India looks to budget hotels expansion

26 August 2009

MUMBAI: The Indian hotel sector's traditional apathy towards budget travel is being turned on its head by a new focus on no-frills accommodation.

First to the mass market segment was Ginger operated by Tata's Indian Hotels Company as a contrast to its luxurious, top-dollar Taj Hotels brand.

But Ginger now faces competition in the form of Lemon Tree Hotels, which has backing from foreign investors including Warburg Pincus, the US private equity fund, for the launch of a new budget chain called Red Fox.

India's own Sarovar Hotels is also said to be developing a budget brand in the form of Hometel, which already operates one property in the software hub of Bangalore, and which now has several others under development.

International companies too are keeping a watchful eye on the development of India's so-called ‘smart basic' hotel segment, with Accor exporting its Formule 1 chain, and the UK's Whitbread aiming to introduce its Premier Inn brand.

With just 130,000 rooms – less than the total number in New York City alone – at its disposal, India's hotel industry is still in its infancy. High land prices and tight building restrictions remain the biggest problems.

In fact, such is the shortage of affordable hotel accommodation that software firms Infosys and Wipro have now set up their own  corporate guesthouses for internal use, making them among the largest providers of no-frills hotel rooms in the country.

Data sourced from Financial Times; additional content by WARC staff