New Delhi, September 27, 2019:
1. How has Embassy positioned itself to be a key player in the hospitality sector with its two offerings Hilton and Four Seasons?
Our Goal is – Embassy Group to be an Owner, Developer & Asset Manager of Diverse Hotel Portfolio which is profitable – with emphasis on Location, Design & Development with globally leading brands.
- We are taking a long-term view on this with an investment approach, seeking healthy returns on our acquisitions in the long term.
- We are adding to this portfolio with two large developments Embassy Manyata 620 rooms dual branded Hilton & Hilton Garden Inn, with 46K convention space & ETV with 500 rooms dual branded hotels Hilton & Hilton Garden Inn & 26K convention space.
- Our organic portfolio is growing by 10X from 2014 to 2025, with a CAPEX of INR 5,000 Crores
- In addition to hotels we are also building a management arm which provides restaurant management services, private club management, e-commerce food delivery, food trucks, out-door catering, managing food courts at our business parks, restaurant brands under Embassy Leisure.
2. What are the strengths of each of these properties?
Our selection of brands is based on what fits best with our hotel strategy mentioned in the earlier question and resonates with our target audience. Our aim is to provide our corporate occupiers:
World class services & recognizable International brands: Hilton resonates with our clients who are among top MNC’s and Fortune 100 companies globally
- Brands that offer products at two price points
- Good quality F&B offerings
- Capacity and ability to manage MICE/Convention space operations
Through our acquisitions, we have partnered with the world class Four Seasons luxury brand and Le Meriden, now a Marriott brand after the global portfolio acquisition of Starwood
3. The hospitality sector is competitive and hence how are two hotels faring to garner the revenues?
- Our building hotels – Based on a rationale business decision – not for sake of hotels & not for return on EGO. It’s a well thought out business decision linked to the growth of our phenomenal growth of our business parks
- Strategically build them into Business parks with captive demand; The hotels capture the captive demand from the park
- FS is positioned to be the ADR leader in the first year in its comp-set
- Hilton EGL has displayed double digit Revpar growth this year over last year
- It was perceived that we would bring tremendous value to our tenants if we were to offer them hospitality infrastructure within the business.
- This not only provides services to our clients – but also enhances the value of our Business Parks.
4. What is the expansion plan which is envisaged by Embassy growth in the hospitality sector?
Embassy Hospitality is open to foraying into new geographies: beyond Bengaluru with a plan to develop a Hotel Platform with diversified hotel assets.
There is an upswing in the business cycle with an immense long-term potential in the Hospitality segment.
- We are bullish on the hospitality space in India, and recognize the growth and opportunity in this segment including hotels.
- Our analysis has revealed key markets where we would like to be: Delhi, Gurgaon, Mumbai, Hyderabad, Pune and Chennai markets where we have existing business and synergies.
- We are also open to looking at High growth and revpar markets like Goa to consider strategic and valuable acquisitions which will complete our portfolio.
- We are looking to acquire undervalued, distress assets where there is an opportunity toreposition; via rebranding or capital improvement plans and enhance owners return on the assets.
We are also seeing many portfolio and stand-alone properties on the block/for sale – and there is an anticipation that strong asset management & brand associations will allow hotels to generate upsides/sufficient yield, thus garnering investor interest.
5. How would you describe the current scene of hospitality industry in India?
- Hotel brands/operators, to rework product offerings attuned to the inclusive and youthful lifestyles and aspirations of the millennials and Gen Z population
- ARR as well as RevPAR will continue to grow backed by high demand from the commercial sector.
- Food & Beverage (F&B) Arbitrage – hotels will limit the number of restaurants or outsource the space in the hotels; independent F&B hubs to grow and independent restaurants concepts thrive
- Hotels developed to capture the latent demand in the MICE segment
6. What are the visible trends in this space?
A. India Hotel Story
- 2018 was solid for India – occupancy 65%, ADR INR 5,800 and REVPAR INR 3,800 (+2% mainly from ADR growth)
- Hospitality industry in India recorded significant improvement in the performance levels since 2016
- 6 Years of Hotel Demand outpacing Hotel Supply Growth – 2019 forecast, Supply +7%, Demand +9%
- Investor interest has revived and there is a likelihood of major re-structuring in the form of mergers, acquisitions
- Experiential services are gaining significance & hotel operators are re-vamping their product positioning and introducing lifestyle focused brands.
B. Technology
- Hospitality industry is witnessing innovation in the traditional hotel formats –
- Airbnb, VRBO, Room Aggregators – OYO Rooms, FabHotels&Treebo and Capsule Hotel formats like Urban-pod.
- Driven by young and tech savvy travellers seeking smart travel at the best deal.
- Community driven shared room concepts offer rooms at all price points
C. Travel Bengaluru Hospitality trends.
- The city of Bengaluru has been retaining its status as the busiest airport in South India, and India’s third busiest airport after New Delhi and Mumbai. The Kempegowda International Airport in Bengaluru recently announced a passenger traffic of 33 million in calendar 2018.
- Bengaluru is also among India’s strongest RFP driven hotel markets, with large international and domestic companies operating here. There is a vast 200 Million sq. ft. of Grade A commercial space in the city, and is one of the most sought-after rental and lease markets in the country.
- Backed by this very healthy growth in commercial demand, Bengaluru Hotels achieved 2.8% growth in RevPAR in 2018 … All segments performed well, with the Upscale – Luxury segments achieving the best ADR numbers since 2011. This bodes well for our developments in the Hospitality segment.
- Bengaluru incoming supply 4,000rooms will address only 35% of the demand requirements.
7. What are the challenges that emerge to survive and succeed in this sector
- High barrier Entry with larger capital requirements, development & gestation period
- Right branding and operations asper consumer demand
- Our Success is determined by:
- Captive demand from business park
- Dual branded hotels developments – Common infrastructure, BOH, laundry, MICE, etc adds to operational efficiency
- Clustering of hotels – one brand focus in a city – economies of scale
- Housing hotels in mixed use developments – the hotels are supported by commercial spaces, F&B led retail thus making for more cost-efficient construction
- Timely completion of the project – with quick and efficient project management
- Careful selection of the right brand partner – ensuring matching the needs of the market
Corporate Comm India (CCI Newswire)
