Now, IHCL aligns its United Kingdom hotels with Taj brand

This story first appeared in DNA Money edition on Wednesday, January 08, 2014.

Indian Hotels (IHCL), Tata’s hospitality business vertical, has rebranded two of its hotels in the United Kingdom (UK), aligning them with its luxury positioning in the international hospitality market.

The UK hotels will now be promoted within the Taj group’s portfolio of luxury hotels, resorts and palaces.

Taj management said it now has sole ownership and management, as well as operational and marketing control, of both properties.

The over a century old Crowne Plaza London - St James, a property located in central London and featuring 340 guestrooms and 21 suites, has been renamed St James’s Court, a Taj Hotel. While the published rate for a standard room at this hotel is £495 (around Rs 50,500) for a night’s stay, the best available rate as shown on its website is £119 (Rs 12,100) including the value-added tax or VAT.

Similarly, 51 Buckingham Gate, Taj Suites & Residences (pictured, below; 86 luxury suites and residences) has been re-branded Taj 51 Buckingham Gate Suites and Residences. With a published rate of £720 for a base category room, the hotel’s website shows £360 and £324 as best available and early bird (non-refundable) rates for a night’s stay.

Raymond Bickson, MD and CEO of the Taj group, said that the rebranding comes at an exciting time for the increasing strategic links between India and the UK. “We are delighted to have the opportunity to restore these iconic hotels that have more than a century of heritage.”

Deepa Harris, senior VP-global sales and marketing, the Taj Group, said that the success of the two London hotels has provided impetus to consolidate Taj’s brand presence in the UK, an important source market where the Tata group has had a presence for over a century, and is now the UK’s largest manufacturing sector employer and one of its largest foreign investors.

Both hotels have undergone phased renovations at considerable (but undisclosed) investment from the Taj group.

Taj will add to the Tata brands portfolio in the UK that includes Jaguar, Land Rover, Tata Steel Europe (formerly Corus) and Tetley Tea.

Mylan ropes in Biocon honcho Bamzai

This story first appeared in DNA Money edition on January 03, 2014.

Post the US parent Mylan Inc accomplishing the $1.75-billion acquisition of Agila injectables businesses from Strides Arcolab in December last year, the Indian subsidiary is now understood to be getting on board a top-notch pharma industry veteran to lead its Indian business activities.

Touted to be taking up a leadership position with Mylan India is Rakesh Bamzai, (pictured) who recently quit as president of Bangalore-based biopharmaceutical company, Biocon Ltd, after 19 years of association.

“He (Bamzai) is joining Mylan India,” confirmed an industry source familiar with the move.

Bamzai could not be reached for a comment on this move, while Mylan India did not respond to a email seeking confirmation on the same.

While details about the leadership position at Mylan India is still unknown, industry sources say it could very likely be a similar position Bamzai held at Biocon or possibly a higher management position.

Interestingly, in a notification to the exchanges, Biocon had said that Bamzai has decided to leave the organisation to accept a new leadership role.

“Rakesh has decided to take up a very senior and challenging leadership assignment,” said Kiran Mazumdar-Shaw, chairperson and managing director, Biocon.

Media reports had indicated that Bamzai was widely considered to be the next chief executive officer (CEO) of Biocon despite the fact that the biopharmaceutical company was going through a process of extensive reorganisation.

Mylan Labs’ current CEO and managing director, B Hari Babu, has been associated with the company since May 2001.

Hari is responsible for all of Mylan Labs’ operations including research and development, active pharmaceutical ingredient (API) and finished dosage production, supply chain management, environmental health and safety, sales and marketing, human relations and finance.

Mylan Labs is one of the world’s largest manufacturers and suppliers of over 150 APIs.  

Among a wide range of therapeutic categories being catered to by Mylan include antibacterials, central nervous system agents, antihistamine/anti-asthmatics, cardiovasculars, antivirals, antidiabetics, antifungals, proton pump inhibitors and pain management drugs.

Update from Mylan Inc.

Mylan Inc (Nasdaq: MYL) announced that Rakesh Bamzai has joined the company and has been appointed president, India Commercial and Emerging Markets.

Bamzai has more than 20 years of experience in the Indian and global biopharmaceutical industry. Prior to joining Mylan, he was president of Marketing at Biocon, where he played a key role in building the company's global biopharmaceutical business. He had overall responsibility for active pharmaceutical ingredients (API) and branded formulations and managed a team of more than 2,000 people across functional areas and geographies.

Through the years, he also spearheaded many strategic partnerships that enabled the organization to gain wider global access and greater market penetration for its biopharmaceuticals business. Bamzai also led Biocon's foray into branded formulations and built many successful brands across therapies in India and Gulf Cooperation Council states.

Mylan President Rajiv Malik commented, "We were extremely pleased when Rakesh asked to join our company. Many of us at Mylan have had a firsthand opportunity to work with Rakesh over the course of our strategic partnership with Biocon and have observed his strong business and marketing acumen, his strategic insight and outstanding leadership skills. In this new role overseeing all of Mylan's commercial operations in India and emerging markets, we believe that Rakesh will add significant value to Mylan."

Bamzai said, "I have had the privilege of collaborating with Mylan during my time at Biocon, and I am excited about the significant opportunities I see for the company in India and other emerging markets. I believe Mylan's commitment to quality and to setting new standards for innovation, reliability and service for patients and physicians in India will further distinguish Mylan from its peers. I look forward to supporting Mylan's continued expansion and differentiation in these exciting growth markets."

Bamzai graduated from the University of Mumbai (Department of Chemical Technology).

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.

Sun Pharma's Sudhir Valia picks 1.41% stake in Ranbaxy Labs

Sudhir Vrundavandas Valia, who is executive director with Sun Pharma, has picked up 1.41% stake in Ranbaxy Laboratories. The stake was bought by Mumbai-based Silverstreet Developers Llp in which Valia is partner.

Approximately 59,67,542 valued at a little over Rs 247.65 crore (average share price at Rs 415 for the December quarter) are being held by Silverstreet according to shareholding pattern released by Ranbaxy for the quarter ended December 2013.

Ranjit Kapadia, senior vice president - Pharma, Centrum Broking Ltd, said, "Sudhir Valia’s move seems to be that of  a strategic investor in the company from long-term perspective. From Sun Pharma point of view there is no change, as the shares have been acquired in his personal capacity."

In another development, Ranbaxy Laboratories has inked a licensing pact with EPIRUS Switzerland GmbH for BOW015, a biosimilar version of Infliximab, prescribed to treat rheumatoid arthritis. The product will be introduced in India and other emerging markets, Ranbaxy said in a statement.

Kapadia is of the opinion that the licencing agreement will help Epirus market its biosimilar in India through a large field force of Ranbaxy without setting up own field force and distribution channel. "However, the molecule has recently completed Phase 3 studies and it would take 12-18 months to get regulatory approval and commercialise the product in India," said Kapadia.

Zydus Cadila gets US nod for two drugs

Drug firm Zydus Cadila has received approval from the US Food and Drug Administration (USFDA) to market Sirolimus tablets 0.5 mg with 180 days of marketing exclusivity Sirolimus. As per the IMS data in 2013, the sales of Sirolimus 0.5 mg is estimated at USD 11.7 million and the total market for Sirolimus stood at around USD 203.8 million.

The Ahmedabad-based firm has also received USFDA approval to market Duloxetine delayed release capsules in different strengths of 20 mg, 30 mg and 60 mg. The sales for Duloxetine was estimated at USD 5.5 billion in 2013.

While Sirolimus tablets are immunosuppressant drugs used to prevent rejection in organ transplantation, Duloxetine delayed release capsules fall in the anti-depressants segment.

Only 10-15 lakh households in India can afford an apartment worth Rs 1 core: Shashank Jain, executive director, PwC

An version of this Q&A first appeared in DNA Money edition on Monday, January 06, 2014.

Shashank Jain, executive director, PwC India in conversation with Ashish K Tiwari speaks of the perils dogging the Indian residential realty sector and why the market is the way it is. Edited excerpts..

 

Unaffordable housing is said to be the key reason for lack of demand and oversupply scenario in key Indian metros. What is your take on it?

There are larger issues involved in terms of resolving this – not only with the developers but with the entire eco-system. Building affordable houses starts with two things, land and infrastructure and both go hand in hand. Land prices will always be high in places where infrastructure is already developed leading to significantly high starting input cost for the developer. So land cost in cities like Mumbai and National Capital Region (Delhi and Gurgaon) could form over 50% of the total project cost. And where the infrastructure is not developed, there are very few takers for the residential projects thus raising questions on their viability. So it's like a chicken and egg situation.

Unfortunately we haven't had a situation where both central and state governments have taken this pro-actively and have focussed on building infrastructure in a greenfield way – infrastructure has always played a catch-up role with urbanisation and development and not the other way round.

Residential market would pick up if you have a commercial catchment area in the vicinity. People would prefer buying into a residential project if their work place is close by as well. While a developer may build affordable housing, if the project is far away from the main city and if people have to travel over 2 hours one way to get to their place of work, the development will be a non-starter. So developing of commercial catchments is crucial for micro markets to pick up the way one would want it to happen.

A holistic approach with infrastructure, commercial, corporate and residential units around it is thus essential when developing cities and micro markets. All of it has to happen simultaneously.

But residential prices are unaffordable even in the extended suburbs of cities where there is very little or absolutely no infrastructure development.

I'd say that has also got to do with the availability / scarcity of resources (primarily land) and the situation is more severe in the Mumbai Metropolitan Region (MMR) because of its unique position / geographical layout.. However, if you look at the National Capital Region (NCR), it has expanded on all sides and offers housing across all price points. Similar is the case with Chennai or Bangalore markets which can expand horizontally. While it may not be completely affordable, one can possibly look at owning an apartment after stretching (finances) a bit.

Unfortunately, in India we are in a situation where if you look at from a developer's perspective, the input cost is so high that it makes the starting point unviable/unaffordable for the realtor as well. For a developer land is inventory and an essential resource for a long-term play of say 10-15 years or more. This means land prices have already seen significant appreciation at places where a common man would actually think of buying / residing. That's because the developer is thinking five to seven years ahead and focuses on acquiring land that may not be uninhabitable at present. So acquisition of land and development always plays a catch-up game and land prices are hence always ahead of the curve that way thus raising a big question on the affordability factor.

Also, income levels of potential home buyers haven't kept pace with the extent of increase in realty rates in the last 3-5 years.

That's correct. At max, salary levels on an average would have gone up marginally when compared to  overall inflationary increase. Leaving aside the exceptional cases, that's generally the kind of increments people would have got in the recent past. However, if you look at real inflation at the consumer level, it's far higher. So from a cash available to sustain I'd say it's a negative growth situation.

Now consider that scenario vis-a-vis developer's input cost for building a house, that's increasing year-on-year too. This is clearly evident from the fact that the primary market, which is is the key driver for affordability – where one can get into buying a house with lower capital requirement – is seeing an increase to the tune of 10-20% every year. Given the overall economic uncertainties of the last few years, salary levels certainly haven't kept pace with it and that definitely is a key challenge.

According to Apnapaisa.com estimates, a monthly income of over Rs 1.5 lakh is required to be able to purchase (through a home loan) a residential apartment worth Rs 1 crore. How many people in the working class would really qualify?

The National Council of Applied Economic Research (NCAER) and Centre for Macro Consumer Research do come up with such data. The last I recollect, there is a a bracket of households earning Rs 12.5 lakh and above and that number is just 1% of the total households. A quick math would reveal that if we are about 120 crore people and taking an average household size of five, then we are talking about 24-25 crore households in the country.

The reason I'm focussing on households is because buying a residential apartment is a household decision and not an individual decision. If 1% out of those many households are earning more than Rs 12.5 lakh annually we get a figure of 25 lakh households spread over the country. If we increase the Rs 12.5 lakh limit to say Rs 15-20 lakh I think it could be even half. So we are talking about only 10-15 lakh households who possibly be earning that kind of a money to afford an apartment worth Rs 1 core.

This profile of households would majorly be in the top four or five metros of the country that again brings back to your question about affordability. When people who can afford are concentrated in certain geographies, prices in such markets would shoot up. Which sort of makes it a vicious circle again, because wherever developers are building affordable housing people living there do not have the means to buy into such projects.

Another concern for home buyers is of the uncertainty in terms of delays / deliveries of housing projects be it in the city, suburbs or extended suburbs. It only adds to the dilemma (to buy or not to) and related sufferings.

Real estate is one of the few sectors wherein delays in a project execution actually gives more returns from a buyer's perspective. At a macro level, by making a booking and not paying for that owing to the project delay, I actually get an appreciation on the investment. That anomaly needs to get corrected at a macro level.

That anomaly could be true for the investor community. The end-user however is at the receiving end incurring rental and EMI expenses at the same time while fighting inflation...

I agree, the end-users are significantly impacted as a result of project delays. Unfortunately we are in a situation that in any project which gets launched, I'd think majority of the buyers are not end-users. It's a vicious circle. The investors are indifferent to any delays in the project as it helps them get better appreciation.

In fact, the registration numbers that get released every quarter, I'm told a large proportion of it is secondary sales.

The other related parameter in my opinion, is that in any micro market, if the secondary rates are Rs 1,000 to Rs 1,500 per square foot lower than what the developer is offering, that's a clear sign of an overheated market. Why would any project that's at an advanced stage of construction be sold at a lower rate as compared to a fresh launch? This is a clear indication that there aren't many takers in the market for projects that are significantly constructed and that clearly is an investor driven market.

But investors continue to drive the residential realty market thus giving the developer that much required initial cash flow.

There are two types of investors, one is the business community with element of unaccounted surplus being parked in the real estate sector. The government is trying to control it by imposing tax deduction at source (TDS) of 1% for an amount of Rs 50 lakh and more. Secondly, a significant chunk of investment is made by white collar executives especially in the metro micro markets. by This class of investors is putting their surplus income in second or third home and they don't have exit pressure. They have a steady stream of monthly income that helps support second or third home thus giving them a significantly higher holding power. That again brings back to the question that prices will not come down significantly.

Are hotel owner-operator marriages becoming flings? Now Swissotel pulls out of Goa property

An edited version of this story first appeared in DNA Money edition on Monday, Sep 9, 2013.

With relationships between Indian hotel asset owners and international hotel operators getting sour, for various reasons, the Indian hospitality market is set to see an increase in the instances of such marriages hitting a rocky patch.

Emulating the split between Phoenix Mills and Shangri-La Hotels that happened last week, another foreign hotel operator has decided to call it quits.

This time it is Zurich-based Swiss hospitality chain Swissotel Hotels & Resorts which is pulling out of its five-star deluxe hotel at Calangute in Goa. The Goa property is owned by Bangalore-based Convention Hotels India Pvt Ltd (CHI).

Officials of both CHI and Swissotel could not be reached for a comment.

However, Swissotel’s website confirmed the development saying, as of September 9, 2013, Swissotel Hotels & Resorts will no longer manage Swissotel Goa. The hotel will be renamed and operated by the owner.

The international hotel chain -- Swissotel -- is owned by FRHI Holdings Limited, a leading global hotel company with 102 hotels and resorts worldwide under the Raffles, Fairmont and Swissôtel brands. The company also manages Fairmont and Raffles branded Residences, Estates and luxury private residence club properties.

Interestingly, Swissotel Goa was launched amidst great fanfare just six months ago i.e. March 2013 and, in most likelihood it is the shortest owner-operator marriage the Indian hospitality market has seen thus far. The fling between Phoenix Mills and Shangri-La Hotels had lasted nine months.

Convention Hotels is currently developing four hotels in the country with a combined guestroom inventory of 715 keys. The company’s development pipeline includes a 35-room tented resort is under development at Kabini (Bangalore), a 220-room Holiday Inn hotel in Goa to be managed by Intercontinental Hotel Group (IHG), a 200-room Hilton Garden Inn to be managed by Hilton Worldwide and a 260-room Hyatt Place hotel in Bangalore that will be managed by Hyatt Hotels & Resorts.

Industry experts said the Indian hospitality market will see many more asset owner-hotel operator relationships turning sour, citing conflict of opinion (on business operations and expected returns on investments) as the key reason for the split.

Another possibility of a fall-out, industry sources said, will be between Shiva Satya Hotels which is developing a five-star hotel to be managed by IHG under its Crowne Plaza brand. The duo had signed a management agreement back in August 2008 and the hotel was to be operational in 2010. However, the project has got delayed significantly and there is no clarity on its completion timeline as yet.

Information Update:

Before launching under the Swissotel brand, the management contract for the Goa resort was signed with the InterContinental Hotel Group and was to be operated under the Holiday Inn Resort. However, Swissotel came in at the last moment and bagged the management contract.

As of now, this flagship hotel from the Bangalore-based Convention Hotels India Pvt Ltd (CHI) has been re-branded as North16Goa.

Hoteliers add over 800 guestrooms across India in two weeks

This story first appeared in DNA Money edition on Thursday, Sep 5, 2013.

The current financial environment may remain tough, but that has not deterred Indian hospitality industry – both Indian and international – from pushing ahead with new hotels. In all, approximately 827 new guestrooms were added in the organised hospitality sector in the last two weeks and a majority – approximately 60% – of them have come up in South India alone.

Some of the big names here include Indian Hotels Co (Taj Group), East India Hotels (Oberoi Group), Accor, Berggruen Hotels and the Panaromic Group.

While French hospitality major Accor opened a 131-room budget hotel under the ‘Formule1’ brand in Bangalore, IHCL from the Tata stable rolled out its 200-room upscale ‘The Gateway Hotel’ on the IT Expressway in Chennai. September thus far has seen three hotels being launched with a combined guestroom inventory of 496.

Earlier this week (September 2), the Oberoi Group threw open its 323-key five-star business hotel under the Trident brand in Hyderabad. Berggruen Hotels, promoted by US-based Berggruen Holdings, opened its first five-star hotel in Pune under the Keys Klub brand featuring 115 guestrooms while a 58-room premium hotel got christened United 21 in Hyderabad.

While it may appear as a sheer coincidence that almost half-a-dozen hotels have entered the Indian hospitality market at around the same time, experts said most of the projects have been under development for some time now. “Hotel chains ideally like to time their new launches and September being the shoulder month it makes for a sensible move. The Indian hospitality sector will enter the peak business season starting October going up to January/February and launching at this time will help them tap incremental business,” said Ashish Bharadia, senior consultant, Mahajan & Aibara Management Consultant.

There is unanimity that coming months will see more additions from the likes of Marriott, Starwood, Accor, Hyatt and IHCL.

For instance, Marriott International is set to open its account for its 297-room five-star deluxe JW Marriott hotel in Bangalore this month. Another 510-room JW Marriott hotel is slated to take off inside the DIAL Hospitality District in New Delhi. Marriott will also open a few Courtyard by Marriott branded hotels with a total inventory of 350-odd in cities like Bilaspur (104), Pune (180) and Agra (150), in addition to a 150-key Fairfield by Marriott in 2013-14.

Similarly, for Accor, it’ll be a 104-room Formule1 and 223-room Novotel hotel each in the Pune hospitality market this calendar year. Two more Novotel hotels, one each in Ahmedabad (180 room) and Goa (150 room) are likely to hit the market in 2013.

A 167-room Hyatt Regency is currently under construction in Ludhiana and projected to go live this year. Starwood Hotels and Resorts will take the curtain off a 323-room five-star hotel in Kolkata under the Westin brand and a 126-room Le Meridien hotel in Mahabaleshwar. Hilton Worldwide is in the process of opening DoubleTree by Hilton hotels in Jaipur (179), Bangalore (172), Pune (115) & Agra (102) and a Hilton Residences in Bangalore (243 rooms) in 2013.

Cement makers seen hiking prices in September

This story first appeared in DNA Money edition on Saturday, Aug 31, 2013.

Cement companies have decided to hike prices starting next month, according to some  dealers in the know. “It could be around Rs 50 per 50 kg bag in Mumbai,” said Peeyush H Shah, promoter, Shri Padmavati Enterprise, a Mumbai-based dealer.

The hike will be effective next week, he said, adding, “The increase, from what I understand, will be taken by all cement manufacturers”.

In a cement sector review on Friday, Mihir Jhaveri and Prateek Kumar, analysts with Religare Institutional Research, said that though some dealers have indicated about manufacturers pushing for hikes from September owing to input cost escalation and the rupee’s decline, the move is not sustainable given the weak demand scenario.

Based on their discussions with over 40 dealers across 30 Indian cities, the Religare analysts said cement prices took a sharp hit during August after remaining relatively stable during July. “Prices in regions have corrected in the range of Rs 10-50 per bag in both trade and non-trade segments. The north and central markets witnessed a sharp fall of as high as Rs 40-50 per bag for select brands. 

"In Andhra Pradesh, prices have corrected by Rs 60 per bag after sharp hikes of Rs 60-80 per bag in June. Other southern states have seen a milder decline of Rs 10-15 per bag. Declines in the western and eastern regions have been in the range of Rs 10-30 per bag,” the duo noted.

The decline was primarily led by increased supply due to the entry of new players, poor demand owing to a weak macro and shortage of materials (sand/brick), and good monsoons across most regions.

The current all-India trade segment average is pegged at Rs 280-285 per bag as compared to the estimated average of around Rs 290-295 per bag in the quarter ended June.

Cement prices in the non-trade segment were lower by Rs 10-20 per bag.
The decision to hike prices, industry experts feel, is certainly motivated by the fact that cement prices suffered significantly in July and August. And with input costs continuously on the rise, a price hike is the only way to stimulate demand and deal with the current slump in the market.

“Cement companies are expecting construction activity to increase considering the monsoon season is almost getting over, and are using this opportunity to bring prices back to the pre-monsoon levels,” said an analyst with a domestic brokerage.

Maintaining a cautious outlook on cement sector for the current quarter, the Religare analysts said that sluggish demand and weak pricing would likely keep profitability under pressure. Also, if prices fail to revive in September (with monsoons still prevailing in some regions), realisations are likely to be sharply lower again on a year-on-year basis, exasperated by last year’s high base due to delayed monsoons.

“With minimal benefits from lower international coal prices (owing to depreciation of Indian rupee), operating profit per ton (ebitda/t) of cement companies could see a quarter on quarter dip in the range of Rs 200-250 (depending on regions, but mid-caps likely to be hit more). The July-September quarter for the sector is also likely to remain muted, with sluggish volumes, weak pricing, cost pressures and a high base,” the analysts said.

A top official of a leading cement firm, however, denied any possibility of pan-India price hikes, saying it would more likely be a regional. “It’s very difficult to say if there will be a price hike in September. It is also the ‘Shraadh’ month and is not considered auspicious, so demand from the real estate sector will anyway be muted. As for festive season, I think there is still some time for that,” the official said.

Depreciating Indian rupee = 12% growth for domestic travel and tourism industry

My colleague Yuga Chaudhari co-authored this story appearing in DNA Money edition on Friday, Aug 30, 2013.

The past 10-15 days have turned out to be quite a surprise for Himmat Anand, founder, Tree of Life Resort and Spa in Jaipur. The 14 villas premium property has been receiving host of inquiries and bookings for the month of November and December, a phenomenon he’s not experienced in the past. “This never happened before because the domestic market usually reacts 2-3 weeks before the travel time,” said Anand.

The sentiment is pretty much the same among travel and tour operators in the country. In fact, experts are of the opinion that the domestic travel and tourism industry which has been growing exponentially in the past years despite economic slowdown is in for a big bounce this business season.

Ashwini Kakkar, executive vice chairman, Mercury Travels, attributed the impact of depreciating Indian rupee (INR) as a key reason for the increased optimism in the domestic travel market. “Domestic travel is set to benefit in a big way. The industry has been growing at 6% odd and it could certainly hit double digit this time around,” said Kakkar.

Anand agrees saying based on the current market scenario, growth in domestic tourism should be upwards of 12% if not more. He added, there is a shift in people’s mindset with a realisation that overseas travel will be challenging. As a result, they are planning and freezing their holidays across domestic destinations.

“In the near term I definitely see an increase in the of number of people choosing domestic travel over internatinal. In fact, a lot of bookings for our property have already come in for the first half of October. The increase in percentage terms this season will be anywhere between 8 and 10% year on year (yoy),” said Anand.

Echoing the sentiment are Regi Philip of travel company Cosmos Agencies and Jai Bhatia, chairman western region, Travel Agents Association of India (TAAI) who expect domestic travel to pick up this year during the holiday season.

In fact, Bhatia is of the opinion that people are also deferring their international travel plans as the INR continues to depreciate compared to euro and dollar. "Domestic travel is expected to get a boost this year as people may look at postponing their international travels," he said.

Industry experts are of the opinion that people are being very cautious and are generally scaling down all types of travel more so the international travel and are think twice before traveling abroad as everything has become expensive. According to Amrit Pandurangi, senior director, Deloitte in India, airlines are also not in a position to provide discounts as oil prices are going up. “International travel, in the absence of any serious airfare reduction, will see a reduction this year. Business travel overseas will also remain muted as companies are focusing on cutting costs," said Pandurangi.   

The general consensus this holiday season is that international travel will take a beating. Based on his interactions with the travel trade, Anand said, outbound tourism is seeing a drop in bookings to the rune of 20-30%. In fact, business to long-haul high-value (holiday packages ranging from Rs 80,000 to over Rs 1 lakh per person) destinations like US, UK and Europe has gone down probably more than 40% or so. Short-haul low-value destinations (holiday packages ranging between Rs 35,000 and Rs 50,000 per person) like Thailand and other Far East countries are seeing a drop of 10-15%.

However, outbound business to South Africa (SA) and Australia is still looking good as the Indian rupee (INR) hasn’t devalued so much (in these destinations) as compared to other currencies. In fact, just a few days back, SA started a very aggressive promotion for the Indian travellers highlighting the fact that the INR will still get them good value in SA.

As a result, bigger tour operators including the likes of Cox & Kings, Thomas Cook, Mercury Travels etc are proposing those destinations where the currency weakening has been of the similar order to the INR so that the impact is not felt by the traveller. “Destinations like Australia, South Africa, Brazil, Turkey, Mexico have seen almost similar devaluation in their currency when compared to the INR. So tourists are open to shifting preferences from say the US or Europe to South Africa or for that matter Australia,” said Kakkar.

With bookings for outbound travel are yet to happen coupled with the volatility in the exchange rate people are taking the wait and watch approach expecting the INR to stabilise and then take a call on their international plans.

Starwood, Marriott in race for Phoenix's Mumbai hotel

This story first appeared in DNA Money edition on Thursday, Aug 29, 2013.

While Phoenix Mills, the promoters of erstwhile Shangri-La hotel in Mumbai, have renamed the property Palladium Hotel for now, it is understood that the asset owners are in talks with global hospitality majors for a new management contract.

Global hospitality majors, including Starwood, Marriott and Hyatt, are said to be engaged in hectic negotiations with the asset owner, Pallazzio Hotels and Leisure, a unit of Phoenix Mills.

The current operator, Hong Kong-based Shangri-La Hotels & Resorts, handed over the hotel to Pallazzio on September 6, 2013. Earlier this week, Pallazzio and Shangri-La decided to mutually terminate the 20-year management contract after operating the luxury hotel for nine months.

Shishir Shrivastava, Group CEO and joint managing director, PML, did not respond to a query on the new international hotel operator/brand.

Industry sources said Starwood is a strong contender for the new management contract. Marriott and Hyatt are equally aggressive pursuing the matter, said one of the sources.

“These chains certainly are front-runners but then the hotel owners could be practically speaking to every possible operator,” the source said.

The current discussions with the asset owner are an indicator that a new hotel operator is yet to be finalised as against PML’s claims of already having someone on board.

Officials at both Starwood Hotels & Resorts and Marriott International said they were not in a position to comment.

Responding to a dna email, a Hyatt International spokesperson said, “The company is not in the race for the management contract at this time.”

There’s also some buzz that the hotel in question will join Starwood’s ‘Westin’ network. Interestingly, Pune-based Avinash Bhosle Group owns a 27% stake in PML’s Mumbai hotel and already has Starwood as the operator for its five-star hotel in Pune under the Westin brand. Its another upcoming property in Goa will also be managed by Starwood under the ‘W’ brand.

PML will have to take a final call on the new operator at the earliest.

This is because the Indian hospitality industry is set to enter the peak business season starting October and not having a hotel operator will make it very challenging for the asset owners.