India has been the focus of a raft of major expansion announcements in the past week as it pushes to establish its hospitality credentials against BRIC rivals Brazil, Russia and China.
A chronic shortage of decent room stock has seen rates reach stunning levels, with two cities, Mumbai and Bangalore, currently more expensive than London according to business travel group Hogg Robinson.
The biggest push was announced by DLF, the largest property developer in the country. The company is planning to invest $5bn in building around 125 hotels over the next seven years.
The company has a joint venture with Hilton to develop 75 hotels and this week it fleshed out a little more detail on these plans with the announcement of seven management agreements on hotels in development. It takes the announced total of hotels to 16 comprising 3,500 rooms.
The new properties include a Hilton in New Delhi plus Garden Inns in New Delhi, Chennai and Trivandrum. There are also two Homewood Suites and a Hilton Residences.
Shakti Singh, managing director of DLF Hotel Holdings, said that the company wants to scale up its hospitality presence to 25,000 rooms within five to seven years.
Last November, DLF announced a $400m deal to buy Aman Resorts and it has engaged Four Seasons on a management contract for a resort in Gurgaon targeted to open in 2010.
Emaar MGF has announced a $400m partnership with Marriott International that will see the construction of close to 1,000 rooms in the next three years. The plans involve three JW Marriotts in New Delhi, Hyderabad and Kolkata, and one Courtyard in Amritsar.
Emaar MGF is a joint venture with Dubai's Emaar Properties and Delhi-based MGF. It already has a JV with Whitbread for Premier Inn and one with Ibis for Formule 1.
An IPO has been planned for February but was pulled after shaky market conditions. According to Shravan Gupta, vice chairman and managing director, another go is possible in the next 12 to 18 months.
Another company expanding fast is Delhi-based Claridges (a name unlikely to please Quinlan Private which owns the London property with the same moniker). The India Claridges has earmarked $300m to develop up to seven new hotels.
This week Claridges, which is part of the Worldhotels representation group, announced a 40% hike in sales from its three existing hotels.
Not to be outspun on the PR stakes, InterContinental announced on Monday that 14 Holiday Inns were under development in India. The hotels will add 3,700 rooms across 11 cities. IHG currently has 13 hotels in the country with a pipeline of 20 more.
Other Indian operators are also planning on strong domestic growth. Indian Hotels, part of the giant Tata Group, is pushing forward both its upscale offer with the Taj brand but also focusing hard on the budget end with its Ginger concept.
The increasing aggression of India's domestic chains was shown by Oberoi when it pulled its alliance with Hilton. This week Oberoi announced that the rebranding of its Trident Hilton properties to just Trident was now in effect. The fall out occurred after Hilton struck its DLF deal.
Meanwhile, Oberoi has said that it now has in place a succession plan for its 79-year old chairman PRS "Biki" Oberoi. But the group refused to name the replacement. Tipped for the job are Biki's son, Vikram Oberoi, and his nephew, Arjun Oberoi.
The Oberoi family control 43% of the listed vehicle East India Hotels which has been threatened with a takeover by domestic rival ITC. The latter company, whose hotel division is ITC Welcomgroup, has an alliance with Starwood under which it carries the Luxury Collection and Sheraton badges.
Other international investors are eyeing the opportunities in India. Dawnay Day has announced plans that could make India its largest investment outside of Europe.
The first Dawnay Day Hotels India property is due to open later this year with the brand name tipped to be TEN. So far, a dozen sites have been acquired with about 2,500 rooms either under construction or about to start.
Another big investor tipped to be making a splash is GIC through its JV with Host. And debt financiers too are dipping their toes with Hypo among the high profile banks having funded projects recently.
The appeal of India lies in its shortage of hotel rooms with Hogg Robinson, in February's 2007 Hotel Survey, estimating that the country is short by 100,000. Given that, according to HVS in a report on the country published last October, the existing supply is just 110,000 rooms, the stock can double without seriously damaging operating prospects. The supply of existing internationally branded hotel rooms is under 40,000 reckons HVS.
Hogg Robinson said that it expects market saturation to take 10 to 15 years given new supply was coming on stream at a rate of just 10,000 to 15,000 rooms a year. HVS calculated that announced new supply over the next five years in India is just over 100,000 but it expects barely half of that to be realised with the probability of announced plans reaching fruition of less than three in five..
The other big appeal is the growth of international arrivals, with the World Travel & Tourism Council estimating that India is the second fastest growing tourist destination of the major economies, just behind China.
But unlike China, India's hotels are demonstrating strong growth in room rates with Mumbai showing the fastest rate growth in the world in 2007 at 37%, according to Hogg Robinson.
China's average room rate growth was described by Hogg Robinson as comparatively low and lagging behind its BRIC counterparts. Moscow, for example, topped the charts as the most expensive city and still showed a double digit growth in rate.
One warning shot for India, however, was Bangalore where room rates went down by 5% thanks to efforts by major end-using companies, mostly IT and outsourcing groups, to create their own hostel type accommodation to avoid the high hotel costs.
Figures from Deloitte showed that in 2007, Mumbai had the eighth strongest revpar in the Global Ranking Index (which excludes North America). Mumbai's ranking increased from 13th place in 2006 thanks to a 47% rise in revpar, the biggest in the survey of 165 cities.
Deloitte commented that the profitability of India was unlikely to be sustainable given the government backed developments underway in the country. "With tax breaks supporting building work in Delhi in the lead up to the Commonwealth Games in 2010, the foundations are in place for plenty of new rooms across the country," said Deloitte's report, Hospitality Vision. The report also showed that China pushed up average room rates by 7.5%.