lower than their peak. While they
are unlikely to fall further, it is at least possible for buyers to negotiate
agreements—something that proved impossible during the boom years.
“We think rates should hold,” said Bhushan. “There is a
healthy negotiation, and there is much more competition out there.”
Accor is among those adding to the competition. It currently
has eight properties open in India, but has two joint ventures in place to
build dozens more. One joint venture, with the Indian travel corporation
InterGlobe, has been in place since 2005 and is primarily aimed at expanding
the economy Ibis brand across India. The second, launched last month, is with
both InterGlobe and asset management fund Pacifica, and will concentrate on
midmarket brands Mercure and Novotel as well as the upscale Sofitel and Pullman.
Bhushan said 52 properties are under construction or in the
planning stage. “We are building from budget to luxury,” he said. “Given the
size of the market, we see room for all our brands, although the focus is going
to be on midscale, economy and budget.”
Like many developing countries, India has a huge gap in
supply between luxury hotels at the top of the range and hostels unsuitable for
business travelers at the bottom.
“Our single biggest opportunity is to cater to travelers who
want a decent hotel room for $50 to $100,” said Bhushan. “There is very little
to choose from.” He believes Accor’s economy and midscale hotels will attract Western
business travelers as well as the growing domestic market.
“We have a Novotel in Hyderabad, and 35 to 40 percent of our
business there is international, as is the case for the Ibis in Gurgaon,”
Bhushan said.