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Outsourcing's Surprise By-Product: More Luxury Hotels in India

Until now, home-grown brands like Taj, Oberoi and Leela have dominated India’s luxury hotel market, but that’s about to change.

High-end international hoteliers including Four Seasons Hotels & Resorts, Shangri-La Hotels & Resorts , Fairmont Hotels & Resorts, Park Hyatt Hotels, J.W. Marriott and Relais & Chateaux plan to significantly expand their presence in India in the next several years.

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An increase of high-end travelers to the country is one incentive, but the main reason is India’s rising global importance to the business community, hotel executives and travel analysts say.

“Like China, India is shaping up to be one of the main growth engines in the world, and as India’s economy continues to grow, business travel into and within India will expand,” said Christopher Wong, regional vice president of development for Four Seasons in Asia.

Recent figures support that prediction: According to the government’s Ministry of Tourism, there were around 270,000 business travelers to India in 2007. That number jumped to more than a million in 2010.

Forecasts from the World Travel and Tourism Council predict overall business travel spending in India will rise by 8.8 percent a year between 2011 and 2021 — growing from $26 billion to $72 billion.

Part of the growth comes from American companies adding outsourcing and back office operations in Hyderabad, Bangalore, and Mumbai, according to Adam Weissenberg, vice chairman of Deloitte and leader of the company’s travel sector. This is resulting in a boon for high-end hotel brands seeking to build properties in India, he said because outsourcing often involves high-end business travelers going to India from the West who expect luxury accommodations.

Thus, a mushrooming number of high-end hotel rooms: The Toronto-based Four Seasons is opening a 230-room property in Bangalore in 2014 and a 260-room one in New Delhi in 2015. Both hotels will have high-end retail stores as well as private residences, which will cost between $800,000 and $3.2 million to purchase. The Bangalore location will be secluded within elaborate gardens.

Shangri-la Hotels and Resorts, which is based in Hong Kong, is set to open its second India property in Mumbai by the middle of this year and has two developments in Bangalore set to open between 2013 and 2014. The 410-room Mumbai property will have views of the Mahalaxmi Racecourse and the Arabian Sea and a private helipad on the roof top. Park Hyatt Hotels out of Chicago, which already has a location in Goa, has a property slated to open in Hyderabad and another one in Chennai this year. And, JW Marriott, which currently has locations in Mumbai and Chandigarh is opening in Bangalore, Chennai, Gurgaon and the New Delhi airport this year and next year.

Fairmont Hotels and Resorts from Toronto, Canada, will enter India for the first time. The brand is opening a 199-room property in March in Jaipur that will include a “hotel within a hotel” called “Fairmont Gold” will offer complimentary amenities like hot breakfast, a lounge with computers and tablets, happy hour cocktails and an elaborate spread of evening hors d’oeuvres like tandoori prawns and sushi. The hotel will also have 45,000 square feet of conference space. Room rates for the hotel reflect the luxury: prices start close to $400 a night.

While foreign hotel names may become more widespread in India in coming years, these brands have made limited financial investment to do so, according to their spokespeople. These foreign hotels act primarily as management companies for most of their properties globally, and each location is individually owned. The chains partner with the owners to hire and train staff set down standards for service and luxury.

The Relais and Chateaux boutique property group, which has invested $14 million to partner with local hoteliers to build new properties in India is the exception. The Paris-based hotel company, which lends its name to upmarket small, historic properties that are independently owned (it currently has 518), says it is planning a big push into India.

“The boutique hotel side in India hasn’t really existed, and we see an enormous opportunity for development,” said chief executive Jaume Tapies.

Mr. Tapies said India’s personal appeal pushed him to move into the country four years ago. The company identified seven hotels to add to its portfolio, and then staff from Paris trained local employees in decor, amenities and service.

Guests at the Neeleshwar Hermitage in Kerala, for example, stay in one of 18 large cottages stocked with iPods and decorated with handmade furniture and ancient and contemporary local original art. The property overlooks more than 20 miles of the Arabian Sea, and a night’s stay costs upwards of $300. At Sher Bagh, a camp on the edge of the Ranthambhore Tiger Reserve in Rajasthan with 12 tents, guests pay around $600.

The $14 million in new capital will be invested in 20 upcoming properties.

“India is a beautiful country with such a huge potential for tourism to places that aren’t commonly frequented but where our properties are,” said Mr. Tapies. “We as a brand have a lot of work to let travelers know about these places, but it’s work we are looking forward to.”

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