The Hindu Business Line : Accor Hospitality bets big on India

Mumbai, April 7 Accor Hospitality, the European hotel major operating brands such as Sofitel, Novotel, Mercure, Ibis and Formule 1, continues to grow its network in India. There have been some delays, but it is committed to having 10,000 rooms by 2012 and launching more brands. The most interesting entry will be of Formule 1, which is priced at Rs 1,500-2,000. It has four committed sites and more are under negotiation. Mr Gaurav Bhushan, Senior Vice-President Development (South Asia) spoke to Business Line on the company’s growth plans:

How has the journey been for Accor Hospitality in India so far?

I think we have made significant progress in India. We entered the market in 2004-end, and now we are in 2009. We have 48 projects underway, have opened four hotels and more are on the way.

Being a foreign hospitality player, what kind of challenges and opportunities do you see in the Indian market given the current economic scenario?

The single biggest issue that all of us face is the ability to execute projects effectively in India — whether it is the licences, the quality of construction and development or the access to land. And these are fundamental ingredients to the hotel business, so that’s where the challenges lie.

One of the significant opportunities that we see here is the availability of the talent pool geared towards hospitality. The business (hotels) has a significant upside. Unfortunately our level of infrastructure and the level of difficulties we face in the economic and business environment in executing projects is a big issue.

In terms of clientele what sort of segment are you targeting?

Primarily business travellers. But we also have a good leisure mix. Being a leading European player in the hotel sector, we obviously have a great distribution channel to secure some good European business, which brings in good in-bound business into India. We also have a good mix of Indian and international business.

Premium traveler numbers are down across the globe. So what kind of pressure are you feeling?

The premium traffic numbers are down. But I can tell you, when I look around in Asia, the performance of hotels in India is still better than some of the other markets in the region, like China, where the operating performance has deteriorated over the last couple of months quite significantly. And that is because the domestic consumption is relatively strong. Even while the international business and corporate travel has taken a hit, India has a very strong domestic leisure and corporate market going, which continues to drive the growth rate.

Is there a specific strategy for the domestic corporate market?

A bulk of our development in the Indian market is geared towards the economy, budget or the mid-market hotels. We are a leading player in the luxury segment, like a lot of our competitors, but the bulk of the development happens in the mid-scale and economy segment. Our brands such as Novotel, Mercure, Ibis are perfectly geared to this market. And we have a brand called Formule 1 that we are also developing here. So we have a product range that ranges from Rs 1,500 up to Rs 7,000 and everything in between.

What are your room tariffs like?

Novotel is a product that’s priced somewhere between Rs 5,500 to Rs 7,000, Ibis is between Rs 4,000 to Rs 5,000 and Mercure, which sits in between Ibis and Novotel, is priced between Rs 5,000 to Rs 5,500. And then we have our budget product Formule 1, which is priced between Rs 1,500 to Rs 2,000.

What are your plans for getting your Formule 1 product into India?

We haven’t opened any of them as yet. These are under development.

Would it be a no-frill product?

Yes, limited service. But low cost doesn’t have to be low quality and that is what this product would be.

Are there any delays in opening of properties in India, given the problems being faced by the real estate developers here?

We have had delays in opening our projects much like most of the market players. The construction and execution issues are quite significant. But we are back on track. We are now in a much better position to handle and execute larger projects. So, we have had some delays and we are trying our best to put all that back on track.

What are the delays like?

The delays have been between six and twelve months. And these are projects that we are developing ourselves with our partners and projects that we are just managing on behalf of the third parties. And it all boils down to the issues of construction, getting the right people at the right price, delays in land procurement, licensing issues, and permits to open hotels, which again is a huge issue.

In terms of manpower, what sort of hiring can we see from Accor in 2009-10?

We are opening four hotels this year, so would look at hiring about 1,000 to 2,000 people in the next 12-18 months at all levels, bulk of it being on the hotels side.

How many rooms are you looking to add this year?

With four more hotels opening this year, roughly about 700-800 rooms. A similar profile of openings is lined up for the following year. A significant number of openings will happen in 2011-12…because a lot of hotels that were supposed to open in the end of 2009 and beginning 2010 are now opening at the end of 2010-11.

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