Le Meridien Plans India Expansion

6th May 2005

Le Meridien Hotels & Resorts is to double the number of hotels it manages in India and the sub-continent within three years, and could increase that figure by 100 per cent again by 2015 according to a senior official at the global hotel group.
Ashok Ummat, senior vice president, finance and development for the Middle East and West Asia, said the only obstacle to growth was the time it took to locate the right site for each hotel or resort.

“Le Meridien was one of the first international players in the hospitality sector in India, and we are reaping the rewards of that growth strategy,” he said. “We first saw the potential around six years ago and began looking for opportunities in the key gateway cities, but having realised that aim, our priority now is to focus on the state capitals and resorts.”

Figures bear out this bullish approach, with the new Deloitte HotelBenchmark survey for India reporting average hotel occupancy growth of 29 per cent and revPAR up 55 per cent for the year to February 2005.

With the economy on the rise, an easing of tensions with neighbour Pakistan and liberalisation of aviation regulations, development is across the board, from corporate and meetings traffic to international and domestic tourism.

“The infrastructure is slowly being built to support this growth, with new airports, airlines such as Kingfisher and SpiceJet launching this month, international routes being inaugurated by private carriers such as Jet Airways and Sahara and the government permitting global airlines to increase their frequencies to India,” said Ummat.Ê


“And, if you just look at a map of India, there is no doubt about the enormous potential of this market. If you just take one state such as Uttar Pradesh, it has a population of around 260 million, the same as that of the United States, yet there is not one five-star hotel there.”

According to consultants HVS International, demand for hotel rooms will grow by at least 20 per cent annual during the next five years, and the current stock of 95,000 will need to nearly double to accommodate this.

However, the company reports plans for the construction of only 35,000-40,000 rooms in new hotels, and envisages an acute shortage in room supply in the short and medium term, leading to continuing rise in hotel rates.

For Le Meridien, growth strategy will remain firmly in the premium sector, despite industry perception that the biggest gap in India is for mid-price hotels, aiming to meet the needs of domestic corporate and leisure travellers.

“With Le Meridien established in the metropolitan capitals, this provides the springboard for our expansion into areas that are untouched such as Lucknow, Chandigarh and Indore, where we are currently negotiating management contracts,” said Ummat.

“We are also consolidating our presence in the big cities and have potential sites for development in Mumbai, Delhi, Calcutta and Goa, as well as Islamabad and Lahore in Pakistan and Dhaka in Bangladesh.”

Despite higher development costs, five-star hotels in India are still rated as good investment prospects, with only six to seven years required for payback, he said.Ê

International tourism is another sector set for growth; give the increase in the number of flights and a perceived upgrading of hotel accommodation on the sub-continent.

“India was not generally considered an upmarket destination, but this is beginning to change, and meanwhile, events such as the Commonwealth Games in 2010 will also fuel interest in the country as a new hotspot on the tourist map,” predicted Ummat.


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