Going where the growth is

India is seen as one of the most important growing markets for the hotel industry globally. All is not hunky-dory with the industry here, however. It is dogged by problems including delays in infrastructure development and a fall in revenue per available room. Despite this, the Britain-based InterContinental Hotels Group (IHG), which has 19 hotels in India, is optimistic about the potential for growth here, and plans to set up 45 more hotels in the country in the next decade or so. Richard Solomons, CEO of the group, tells Fortune India he plans to have 10,000 rooms by 2020, from 2,334 now. Edited excerpts:

What’s your strategy for emerging markets?
About 75% of the global hotel industry’s growth will come from 10 markets in the next 10 years, and it’s important to focus on them. IHG is successful because we saw a need for brands such as Hualuxe [for Chinese travellers] and Even [wellness hotels in the U.S.]. In Africa and Asia, where some of our competitors are just going after growth, we’re turning down more deals than we sign. We are rigorous before going for long-term contracts, ranging from 20 years to 50 years.

Is IHG playing safe here with its Holiday Inn and Crowne Plaza brands?
India has 150,000 [branded] hotel rooms, in which the share of international brands is low. The bulk of the market here consists of domestic business travellers; Holiday Inn and Holiday Inn Express are positioned perfectly for this. However, you will be hearing more from us about luxury brands.

You made an exception in India when you bought stakes in partner companies. Why?
Our business model is asset light [IHG owns seven hotels and manages the rest]. We have 4,700 hotels, with equity capital in a couple of dozens. It has worked well for us: We have 5% of rooms in the world and 12% of the pipeline [making IHG the No. 1 brand in the world]. We are launching Holiday Inn Express as a new brand in India; putting in capital will help us accelerate its growth.

Has growth in India been slower than expected?
On average we take two to three years to open a hotel; here it takes five to six. That’s a lot of value destruction. There’s no lack of demand for the brand, but physically it’s difficult here.
Do you follow real estate development or actual demand here?
Hotels tend to follow the tarmac or railway lines in India and China. You can’t create a growing urban economy without hotels. Some governments recognise that and push hard, some don’t. Our strategy in India has been market by market. In China, it is a national strategy.

How will you deal with manpower shortage?
We need 10,000 employees here in the next two to three years. We have 15 training academies for which we have partnered with IL&FS and others.