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Foreign hotel chains shoring up presence - Views on News from Equitymaster
 
 
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  • Mar 11, 2000

    Foreign hotel chains shoring up presence

    Foreign hotel chains in the recent past have shown their interest in tying up with Indian hotel owners for management contracts. Hilton International pulled out of a project promoted by Appu Hotels Ltd in Chennai due to differences between the two companies. However many other foreign hotel chains have lined up to take its position.

    Foreign hotel chains are keen to expand their base into India and have evinced special interest in the five star segment in the metro cities. However majority of these are for management and marketing contracts and not for equity investments in the hotel sector. The entry of these hotel chains has resulted in encouraging many industrialists to set up hotels across the entry.

    Earlier the hotel segment was dominated by brands of Taj and Oberoi. However now many companies keen to diversify into the hotel sector are able to enter into tie-ups with foreign hotel chains and hence do not need to come out with their own brands. They have on hand readymade international brand names for getting into marketing and management tie-ups for a fee based on turnover and operating profits.

    Hyatt International recently announced its plans to infuse Rs 1.1 bn in two projects the Grand Hyatt, Mumbai and Park Hyatt, Calcutta. It is the first foreign hotel chain who has decided to invest in the projects that it will manage.

    Five star hotels in India have been going through a tough period mainly due to economic slowdown and the political instability over the last few years. However as the economy is now picking up and the political situation has stabilised business travel should improve in the next year. Also as India has good long term potential as far as tourism is concerned many foreign hotel chains are looking to set up shop here. However in future a cause of concern would be oversupply in the metro cities. Hotel expansions especially in the five star segment are going slow due to current scenario of the industry and some are delayed due to funding problems. However room supply will go up rapidly in the metro cities after four to five years.

     

     

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