For a nation whose hospitality offerings for decades were focused on either end of the market—luxury and unbranded standalones—the prevailing winds seem to finally align with most of the major hospitality markets around the world. Yes, the pot of gold lies—if not at the bottom of the pyramid—at least just a step above it. Numerous mergers, acquisitions, and strategic alliances have witnessed India’s top hospitality players invest in expansion into the hinterland.
Globally, most hospitality majors have their largest number of hotels and revenue from their mid-segment hotels. Admittedly, though, the definition of what constitutes mid-segment differs considerably from country to country. India’s hospitality majors are waking up to the low-hanging fruit provided by the midscale segment. This year has already seen expansion in this space with Accor’s partnership with Banyan Tree group and Marriott’s global launch of its new collection brand for the midscale and upscale lodging segments—Series by Marriott, through a founding deal with Concept Hospitality Private Limited (CHPL) in India. Under the strategic agreement, CHPL’s flagship brands, The Fern, The Fern Residency, and The Fern Habitat, will affiliate with Series by Marriott on an exclusive basis across the country, and Marriott will make a small equity investment in CHPL.
IHCL, India’s largest hospitality brand by number of hotels, recently announced a significant step to expand into the midscale segment. It entered into a strategic partnership, signing agreements to acquire a controlling stake in ANK Hotels Pvt Ltd and Pride Hospitality Pvt Ltd, and signed a distribution agreement with Brij Hospitality Pvt Ltd, catapulting IHCL’s portfolio to over 550 hotels. With this acquisition, IHCL emerges as the leading player in the segment with 240+ hotels.
“We are now leading the midscale opportunity,” Puneet Chhatwal, Managing Director & Chief Executive Officer, asserted while making the announcement regarding the partnership. “In 2018-19, we reimagined and relaunched Ginger more in a lean luxury segment. This partnership (with ANK, Pride, and Brij) doubles our presence and helps us secure another platform, which will help us pivot. The idea is not to collapse, merge, and put it all under IHCL, but rather to use this as a platform to grow exponentially, and also to make it a much more attractive and profitable proposition. We have the possibilities of synergising with other group companies, so we can offer these companies big box assets.”
Paris-headquartered Accor, which already has a significant presence in the midscale segment in the country with its Ibis, Ibis Styles, Mercure, and, to an extent, Novotel brands, invested in Treebo earlier this year, a move designed to address the economy end of the market, the sub 100-room hotel space. The unified joint venture, along with InterGlobe, has made a strategic partnership with Treebo, “under which Treebo will take on a master license for the Ibis and Mercure brands and develop that nationwide,” says Gaurav Bhushan, Chairman, Accor and InterGlobe’s proposed joint hospitality enterprise in India. “While we absolutely have a big focus on luxury, lifestyle, we will continue to drive the midscale and economic growth that it’s already been doing.”
Sub 100-room hotels are what made the North American landscape, replete with highway properties over the past 75 years, points out Achin Khanna, Managing Partner – Strategic Advisory, Hotelivate. “With road connectivity improving by leaps and bounds across India, there is likely to be a similar opportunity across our nation. Sub 100-room hotels make business sense in various getaway leisure destinations as well. Lastly, small-format hotels can be a great FSI user as part of the mixed-use format in major markets, where excess built-up area is permissible, but it doesn’t make sense to build more retail or office space on the higher floors.”
The potential is immense. About 85% of the mid-market business in India is domestic, and we are well-positioned to take advantage of the potential, says Rahool Macarius, Market Managing Director – Eurasia, Wyndham Hotels & Resorts. “Mid-market is a sweet spot, as you can draw from the upscale segment from an ADR standpoint, and you take occupancy advantage from an economic standpoint.”
All the global majors have their eye on the middle. Hilton is looking to grow in the midscale space with Hampton, while IHG is signing hotels for its Garner brand. Hyatt has a renewed focus on Hyatt Place. Even Dusit is looking to grow its presence in India with expansion into smaller towns. Indian chains such as Lemon Tree and Sarovar have targeted this segment for long and both have some of the largest hotel inventories in the country, while newer brands such Bloom are also emerging.
