In its 100th year, Hilton Hotels & Resorts is turning its attention to India to tap the potential of the market
Alan Watts, president, Hilton APAC and Navjit Ahluwalia, country head, Hilton India, tell Hotelier India what it takes to expand your footprint
The group is looking to grow at a breakneck speed in India, and the APAC region, on the back of growing travel for business and leisure. A hospitality group that pioneered several hospitality concepts, is ranked #1 on 100 Best Companies to Work In by Fourtune magazine, and is considered the most valuable brand in the world, has yet to make huge inroads in India. Although they may have missed the last cycle, they are looking at ramping up their presence with an aggressive new strategy and a new team which is geared to achieve the expansion ambitions. Alan Watts, president, Hilton APAC and Navjit Ahluwalia, country head, Hilton India, tell Hotelier India what it takes to expand your footprint.
ALAN WATTS, PRESIDENT, HILTON APAC
What has Hilton’s journey been like in the APAC markets as well as in India?
It’s our 100th anniversary; we have just opened our 300th hotel in Asia Pacific and 200th property in China. If you consider the fact that Hilton International took back Hilton Worldwide less than a decade ago, it has been a phenomenal growth story. Here in India, it’s been more of a challenging journey for us. We have been in India for a long time but through a strategic partnership. Since that did not work out, we have missed the last cycle. That's the reason why Hilton has got a relatively smaller footprint in this market. But its RevPars have doubled over the last few years and our market share has increased. We have reinvested in India; we have got a new management team, have had really successful openings and a successful growth strategy under the new leaderships.
In the APAC region, Hilton has seen almost a double digit growth last year. What has led to this growth?
We have grown the market to 28% to be specific in APAC last year, and we have got 30% this year. In the last year, we have seen some record openings; we opened 68 hotels, just shy of a 100 hotels this year. Despite economic challenges, the growth rate and the opening rate in Asia continues to be phenomenal.
The rise of travellers to the Asia Pacific region, the potential offered by emerging economies, pan-Asian travellers fuelling pan-Asia travel has fuelled this growth. If you think of GDP growth rate, we have seen some hard numbers in Thailand, Indonesia, and across India and China. A mass migration of Asian travellers has fuelled the industry, complemented by the strength of emerging markets and economy in business travel. Besides, global travel has got cheaper. We have always had a long-hold on international markets that cycle around this and now short-hold on Asian markets that have generated demand. I think the rise in travel, tourism and airlines is fuelling the boom in the hotel space. Here, in India to a lesser extent than say other regions, but it is certainly starting to heat up now. China is a poster boy fuelling the growth, with the Chinese contributing over 125 million trips. It is this number that has helped occupancy hit a new peak in the APAC market, driven rates, which, in turn, drives owner returns.
What does this sort of growth accrue for the owners?
Good returns motivate owners to invest in hotels, over commercial and residential properties. Most owners with a great piece of land look for great commercial return, so they opt for a shopping mall or build residential projects or even commercial ones. Increasingly, they are building hotels. The good thing about hotels is that they ride the economic crest, particularly in emerging markets where the growth rates are phenomenal. So, you are not locking yourself into long-term leases or apartment prices. Hotels are so dynamic to the ebb and flow of business, that your rates can be 30% higher within a week. As asset class, hotels are phenomenal. Even if they are affected by demand and supply, it is such a short cycle that the hotels can absorb the volatility. It is very different for residential projects when you are a developer. You set the price at the time your apartment complex or condo comes to the market; or in case of retail development, you engage in long term leases only once your shopping mall is ready to open. A hotel’s inventory, on the other hand, is a daily inventory; its available 365 days a year and you can ride the market accordingly.
What are challenges of operating a hotel in APAC?
The biggest challenge comes from a relative small base, though we are the fastest grown hotel company in APAC today. While we will open more hotels than any competitors this year, for Hilton, talent attraction, talent retention and succession planning is absolutely critical. The largest challenge for me is not in signing deals, it is not in building and constructing hotels; it is in ensuring that I bring in people through the Hilton system fast enough to ensure the best-in-class returns. The challenge lies in acquiring the right talent and retaining it.
The best-in-class experience, best-in-class owner returns and best-in-class employee experience is what makes our business go around. You need to ensure that you are building infrastructure and career pathways ahead of your own growth. Given the relatively small footprint in India, Navjit (Ahuluwalia)’s focussed on how he facilitates doubling the size of the stake. Through strategic deals and rebranding opportunities, we have gone from 19 hotels to another 20 hotels, a number that’s doubled within three years. The idea is to create more opportunity for your people and a strong culture. If you want your people to recognise you as a great employer, you got to make sure that you create growth opportunities. The biggest challenge for us is to make sure we have skilled people for the great hotels that we are opening, so that we can continue to pioneer new markets and position ourselves within new markets. We are opening Waldorf Astoria in Maldives, a new market for us — the brand is entering a mature resort market. We are looking to match people with the product so that we gain a fair marketshare in the quickest time possible time.
The perception is a career in the hospitality industry involves long working hours and no work-life balance. How do you counter this kind of perception?
I think that’s an entrepreneurial industry challenge. It is a challenge not just in India, but globally. Hospitality is a highly competitive industry with a low percentage chance that you will get to the top. Having said that, I must also mention that hospitality, as a global employer, currently accounts for 15% of global GDP. It is still one of the industries, if not the only one, where you can start by washing pots or doing dishes, and work through the ranks to become the general manager. It is also the only industry, outside the military service, which you can join with limited education and through sheer hard work and dedication, scale up through the ranks. It also offers opportunities to work in any of the four corners of the world. It has such an important story to tell and the industry doesn’t tell it well enough. In India, we are interfacing with universities and schools. We have got programs that provide a bridge for the young into hospitality. However, it could do a better job at attracting talented people. We can do a better job at lobbying with the government on better tourism policies and make sure that hospitality stays top-of-the-mind of both the government’s GDP aspirations
as well as societal aspirations.
L to R: Alan Watts, president, Hilton APAC and Navjit Ahluwalia, country head, Hilton India
To me, hospitality is more than just an industry; it is more of calling. The reason why people join Hilton is in the hope of career progression, and the large reason why they stay is the founder’s mentality. Conrad Hilton believes that he can serve world peace to some extent. His great phrase is, ‘I believe in peace through travel.’ Most of the world’s problem are due to miscommunication; only if people interacted more and have conversations over a cup of coffee, the world would be a better place.
Which is your favourite Hilton brand?
I would say for city-based hotels, I like Conrad, because it is a business brand for business travellers. It is built on the foundations of luxury as well as efficiency. And mostly, when I am travelling I am busy. When I am with family, I like Hilton Resorts; I like the environment and the fact that they do the kids club exceptionally well.
What are the factors or offerings that set a Hilton property in India apart from that in other parts of Asia?
I think what Hilton group stands for are truly world-defined brands; one hotel group in the brand tree doesn’t compete with another. So, from Waldorf Astoria to Conrad and Hilton, to Doubletree, Hilton Garden and Hampton, our brands are clearly well-defined. In India, the difference lies in the F&B adaption and some design elements. But ultimately, we have ensured that there is a right hotel in the right location, structured at the right point — all the way from luxury to focussed services. This is exciting time for India; for a while, the industry got over-supplied very quickly and went through the long down cycle. Now, with three years of double digit RevPar growth, I feel that we are poised to capitalise on the next upcycle on the market.
What has been your experience with Indian developers?
All the developers/owners of Hilton group’s hotels are based in the country. They have a high risk price profile, are very close to their assets and can be very actively involved. There‘s nothing particularly wrong with that. In fact, developers need to be closely involved with their assets.
How would you define the ‘Hilton Effect’ in terms of impact left on communities and guests in Asia?
I think the Hilton Effect come to life when we are opening a hotel in a new location where we have never been before. A hotel can be like a local school; it can teach everything — from hygiene to human interactions to language skills to culture appreciation. It can be a major employer in a community. Increasingly, our hotels find themselves working as sanctuaries in the times of crisis. You have seen that in Sri-Lanka, with the terrible bombings. With our focus on warmth of hospitality, we end up being the cornerstone or central piece of a community in the location we are in. Another way to look at Hilton Effect is our pioneering spirit. If you look at Hilton’s history, we were the first company to put TV in guestrooms, the first company to put an AC in rooms, put a mini bar. With digital castings, digital key, and honours programme, the Hilton Effect has really been important to bring innovation to the space.
What sort of effect does infrastructure development have on the hospitality industry, particularly in India?
Think of all those super highways in the US and the impact that infrastructure has had on GDP growth and consumer spending. India has always been on the verge of real accommodation supply explosion. It’s such a fantastic market. It is a matter of time before it becomes the third largest accommodation market in the world. The government needs to spend on infrastructure, and it seems to be doing so. We can certainly see that in Delhi and also in Goa, where there is such phenomenal infrastructure expansion. This is what makes the industry positive. It is worth mentioning that not only is Hilton bullish about the industry, you are also starting to see some really great quality institutional investors such as Brookfield, Blackstone and Goldman coming to this market and teaming up with some great local partners, such as Raheja and SAMHI. We have not seen this kind of sophisticated investors in the last few decades, since the last oversupply. If you look at the macro opportunities in India, it is phenomenal. The solid returns for institutional investors
from hotels, the double digit RevPar growth and infrastructure expansion offers the Indian industry lot to be excited about.
NAVJIT AHLUWALIA, COUNTRY HEAD, HILTON INDIA
What has Hilton’s growth pattern been like in India? What have been the really profitable markets and which are the markets of the future?
Last year we opened two important hotels in India — Double Tree hotels in Ahmedabad and Goa. Before that, just towards the end of the year, we opened Conrad Bengaluru, which is India’s second Conrad. I think we still need to fill few gaps in Delhi and Mumbai. We are looking forward to a big-box Hilton. And apart from that, we are looking to expand our entire portfolio of brands across different markets — whether it is in the leisure market or in state capitals, there are lot of opportunities for us to expand. We are very keen on bringing Waldorf to leisure locations such as Jaipur, Udaipur, and certainly Mumbai, Delhi and Bengaluru. India is growing in Tier-II and Tier-III cities and obviously, in a lot of resort and leisure locations. And those are definitely opportunities for us and we have many brands that will fit those markets.
What has your learning experience been like?
I think it’s been a journey; it’s exciting because you are climbing a mountain and there is a long way to go. There are lot of things to do and it is exciting; it is something that keeps you awake at night and keeps you on your toes. Sometimes you think it should be faster and you are impatient to get there. But it is important that we do the right things even though they may take time. It is important to build good quality assets at the right location and then create a cycle of constant growth. I think we are laying the foundation of something that will last for the next 30, 40 or 50 years as India continues to grow. And like I always say, we are here for the long term and Hilton is definitely going to be # 1 or #2 player in India.
What have been the challenges thrown up by the Indian market?
I think India is a challenging market for several reasons. One, the cost of building something has always been higher because we have high land cost. So making sure that owners get good returns, that is commensurate with their investment, has always been a challenge. You need to ramp up quickly and to stabilise the hotels as fast as possible. In some markets, the supply is slowly getting exhausted. But that truly remains to our advantage — we are delivering higher than market GOP margins and offering best-in-class returns.
What are you doing differently?
We have great distribution systems around the world that drive demand for our hotels. Given the fact that we are disproportionately under-represented in India, the hotels get disproportionate share of our distribution pipeline. So they get a much higher share from Hilton Honours and that’s an advantage.
Since F&B is a differentiator in India, what is the revenue you earn from it?
I think it is easy to say that our revenue is split around 40% F&B and 60% gross. is a very big F&B market and until we get a bigger box hotel, with large convention space, F&B revenues will continue to remain in that kind of percentage.
Do government policies in India aid or hamper the growth of the hospitality industry?
Travel and tourism are such big industries and large employment generators that a lot needs to be done. I think we need to address it holistically — from the taxation perspective, infrastructure status that will allow more hotels to come up, and come up much faster, and also make it affordable for more people to travel. I think giving infrastructure status to the industry would certainly help because we are so undersupplied in India. It would make financing much easier if the sector is not treated like a luxury service or product that needs to be highly taxed.
What has your experience been like with developers?
Developers in India are not very different from those in any other market. They are focussed on making sure that when they invest money, they are choosing the right partner who is going to ensure that their asset delivers right returns, a partner they can trust. So their reputation, credibility and performance in the industry is very important.