U.S. Hotels Grow Supply In India

<B> U.S. Hotels Grow Supply In India</B>

By Robert Selwitz

<I>New Delhi</I> - Getting a quality hotel room during high season in India continues to be as challenging as landing prime pre-Christmas digs in New York. But time is on the side of South Asian-bound business travelers as increasing numbers of internationally flagged properties are preparing to meet soaring demand.

Indeed, relief is expected soon as Hyatt, Marriott, Radisson and Sheraton are among the growing number of hotel companies developing or planning to develop properties here.

For now, however, business travel buyers should book up to four months in advance to secure high-season rooms in New Delhi and Mumbai (formerly Bombay), according to Ronjon Lahiri, assistant director for the Government of India tourist office in New York.

"Right now we have some 40,000 international hotel rooms," Lahiri said. "We need at least an additional 52,000, particularly during October to March, our busiest period and coolest time of the year."

Daniel Larkin, associate general counsel for Hyatt Corp., said timing is the prime reason behind the current tight guest room situation.

"It's just six years since the Indian government decided to open up its economy and welcome foreign investors and companies to do business in India," he said. "Until 1991, business terms were very restrictive. Conducting business was very regimented. It was tough to take money out, and generally difficult to make a profit."

While today's business ground rules are considerably more open, Larkin said, "To erect a good quality hotel requires a five-year lead time in which to plan, finance, erect and complete such a structure. Therefore, it will take a while for supply to catch up with demand."

Hyatt presently operates one New Delhi hotel. A second is planned, and a Mumbai property is expected to debut within two or three years. The company also is exploring lodging options in Bangalore and Chennai (formerly Madras).

Speaking for Radisson, Jim Olson, senior vice president of new development at Carlson Hospitality Worldwide, said the company soon will open a 450-room property in Mumbai and a 270-room property at the airport, "the only international hotel in the airport area."

Other Radisson efforts include a hotel at Chennai airport, plus a recently opened property at Raichak, south of Calcutta. Olson said five more projects are in various stages of development.

Despite rising corporate demand, Olson said attempts to quickly build hotels in India face a number of challenges.

For example, he said, "Assembling large land parcels, particularly in center city locales, is extremely difficult. Most real estate tends to be controlled by wealthy families, or is in very small parcels that are extremely difficult and time-consuming to assemble."

Another obstacle to hotel building is the lack of basic services and red tape.

"There are limited areas with adequate infrastructure--including electricity, water and telephone circuits--to support hotel development," Olson said. "In addition, all business arrangements involving foreign investors must be approved by the Reserve Bank of India. And that body, along with other government regulatory agencies, tends to take a bit longer to grant approvals than its counterparts in many other countries."

But now, the infrastructure is being extended from the centers of cities to outlying areas where land is more accessible and therefore cheaper.

Another positive signal for corporate buyers and investors alike is the status of the local currency. The Indian rupee has been devalued by 14 percent since last spring, which translates into costs being shaved by one-seventh, Olson noted.

Another factor spurring Indian hotel growth is a more stable socioeconomic base. "The middle class in India is growing by 9 percent a year, which provides huge potential for further growth in that market place," said Susanne Barfoed, Sheraton's manager for marketing services & communications, Asia Pacific. "We expect to be able to sign two new properties in the near future, with more to follow later."

There are two Welcomegroup-Sheraton properties in Chennai, and one each in Agra, Bangalore, Jaipur and New Delhi. (Welcomegroup is a local hotel chain that co-brands with Sheraton in India. Before India relaxed its foreign investment rules six years ago, foreign hotel companies were required to partner with local ones).

Meanwhile, Marriott announced it will manage a 220-room New Delhi hotel set to open later this year.