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Sunday, April 14, 2013

Hotel conversions picking momentum in Indian hospitality market

This story first appeared in DNA Money edition on Wednesday, Apr 10, 2013.

Hotel conversion – more popularly referred to as flag-hopping – appears to be gaining currency in India as the economic environment makes it harder for new properties to come on stream.

The concept basically involves replacing an existing hotel brand with a new brand. The idea is to leverage the distribution network of the new hotel operator, thereby improving the hotel’s topline and bottomline.

If 2011 saw only one conversion – the Le Royal Meridien at Sahar, Mumbai converted to Hilton Mumbai International Airport Hotel in January – 2012 saw as many as eight. Among these, Hyatt took over five Ista hotels from IHHR Hospitality, while Keys took over three standalone properties, including a Biznotel from Pride Group.

The trend has continued this year.

Just last week, Starwood Hotels & Resorts took over the management of Royal Orchid Central Ahmedabad hotel from SAMHI Hotels Pvt Ltd.

Earlier this year, Boston East India Hotels LLC launched its first property in North Goa under the banner The Sofala 15°74 by Troca Hotels. The hotel, owned by Sun Leisure (India) Pvt Ltd, was earlier operated under The Sol brand.

More conversions are on the way.

Among others, Keys is set to convert two more hotels in the National Capital Region, said Sanjay Sethi, MD & CEO, Keys Hotels.

On its part, ITC Hotels, India’s second largest hospitality chain, is in a very advanced stage of finalising a deal with the owners of the erstwhile upscale hotel Lebua at Dwarka in New Delhi, a source said. “ITC will take over management of this property and operate under one of its own brands (that’s not associated with Starwood),” the source said, adding, the move is in line with ITC’s asset-light expansion strategy.

ITC Hotels did not offer a comment on this. An email remained unanswered at the time of going to print.

Industry officials are gung-ho on the possibilities.

Conversion offers an exciting new growth channel for Starwood, said Nikhil Manchharam, vice-president - acquisitions and development, South Asia, Starwood Hotels & Resorts Worldwide.

Abhijeet Beej Das, president and chief executive officer, Boston East India Hotels, said his company will be primarily looking at conversions to build a portfolio of hotels in India. “We have also introduced a new brand Troca Hotels and will be targeting key gateway cities in India for conversions,” he said.

“The concept has been very popular with franchised hotels. However, with new-built hotels experiencing significant delays, a tweaked version – combination of branding and management contract – of this strategy is being aggressively pursued by hotel chains,” said a top hospitality consultant, who did not want to be named.

Also, in a situation where there is little new supply of hotel rooms, “conversions reduce stress on pricing,” said Sethi.

Among a few other hotel conversions that are likely to be announced soon include Hotel Golden Tulip, Jaipur that will not be branded and managed by Patu Kesawni and Rattan Keswani promoted Carnation Hotels India P Ltd. Similalry, Lebua Hotels & Resrots is set to convert an ancient palace hotel in New Delhi as part of its expansion plans in India.

Follow Ashish K Tiwari on twitter @ashishktiwari

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