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Indian hotels seek brand partners

News, 08 June 2016

CALICUT: Growing competition in India's hospitality category has led to the emergence of tie-ups between family-run hotels and larger, branded operators, as the former seek to boost occupancy rates and the latter to extend their geographical reach.

For example, Keys Hotels, part of New York-based Berggruen Holdings, currently offers three sub-brands aimed at different types of traveller, from economy to business and has a growth strategy that includes management contracts and franchising.

"It gets tough to increase occupancy unless your product is differentiated and you follow best practices that are at par with international standards," observed Anshu Sarin, chief executive officer of Keys Hotel.

"Once you have a brand, you can attract better talents and ensure improved standards to drive guest loyalty," she told the Business Standard.

That is the route being taken by one Calicut hotel owned by the Malabar Group jewellery business which is hoping that its association with Keys Hotels will enable it to double its occupancy rates.

"We have seen an average occupancy of 40-45% in the hotel for most of the years," reported Iqbal M, a director with Malabar Group who has looked after the hotel for some years now.

"With Keys on board, we hope to reach an occupancy level of 80% in the near future," he explained. "The quality of service will go up and so will our returns," he added.

Last month, Indian Hotels Co Ltd, which runs the Taj Group of hotels, indicated it would also be exploring expansion via management contracts. "We are planning to move forward by being asset light and very opportunistic while increasing our footprint," said chief executive Rakesh Sarna.

An additional incentive for independents to team up with such large branded operators is the cost-savings that can be achieved in the booking process.

Indian Hotels, for example, is stepping up its investment in its own digital platforms in order to drive direct bookings and avoid the steep commissions – as high as 35% – charged by online travel agents.

"I would not be surprised if, in the next five years, half of our business is booked online," Sharma observed.

Data sourced from Business Standard, Mint; additional content by Warc staff