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Dec, 07 2010

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The Indian hotel industry projected to grow at 8.8 per cent is undergoing tremendous transformation. The presence of several international hotel chains offering numerous prospects with attractive returns is making this segment the most sought after.

ACCORDING to industry data, India is expected to double the number of branded hotel rooms from the present 1 lakh in just three years. Leading the bunch are global hotel chains that are estimated to add over 300 hotel properties (an estimated 55,000 rooms) in the country by 2013. Industry experts attribute this boom in the hospitality industry to the Indian travel and tourism sector, which is believed to have brought about a drastic change in the field. Heightening this success quotient are fast evolving international hotel chains that are yielding rich dividends through the franchise format.

Business potential

Going by the increasing number of domestic and international tourists, the hospitality industry has thrown open lucrative business opportunities with high returns. According to experts, the contribution of hospitality industry to the GDP is on a steady rise from 3.56 per cent in 2004-05 to 6.1 per cent in 2008-09. Moreover, global brands like Best Western and Choice Hotels are scaling profits through the franchise format in India, making several other international brands to follow suit. Vilas Pawar, CEO, Choice Hotels, India, explains, “Franchising in the hospitality industry appears a lucrative business agreement, as promoter will have ownership advantage and can obtain management services along with training, brand audit, marketing and sales support in creating awareness, gaining recognition and attaining higher occupancies and returns.” Sudhir Sinha, President & COO, Best Western, India, says, “Almost all international hotel franchise brands present in India or having plans to enter the market have got tremendous opportunity in the future due to their international lineage, well-proven system and product configurations, robust reservation system and client base.”

Franchisability

The ingress of several international hotel brands and their growth through franchising has made the format a success here. Franchising offers benefits like a smooth start to hotel operations, instant recognition to property and good brand recall due to co-branding. Recalling the benefits of franchising, Sinha avers, “The franchise system of Best Western helps its members to get instant access to worldwide recognition, one of the best reservations systems worldwide and a ready list of leading corporate houses and travel agents in the world. Franchising is the most convenient way for international hospitality brands like us to expand globally, which also have fantastic scalability and adaptability.” An international hotel brand franchise requires an initial investment ranging between Rs 25 lakh to Rs 22 crore approximately, depending on the premier, high and mid-ranges, as per the franchisees budget. The breakeven is usually achieved between five to seven years.

Defining it further, Pawar shares, “As a mid-market hotel chain, we see enormous opportunity for growth in mid-market segment offering value for money, smart accommodation for budget-conscious business and leisure travellers. Our spectrum of services includes human resources/training support, onsite quality assurance and inspections. We also provide services like hotel development, project planning, technical and pre-opening services, operations support, sales and marketing and reservations system.”  According to Sinha, Best Western extends online training to its franchisees free of cost. He explains, “Best Western is probably the only international hotel chain, which provides comprehensive online training resources for the staff of all of its hotels, without any fees. And the best part of this is that we do not restrict this only to the general managers or HoDs but also for the supervisory level of employees.” Best Western provides many certification courses in areas like food & beverage production and service, housekeeping cleaning schedules, housekeeping deep cleaning procedures, preventive maintenance schedule, revenue management, best selling techniques, certified hospitality supervisor, etc.

Expansion

Several international chains have expanded pan India and are even planning to seep into tier-II cities. In case of Choice Hotels, the expansion is spread across 25 properties, in over 17 destinations, while its 14 other properties are under different stages of development. For Best Western, the company aims to establish its presence with 100 properties in India by 2017.

Flip side

Several problems do crop up in the form of franchisee's lack of knowledge and experience, high fee structure, rising real estate rentals to name a few. Sharing some of the difficulties, Pawar quips, “The major challenge is to maintain stringent brand standard/specifications, which are ensured during quality audit at various properties.” Says Sinha, “Our first and foremost task was to start creating awareness about the strengths of Best Western brand in India and unique core competencies we deliver to our member properties and our worldwide guests.”

Exit option

Do international hotel brands permit a check-out facility for their franchisees? “Franchisees selling out is the prerogative of the hotel owners/promoters and we do not get ourselves involved in such circumstances, other than working with the new promoters to see their keenness on remaining associated with the Best Western brand and their commitment to comply with our standards and guidelines,” Sinha enumerates.

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