What major plans do you have for India?
We are likely to go from 100 to 200 in a handful of years. We have about 50 more hotels that have been signed and are under development. This doesn’t mean that all are under physical construction; some are in the permitting process. Our team has got another 50 or so that are in discussions... So that gives you a sense where the growth is coming from in the next few years.
How important is India and what are the drivers of growth?
India is a big economy and with a large population. Travel is business travel as well as tourism. Business travel is more important in some respect than tourism. A majority of our business is domestic Indian travel. The most important driver of growth and demand in that area will be the strength of the Indian economy because it will drive business travel and because the strength of the business economy will drive leisure travel as people would like to take vacations. So the first thing is about policies, which are about growing GDP.
Second is when you look at the inbound business [travellers] India gets… and also about India as an attractive destination. India is still relatively underappreciated; sometimes it is seen as exotic. Sometimes exoticism draws and sometimes it doesn’t as it is seen as a complicated and a difficult place to visit. India has done well with visa on arrival and other things, and should continue to market itself.
Around the world, tourism and hospitality is around 10% of GDP; in India it is 6%. So if the industry would be penetrating as much as an average country, then it would be twice the size.
Where do you see growth coming from in India?Are you targeting smaller cities?
We will see growth in the secondary and tertiary market since there is a need for quality destinations in those markets. We will continue to see growth in resorts and religious destinations. New airports will lead to growth of new markets, and existing destinations will grow. Occupancy in Indian hotels is at a level that hasn’t been seen before.
We will see growth in tier 2 and tier 3 cities, from select service brands, mid-market brands such as Fairfield, Courtyard, Aloft, Moxy… Increasingly, they will be an attractive economic proposition for hotel owners. Every deal we do, we do it with a local Indian real estate partner. We don’t develop our own real estate, so it depends on where they see the future too.
What challenges do you face in India?
We face challenges every day. Some are common around the world, and some are a bit different in India. Training is an important challenge. We need to make sure we get the talent we want. We have about 30,000 Indian associates in our hotels, and we will add another 10,000 or so in the next couple of years. So we have to make sure that training is done right. Hotels that trade about $110 (near Rs 7,000) a night are taxed at 28%, and there is no other market in the world at 28% taxation. Hotels under $110 are taxed at 18%, and no other market in the Asia Pacific region has this size of taxation.
It’ll take time to assess GST’s (Goods and Services Tax) impact, but it does make India more expensive than other markets. And as a consequence, we expect that lowering of GST will help business.
We want to see policies that help easier development. We need 60 permits to open and develop a hotel, which takes a lot of time, bureaucracy, and expense. Easier the policy, the faster a hotel can open up.
What about increasing competition from budget hotels?
It will be interesting. We have competed fairly well. We never pretended to offer cheaper stay; that is not our business. Our business is quality brands.
How do we look at the Marriott-Starwood merger? Is consolidation a trend?
We are digesting the merger of Starwood and are about 18 months into it. Last year we signed more than two hotels a day, almost 800 new hotels signed into our system in one year’s worth of development, which has nothing to do with acquiring Starwood. We will continue to see consolidation in the hotel industry because technology and loyalty programmes can become more effective [to take on competitors] with multiple hotels that are supporting those efforts.
( The interview was originally published in the May 2018 issue of the magazine.)