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Friday, January 27, 2012

Hero set to launch an Edition with Marriott

This story first appeared in DNA Money edition on Thursday, January 26, 2012.

Hero Group, India’s largest two-wheeler maker, is in advanced stages of discussion with New York Stock Exchange-listed Marriott International Inc to launch the global hospitality major’s ‘Edition’ hotel brand in India.

Industry sources said the creator of Edition, Ian Schrager — who is also known as the godfather of trendy boutique hotels globally — was in India last week for a discussion with the Munjals.

“He (Schrager) also visited their recently acquired cold shell in Gurgaon to get an idea of the site and its suitability for the Edition brand. The latest on this is that officials from Marriott and Hero Group are currently working on the finer details of their arrangement and an announcement to this effect can be expected soon,” said a source familiar with the development.

A Hero Group spokesperson did not respond to repeated calls and text messages.

Marriott International’s India office, however, confirmed the development.

“We are in discussions with them (Hero Group) and Ian Schrager was in the country recently to discuss the possible association. We are in the process of finalising the details. The team is currently working on the hotels design element and we are hopeful to start work on the project in another six months from now,” said Navjit Ahluwalia, senior vice president - hotel development (India and subcontinent), Marriott International.

With 250-280 guestrooms and a host of other facilities, the Gurgaon Edition will mark Hero Group’s foray in the Indian hospitality market. The hotel, to be operational sometime in late 2013-14 or early 2014-15, is being developed on a 3.9 acre plot that was acquired by Hero Group through a bidding process organised by Punjab National Bank.

The overall cost of getting this project operational would be Rs650 crore, Pankaj Munjal, managing director of Hero Motors, had said in an earlier interaction.

Edition's global development pipeline include hotels in six major global gateway cities on three continents by 2015. Among various locations being identified include one of Manhattan's (New York) landmark buildings – the Clock Tower, a historic building formerly known as the Berners Hotel in London and a hotel under construction in the former Seville Hotel at the Miami Beach location. These projects are owned and operated by Marriott International in an attempt to reflect confidence in the brand's future growth and success.  Hotels to be operated purely under management contract include under construction properties in locations like Bangkok, Abu Dhabi, Los Angeles and Gurgaon (India).

On the competitive set for Edition, Ahluwalia said the brand currently has no competition in the market and is addressing a space that has been left untapped / not captured yet by most global hotel companies. Interestingly, the Edition hotels will be operated by Marriott’s Ritz Carlton management team with the promise of offering a completely distinct level of service.

“Edition hotels are very unique properties addressing the next generation’s needs. We have been looking for partners who want to own a distinct customised hotel that customers will be looking for in the coming years. I think Munjals have that kind of a vision and they have already demonstrated it in some of their other businesses,” said Ahluwalia.

On the possibilities of a multi-property arrangement with the Hero Group given they have historical land bank in the country, Ahluwalia said, “Once we have a good relationship / partnership, we will explore other markets to go in to, together and do more Edition hotels across the country.”

Given the potential, Marriott International is optimistic about having more Edition branded hotels in the Indian hospitality market. “In fact, Schrager during his recent visit could very clearly feel the excitement in the Indian market for a customised luxury hotel. We certainly feel the markets of Mumbai, Bangalore and Goa would be ideal locations for future developments,” said Ahluwalia.

When asked if Marriott will take the investment route like the hotel company did in New York and London, Ahluwalia said, “We are not shy of investing in the Indian hospitality market and have already committed $30 million for the development of Fairfield brand with SAMHI Hotels Pvt Ltd. While our model has always been management contracts, we do invest wherever we feel there is a need for it. The Edition hotels in New York and London are owned by Marriott and we will eventually get an equity investor to buy these properties while we retain the management contract.  I think India has so many wealthy individuals who would want to own unique luxury lifestyle properties negating our need to invest. Instead, we are focusing on the right asset partners with ideal locations that can sustain a product like Edition.”

Introduced in 2008, the Edition brand is positioned as luxury lifestyle hotels combining the personal, individualised and unique experiences that Schrager is known for globally. The Istanbul Edition is the only operational project at present under this brand. In fact, media reports also indicated that another Edition development in Honolulu moved out of the network in August 2011 and its asset owners (M Waikiki LLC) had subsequently sued Marriott, saying the company had not developed the brand as much as promised.

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