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Hotel Growth Spurt Coming to India

With a population of 1.1 billion, a GDP that's projected to grow about 8% annually until 2020, and a burgeoning middle class, India is on the radar screen of several hotel companies. It helps that the market is significantly undersupplied. India's inventory of 110,000 hotel rooms makes it roughly the same size as the Orlando lodging market.

“They have a middle class approaching 300 million people. Their middle class is similar in size to the total U.S. population,” says Tom Keltner, president of the Brand Performance & Development Group with Hilton Hotels Corp. And as India continues to prosper, the middle class is destined to become even bigger, Keltner says. Layer on top of that the fact that only 37% of hotels worldwide are branded, and the incentive for the big chains is clear.

Seizing the opportunity to gain market share and expand its empire, Hilton Hotels has entered into a joint venture with Dehli-based DLF Limited to build and own up to 75 hotels in India over the next seven years. Hilton's principal role will be to manage the properties. The hotels will largely be a mixture of the Hilton Garden Inn brand geared toward business travelers and its signature Hilton Hotels product. Currently, Hilton's portfolio in India includes eight hotels that are a combination of managed or franchised properties.

Starwood Hotels and Marriott Corp. also are growing their brands in India, but at a more moderate pace. Each company has about 10 hotels in the pipeline. Marriott will focus on the expansion of its Courtyard brand for the middle class. Starwood, meanwhile, will focus on its luxury and upper upscale brands.

Rolling out brands internationally presents several challenges, Keltner says, starting with the prototype. The prototype for a Hilton Garden Inn in the U.S. calls for limited food and beverage and limited meeting space. “In India, you don't have the same infrastructure of independent, freestanding restaurants, and you don't have a lot of hotels,” Keltner says. Consequently, a Hilton Garden Inn in India will likely include two restaurants, one Western restaurant, and another that offers Indian food.

Acquiring sites is much more difficult in India than the U.S., which is why Hilton chose to enter into a joint venture with DLF. “It was essential to have a strong local partner who already owns land throughout India, and who has a huge amount of experience in doing multiple types of development, from commercial to mixed-use to residential,” says Keltner.

With more than 20 years of hotel experience, what has Keltner learned most about international expansion? “You don't want to underestimate how little known our U.S. brands are overseas. Launching a new brand is not an easy, or a simple, process.”

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