Xander Group Inc finds the Indian hospitality sector so hot that the investment firm has picked up stake, over the past few years, in hotels such as Sinclairs in Ooty, Devi Garh in Udaipur, Mariott Hotel and Convention Center in Pune, Devi Ratn in Jaipur and so on.
Like Xander, whose retail unit Virtuous Retail plans to build several high-end malls across the country, global firm Duet Group,
which manages more than $2.7 billion of equity, has invested hugely in Indian hospitality. More such players-and they include SAMHI, Lemon Tree, Accor, InterGlobe, RMZ, etc-are revolutionising the way branded hotels are built and maintained in India.
These firms constitute what Kaushik Vardharajan, managing director of global hospitality consultant HVS Hospitality Services, calls "institutional investors" and they are currently funding 20-25% of the new hotels that will be built in the country over the next five years. "[They] bring with them a disciplined approach to developing hotels, focusing on maximising return on investment and optimising exit strategies," he notes, emphasising that this is a departure from the past trend: of hotels being financed either by high networth individuals or real estate companies.
"We expect this percentage [of their investment] to increase going forward," states a report that Vardharajan co-authored with colleague Yashaas Rajan; this report will be released on Monday. It contends that armed with market research and due diligence, such investors ensure that unfeasible projects are not developed on a whim and that new supply is not added to markets indiscriminately. According to the report, "as part of their drive to reduce input costs, [these] investors are questioning the brand standards dictated by hotel companies and the relevance or requirements for some of them".