With so much buzz about the booming economies of India and China, it’s no surprise that hotel companies have taken notice and are working furiously to establish beachheads there.
Unlike in the past, when it was usually the most upscale brands that moved into emerging countries, now it is the so-called mid-market brands—also called limited service or focused service—that are being aggressive about moving into those countries, as well as other regions of the world where hotel branding has not been commonplace.
Hilton made news recently with the announcement that it would open 75 hotels under several brand names—mostly Hilton Garden Inns in India. According to Thomas Keltner, executive vice president for Hilton, in charge of the company’s development, “Orlando has more hotel rooms than all of India and among Indian hotels most are either upscale or guesthouses; there is very little in the middle.” And, Keltner added, “With an estimated 300 million people soon to emerge as an Indian middle class that is a market bigger than in the United States.”
Keltner continued, “You have a growing middle class, an economy growing in high single or low double digits, low-cost air carriers springing up all over India and a lot of technology companies—so if you’re going to be in the global hotel business you’d better not forget India.”
According to a recent report from the consulting company, Deloitte, the number of domestic tourists in India will more than double to 750 million annually while international visitors will grow to 5.1 million by 2010. The consultants estimated that the country will need an additional 400,000 to 900,000 “branded hotel rooms” in the next five years “if it is to follow the U.S. model.”
Development of Hilton brands will initially involve 20 hotels in key locations including Chandigarh, Chennal and Kolkata. There are already two hotels under construction, according to Keltner.
Not long after the India announcement, Hilton announced a similar deal for a joint venture in China to open more than 20 focused service hotels under the Hilton Garden Inn brand.
Adrien Kurre, senior vice president for Hilton Garden Inns, noted that his brand comprises overwhelmingly new hotels so “We will not be everywhere in India in the next few years but we will do it right, based on the model of the United States.”
In China, Kurre says, “We will seek to do the same thing, as well. We know we could start it faster but we believe in taking a consistent approach similar to what we have done here. We want to make sure that we maintain the core elements of our brand.”
Hilton is not alone among hotel companies in focusing on India and similar markets. Mark Pearce, v ice president-international for Choice Hotels, which franchises a variety of brands including Clarion, Quality and Comfort Suites, says part of the reason for global development is that franchising itself has become more accepted in markets once closed to it.
Also opening up the world, Pearce says, are distribution channels like the Internet that make it easier for people to book from anywhere. In addition, he says, “People from different countries are traveling more, getting to know these brands, and hoping to find them in their own countries.”
Wyndham, which operates a number of limited service brands, recently signed a deal to develop 10 Ramada hotels in India. A number of Wyndham brands are already in India (five Days Inns, two Howard Johnsons and three Ramadas) but Reas Kondraschow, executive vice president-international development for Wyndham, said the strategy would shift away from that kind of limited franchising into a larger joint venture.
Kondraschow said a number of factors are behind Wyndham’s strategy, including the changes at Wyndham itself. “With the acquisition of the Wyndham brand” (Ramada and other limited service brands had been operated by Cendant), Kondraschow states, “we now have a portfolio with the kind of breadth needed in a market like India. Also, changes in the regulatory structure in that country have opened doors to global brands.”
Kondraschow said the Hilton deal and another deal recently announced by the French hotel company, Accor (a joint venture to develop 100 Formule 1 economy hotels over the next 10 years) “breaks down the barriers to new entries.”
Kondraschow said he also sees potential in India for Wyndham’s vacation ownership brands—RCI and Wyndham Vacation Ownership.
In China, Super 8 Hotels, another Wyndham brand, projects that it has more than 100 properties open or under contract in 58 cities across China.
At Marriott, its Courtyard by Marriott brand already has 66 hotels outside the continental United States—including several in India and China.
Elsewhere in Asia, Japan seems prime for limited service. According to Kurre, “Places like Japan and elsewhere in the Asia/pacific are good for brands like our Hampton Inn that are more geared to conversions of existing hotels and other buildings.”
While Choice, like Hilton, is moving cautiously in China, the company is moving ahead quickly in Japan and expects to have 50 hotels by the middle of 2008.”
Viva La Difference
While many of these brands will try to maintain the same look and feel of their U.S. originals, there will be adjustments. As Kurre notes, “Because you won’t see stand-alone restaurant choices as we do in the United States, we will have a full-service restaurant, as well as a specialty restaurant.”
Also, there will be more meeting space in Hilton Garden Inns in India and China, Kurre says, who notes, “Hotels are where people have weddings and there tends to be less meeting space available.”
There will be some cutbacks in size because of the cost of land in India and China, Kurre says, who notes, “Our pavilion will be pushed back under the building tower but it will maintain our light, bright and airy feel. We couldn’t afford to eat up all that land.” Also, rooms will be slightly smaller—though they will have similar furnishings and materials.”
Microwaves are not common in India, Kurre says, so there will not be one in every room as in the United States—they will, however, be available in the hotel pantry and in corridors.
On the other hand, because operating costs are lower, Kurre says, while there will be an iron and ironing board in every room as in the United States, there will also be 24-hour valet service in Indian locations—unheard of in a U.S. hotel in this category.
In Europe, Pearce says, “We are often converting historic buildings so you might have smaller rooms, especially in big cities. Outside the cities, they will be more of a standard size.”
But brands must be careful in using terminology. The word mi-market, Kurre says, has a “negative connotation” in countries like India—thus the use of the focused service.
Demographics Affect Training
“It’s the million dollar question,” Kurre says, as to the breakdown of domestic versus international guests in emerging markets. “We will know more when we open and get there,” Kurre states, who adds, “It will be very market-driven where at an airport hotel you might see more international guests.”
Of course, another difference in international versions of these popular brands will be training of staff to deal with this distinctly different demographic. According to Kurre, “We are translating our training materials into Hindi and Mandarin. We will have a North American regional director relocating to Singapore, and will support the brand in the China launch. In turn, Hilton will bring managers in from India and China to work in North America before returning to their home countries.
“You have to be localized,” Kurre says; “people in these countries might tend to run HGI as full-service hotels, which they are not; we have to be careful to void that.”
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