Hyatt International to invest in 6 hotels in India - Views on News from Equitymaster

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  • Feb 28, 2000 - Hyatt International to invest in 6 hotels in India

Hyatt International to invest in 6 hotels in India

Feb 28, 2000

Hyatt International Corporation will be opening 6 hotels across major cities in India and one in Kathmandu. While most of these hotels will be franchised to individual property owners, Hyatt International plans to infuse Rs 1.1 bn in two projects the Grand Hyatt, Mumbai and Park Hyatt, Calcutta. This infusion would be jointly with the R.S. Saraf family and the total project cost for these two hotels would be Rs 8.1 bn. For the first time a foreign hotel chain has committed to invest in hotel projects in India. Most of the foreign chains who are making or have made their entry into the Indian hotel market have either franchised their brands to hotel owners in India or have tied up for operating management contracts for a fee.

Currently the Hyatt International has its presence in India only via the Hyatt Regency brand in India. The Hyatt Regency, Delhi is the only franchised hotel in India currently and is owned by Asian Hotels Ltd (AHL). However with Hyatt International's expansion plans all its three brands: Grand Hyatt, Hyatt Regency and Park Hyatt will have their presence in India.

Their expansion plans include a 390 room Grand Hyatt in Delhi, a 459 room Hyatt Regency in Mumbai, a 667 room Grand Hyatt in Mumbai, a 250 room Park Hyatt in Calcutta, a 240 room Hyatt Regency in Calcutta and a 250 room Hyatt Regency in Goa.

Five star hotels in India have been going through a tough period over the last couple of years with fall in occupancy rates and pressure on average room rates. This being mainly due to the domestic economic slowdown and the political instability over the last few years. However as the economy is now looking up and the political situation has picked up business travel within and to India should improve in the coming months.

Some of the problems however that the hotel industry still faces is high taxes charged to guests in hotels and inadequate infrastructure facilities across the country. However as India has good long term potential as far as tourism is concerned many foreign hotel chains would be looking to set up shop here.

Specifically for AHL, who currently owns the Hyatt Regency in Delhi, this would mean competition from other brands of Hyatt. Two of Hyatt International's planned hotels in Mumbai and Calcutta would be franchised to AHL, however these would compete with the Grand Hyatt and Park Hyatt brands in the same city. Though the Grand Hyatt is a superior brand, in India there is little difference in a five star deluxe brand and say a seven star brand, as the highest rating given to hotels in India currently is five star deluxe. Hence both the Grand Hyatt and Hyatt Regency brands in India will target the same class of business travellers.

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