Hoteliers Investing In India As Business Traffic Booms

As a boom in India's economy pushes business traffic higher, hotel companies have responded to a lack of hotel rooms by announcing plans to invest more than $2.32 billion during the next five years to fund expansion programs in the country.

The investment is coming not only from such multinational chains as Shangri-La, Hyatt International, Choice, Accor and Dubai's Emaar Properties, but also from indigenous chains. Tobacco company ITC Ltd., which has more than 66 hotels in 50 destinations in India, is making one of the largest investments—$697 million. ITC is building two deluxe hotels in the southern cities of Bangalore, the heart of India's Silicon Valley, and Chennai. Plans for building villas at the ITC Golf Resort in Gurgaon near Delhi are underway.

Such indigenous chains as the Taj Group, Oberoi, Leela and the Bharat group of hotels each earmarked an investment of more than $230 million during the next few years.

Luxury hotel group Shangri-La Hotels has signed management contracts with India's Adarsh Group to operate three new hotels in Bangalore, starting in August 2007, adding more than 1,000 rooms to the group's inventory in India.

The 323-room $70 million Shangri-La Hotel in New Delhi launched in early September. "Shangri-La Hotel, New Delhi, is a landmark property representing the introduction of our signature Asian-style hospitality to the capital and an important milestone in our expansion in the subcontinent," said Giovanni Angelini, CEO and managing director.

Hyatt International Hotels and Resorts plans to add 15 hotels and resorts over the next three to four years, said South Asia area director Ratnesh Verma.

Hyatt manages five hotels in India and will set up two each in Bangalore, Hyderabad and Chennai. It also will expand in Mumbai, Ahmedabad, Chandigarh and Gurgaon. The group is looking at resorts in tourist destinations of Kerala, Goa and Rajasthan.

"The tourism industry has been buoyant. The deluxe segment is expected to grow at about 15 percent over the next three years," said Verma.

Choice Hotels plans to spend $35 million during the next couple of years to build four-star Clarion hotels in Mumbai, Chennai and Bangalore, said Sandeep Gupta, executive director.

A joint venture between Accor and InterGlobe, targeting the three-star segment, plans to invest more than $115 million over the next five years. According to InterGlobe Hotels president and CEO Uttam Dave, the joint venture plans to set up six Ibis brand of hotels across the country.

Dubai's Emaar Properties also plans to extend its reach to the Middle East and India after raising $3.9 billion through a rights issue. "International expansion makes business sense. If you look at India, for example, Emaar is investing in Hyderabad, which is emerging as the country's information technology capital," said an analyst.

The Oberoi group plans to expand to Thailand, Cambodia and Dubai through management contracts. "We plan to build a 440-room hotel in Mumbai (in December 2007). We are also developing a property in Bangalore. The company has already acquired the land and appointed an architect for the project," said Oberoi Hotels chairman P.R.S. Oberoi, announcing investment plans at the group's recent annual general meeting. Oberoi already has entered into a management contract for a 175-room property to be built in Gurgaon, on the outskirts of Delhi, a thriving town for expatriates.

Taj Group's Indian Hotels Co. has earmarked $100 million for expansion and $130 million for upgrading its existing properties, said chairman Ratan Tata. The company plans to add about 1,100 rooms by March 2006. Immediate expansion will include Bangalore, Coimbatore and Mumbai.