Indian hotels face off with foreign majors

Analysts say in a few years competition could jump to levels that could put pressure on Indian firms8217; room rates as they face-off with global giants,but will still manage to grow on rising demand for rooms in Asia8217;s third-biggest economy.

8220;Market is certainly becoming a lot more competitive,which is actually a sign of maturity of the market,8221; said Manav Thadani,managing director of hospitality consultancy HVS India.

8220;It will help in rates being more stabilized and better quality being offered. I think it8217;s healthy for the market for more hotels to come in,8221; he said.

India,with a population of more than 1 billion,has only about 104,000 rooms,according to government estimates. In comparison,New York City alone has more than 80,000 rooms.

A recovery in the global markets and a booming domestic market have pushed up business and leisure travel in the country,driving up demand for hotel rooms.

Demand for hotel rooms far outstrips supply in India,and this has attracted global players like Starwood Hotels amp; Resorts,Marriot International,Hyatt Hotels,InterContinental Hotels and Accor Hospitality.

Starwood is aiming to expand its local portfolio by 60 percent by 2013,while Hyatt has earmarked about one-fourth of its global pipeline for India. IHG has 41 hotels in the pipeline.

These hotel chains with multiple brands add to the already crowded space dominated by home-bred firms such as Indian Hotels Co,owner of Taj luxury chain; EIH,operator of Oberoi and Trident hotels; ITC and Hotel Leela Ventures.

8220;Unlike other markets in the world,India has got four strong domestic brands 8211; Taj,Leela,ITC and Oberoi 8211; which makes it that much more difficult for international brands to enter,8221; said Nikhil Manchharam,vice president of acquisitions amp; development,Starwood Asia Pacific Hotels amp; Resorts.

8220;It8217;s a much more competitive environment than other growing markets.8221;

INDIAN FIRMS UNFAZED

Undeterred by cut-throat competition,Indian firms have announced ambitious expansion plans for the country,where travel and tourism demand,according to the World Travel and Tourism Council,is expected to grow at 8.2 percent annually till 2019.

Indian Hotels plans to open properties in New Delhi,Bangalore,Hyderabad and Guwahati,while EIH is adding a property in Gurgaon under the Oberoi brand and two hotels in Hyderabad and Dehradun by 2012 under Trident.

Global chains are expanding under management contracts and hence moving faster than Indian peers who have lined up sizeable investments for expansions,said Sanjoy Pasricha,vice president sales and marketing at Hotel Leela,which is adding a property in New Delhi this year and another in Chennai next year.

8220;As companies which own,build and manage their hotels,our progress is obviously slower than international companies who take over hotels from builders and then can have eight hotels getting built simultaneously,8221; Pasricha said.

India requires investments worth 600 billion rupees over the next five years to cope with the unmet demand for about 150,000 rooms,according to FICCI-Evalueserve.

8220;In India,there is room for everyone to grow,8221; said Jan Smits,managing director of IHG Asia Australasia.