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Friday, January 10, 2014

Fairmont Raffles looking to wind up India operations

A version of this story first appeared in DNA Money edition on January 01, 2014.

Canadian hotel company Fairmont Raffles Hotel International (FRHI) is considering winding up its India operations as the cost of operating a hotel management company in India is becoming unviable, industry sources said.
It may re-enter when overall environment gets more conducive for business, they said.

“The hotel management company has begun giving out feelers to asset owners on its plans to withdraw from India. A communication has been sent out by the company to hotel asset partners with whom it has signed Letters of Intent for future launches expressing its intentions. The same is true for its operational properties, too,” said an industry source privy with the development.

It is also learnt that FRHI has already shut its development office in India and has moved some of the staff to its Dubai office. The development office typically identifies and initiates discussions with hotel asset owners and enters into LoIs and management contracts.

“However, slowdown in development activities forced the hospitality firm to relocate operations,” said another source.

FRHI, however, denied all market talk of its India exit.

In an emailed response, the hotel operator said, “FRHI Hotels & Resorts continues to view India as a core strategic market and we look forward to growing our presence in the country in the future. We have enjoyed a very successful entry into the market with Fairmont Jaipur, and remain fully committed to operating in this key domestic market. Additionally, we see the Indian market as critical not only for our growth in India but also for outbound travel to our hotels globally.”

Fairmont Raffles Hotel International is a global operator of hotels in the five-star luxury category with brands like Fairmont, Raffles and Swissotel with more than 100 properties. 

The company had entered India in 2010-11 with plans to operate 40 hotels in five years. The plan was to operate up to six hotels under Raffles brand, about 8 to 12 under Fairmont and around 20 Swissotels under management contract in India, a top official had said then.

However, it has only two operational hotels so far -- one each under Fairmont (Jaipur) and Swissotel (Kolkata) brands. Its third brand Raffles is yet to debut in the market.

Its Swissotel branded five-star deluxe resort at Calangute in Goa was deflagged (within six months of the launch) in September 2013.

The development pipeline had two more hotels under the Swissotel brand in Gurgaon/Noida and Bangalore (Whitefield) that were to be operational in 2013 – the Swissotel website now has 2015 and 2016 as the year of launch.

Similarly, work on a Swissotel property at Mumbai's Andheri-Kurla road area has been stalled for almost a year now and is unlikely to meet the 2015 launch date. The fate of Fairmont branded hotel in Hyderabad is uncertain as well.

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