Indian Hotels Seek to Meet Guests’ Demands

With a bright, airy lobby decorated with colorful seating and stained-glass installations, the Lemon Tree Gurgaon promises cost-conscious travelers a respite from the hustle of a busy New Delhi satellite city.

Service bell at hotel reception
Louis Fox | Digital Vision | Getty Images
Service bell at hotel reception

With pleasant — if small — rooms, a gym, a swimming pool and a coffee shop, the hotel offers all the basic amenities — at a price 30-50 percent less than the area’s many luxury hotels.

Little wonder that Lemon Tree Gurgaon — one of 17 properties run by the seven-year-old, New Delhi-based Lemon Tree chain — is running about 70 percent full, popular with both foreign and Indian business travelers.

“In India, you have two distinct classes of hotels — deluxe properties, which compare very well internationally, or bottom of the pyramid, where the basics of the business — security and hygiene — are not guaranteed,” said Rahul Pandit, Lemon Tree’s chief operating officer.

“There is a wide space in the middle — we occupy this space.”

India’s growing market for clean and decent, yet affordable hotel rooms is now attracting plenty of international attention too, with global hotel groups such as Accor, Marriott and InterContinental Hotels all rolling out new mid-price chains to cater to India’s fast-growing domestic travel market.

India’s Taj Group, long a byword for luxury, has also established its own budget chain, Ginger, with 24 properties.

India’s hotel market is like “flying an airline with more business class seats than economy”, says Mr Pandit.

Of the country’s 135,000 formal-sector hotel rooms, about half are in the four- or five-star category, with prices upwards of $150 per night — out of reach for most Indian travelers.

The picture is very different in China, where a bevy of domestic chains such as Home Inn, 7 Days Inn, and Motel 168 — some backed by western private equity groups — have created a highly competitive market for budget accommodation.

New value offerings are expected to find strong response in India, where 70 percent of all domestic airline flights are on budget carriers, but the number of domestic airline trips has risen from just 10 million in 1990-91 to 52 million last year.

“The middle class is growing at an extremely rapid pace and they want to travel, but they are conscious about spending,” said Rajeev Mennon, Marriott’s vice-president for India.

“It makes perfect sense to be coming up with an array of brands which could cater to different market segments.”

Marriott has just unveiled a joint venture with Sahmi Hotels, an India-focused investment fund, to introduce its mid-range Fairfield brand in India. Sahmi is raising around $150 million for the venture, of which Marriott will invest 30 percent.

Mr Mennon said Marriott decided to make the unusual direct investment to help facilitate a speedier rollout, with a goal of 12 to 24 Fairfield properties in India by 2015. “If you can get a few of these up in strategic locations across India fairly quickly, it allows the consumer to connect quickly with the brand,” he said.

InterContinental Hotels is investing $30 million for a 24 percent stake in a joint venture with Duet India Hotels Group to establish 19 of its Holiday Inn Express hotels in the country by 2016.

Of foreign hotel groups, Accor has made the biggest financial commitment to India, with an investment of $250 million, mostly for developing moderate-price and budget properties.

It has a 50-50 joint venture with InterGlobe, the parent of popular Indian low-fare carrier IndiGo, to expand the Ibis brand in India. Accor is also building 10 of its budget Formule 1 hotels, which the French company will wholly own.

“We are very serious about having an expansive network, and we tend to believe to get them right, in the beginning you need to invest, to discover, to test your products,” said Evan Lewis, Accor’s vice-president of communications in Asia-Pacific.

Catering to Indian guests is not as easy as replicating successful western formulas. Given the poor state of infrastructure and limited dining options, even cost-conscious Indians travelers expect to be able to get full food service, or relax at a bar inside their hotels after a busy day outside.

“Indian consumers want it to be affordable, but they want to be chic and have all the bells and whistles,” Mr Lewis said.

Accustomed to household help at home, most Indian middle-class travelers also see room service as a basic essential, rather than as part of a luxury environment.

As global hoteliers learn what it takes to satisfy their price-sensitive Indian guests, Lemon Tree, backed by private equity firm Warburg Pincus, is expanding, aiming for 54 Lemon Trees, and 118 of its budget properties, Red Fox, by 2020.