How can the Indian hospitality industry transform into a Goliath?
Neeraj Govil, Area Vice President–South Asia, Marriott International, in a conversation with Deepali Nandwani talks about the bottlenecks facing the hospitality industry, the perception that India faces as a luxury leisure market, the might of the domestic traveller who is driving the industry, and the possible solutions to achieve exponential growth and help India attract well-paying, discerning global travellers.
The Marriott group has done well in the past two to three years and has a larger portfolio of hotels. What is Marriott’s game plan for India?
We entered India in 1999 with the Goa Marriott property. We have essentially grown through management contracts and stayed away from franchising initially. We are doing both now. Essentially, when you come to a market like India as an international player, you want to make sure that the elements needed to deliver a franchise experience are in place. If you go and put your name on a franchise agreement and if the operator is not able to deliver the experience, you will do irreparable damage to your brand. We were cognizant of that fact which is why we chose to grow fairly slow.
I think the expansion has happened over the last two years…
Yes, we have grown organically, we have positioned a number of our brands in Tier-1 markets—Mumbai, Bangalore, Hyderabad, Pune. We went to about 35 hotels and after the acquisition of Starwoods last year, we overnight doubled our portfolio in India. It brought in seven new brands into our portfolio and a big piece of the franchise business. We are continuing to see a growth across all our brands in India.
We are now seeing growth in the resort segment; we are witnessing growth in Tier-2 and Tier-3 markets, and we are also seeing growth everywhere there is infrastructure development. For example, Aerocity in Delhi has developed into a significant business hub. We now operate two hotels here. And as our larger cities are developing, we have begun seeing the emergence of micro-markets within the cities. The infrastructure is stressed, the travel time from one area to another is too much, and people tend to hang out in one part of the city.
Bangalore, for instance, has various micro-markets, which is allowing us to expand different brands across the city. Today we have about 118 operational hotels in India. For us, it is not just about the number of hotels; it is about the number of keys; it is about ensuring the best F&B experiences, and it is about ascertaining that we are available to Indians as a big outbound market, which is a very large segment. If you are a loyalty member here in India, chances are you are going to stay with the Marriott when you travel outside India because of the benefits offered to you and the experiences we create.
What is the resort market in India like?
It is fabulous; the domestic consumer is spending money. Gone are the days when you had to target foreigners for your resort properties. Look at Goa. Today, it has gone from being a seasonal market to a 365-days market. And our hotels, be it W Goa or Le Méridien or the Goa Marriott, are all frequented by affluent consumers. At JW Marriott Mussoorie, the mix is almost always Indian. Having a resort destination a couple of hours outside large metros works rather well. The infrastructure has improved, airports are getting better, and regional connectivity is far better.
The government is connecting smaller cities across India by air travel. Does that help in popularising resort destinations?
Definitely. I will give you the example of Jaisalmer. We opened a Marriott hotel there and today, the government has announced that there are flights from Delhi to Jaisalmer. This allows a whole number of people to get out to the location fairly effortlessly.
Have government policies helped bolster the hospitality sector or have they hampered it? What intiatives would you like from the government to ensure that the the industry thrives?
We have spoken about the infrastructure, which is slowly improving. The big one now is GST. We need to look at bringing it down. We probably need to rethink how GST is being levied for the hospitality sector. While it is great for the country, we have to rationalise the taxation. Today it stands at 18% and 28%; it needs to be brought down to a more rational level and be easy to execute. We are approaching this issue through many government bodies and hopefully, we will have a resolution soon.
We also need to ensure ease of doing business for the industry. There are a number of areas where single-policy clearance windows would help, such as procurements of licenses. We want it to be easier to construct hotels.
While infrastructure has been improving, has it reached a level of optimization where you see the industry benefitting to the maximum?
Absolutely not and I think the government has acknowledged that. There are still airports being made, rail travel is being improved, there are metros being built in a number of our cities, and roads are being constructed. All this takes time. The issue here is about creating demand generators in the country. India needs to have world-class convention centres; they will drive demand in the future. While there are a couple of these planned already, we need to increase the pace and commission a few more. I know there are plans to build one in Dwarka and another one in Aerocity. Large convention centres will fuel MICE in the country and will bring in tourism as well.
On agenda should also be construction of world-class tourism facilities. I think we have some phenomenal destinations that people should visit. The process of getting there has to be improved.
Even though India is acknowledged globally as a vibrant economy, there is a view that the government needs to work towards creating better perception about the country in the global market. Do you agree with that, particularly in the view that there has been little growth in global leisure travellers to India?
I agree that there are perceptions regarding safety and health. There are perceptions regarding lack of facilities when you are travelling within India. And these are not necessarily perceptions; in many cases, these are realities that have to be dealt with.
I think we need to be more friendly towards high-end tourists. We have phenomenal tourist sites that people can go to. In most of our states, we can curate great experiences, but we haven’t done enough to leverage what we have. There are a number of conversations around this aspect.
When you say India needs to be more friendly towards luxury traveller, what exactly are you referring to?
We need to make it easier for people to get into India. Sometimes, if you look at our airports and the amount of time it takes to get out of the airport, there are bottlenecks everywhere. Our airports are stressed. When you are trying to attract a very high-end tourist, you have to ensure the right arrival experience. Safety and health are serious issues that need to be handled. You need to tie in an authentic itinerary for them. You cannot just bubble-wrap them and take them around and show them some stuff.
Luxury travellers today do not really want to be bubble-wrapped. They want to be able to experience the country. It is about creating a compelling experience for which people are paying. The price of luxury is determined by how unique that experience is. We have to move beyond the old-fashioned way we approached luxury.
You are dealing with a whole new generation of travellers whose needs are different from the earlier generation. The market seems very fragmented. Given these trends and the challenges that India itself throws up, do you think that the hospitality industry is geared up to deal with these challenges?
We have incredible talent in the country and the hospitality industry is very resilient. I think the good times are just beginning for us. The co-relation between demand and supply is getting to that point and it will help us drive the rates up. Whichever matrix you look at, India is developing faster than most other countries.
A lot of conversation in the Indian hospitality industry revolves around ADRs. Eventually, we will get to the right ADRs. We are on the cusp of resolving that. I don’t think we are going to be discussing ADRs over the next five years.
There is no doubt that the Indian hospitality industry is among the best in the world. And we have great quality products in terms of our hotels. If you compare hotels of a certain category here in India with those in other countries, we all know that Indian hoteliers do a phenomenal job. I think that augurs well for the industry. I think tech-wise too, the way people book here, the way people are travelling, is up to global standards. The domestic consumer is leading the growth.
Is the industry a cohesive force that can identify the challenges and lobby for solutions?
I think the industry has a voice but I don’t think it is unified. It is pretty fragmented. There are different people who, for obvious reasons, have different points of view. And that is natural because tourism, as a segment, is broad enough to accommodate all kinds of voices. It is just about developing a cohesive voice. We are big employment generators in India. I don’t think we get enough credit for the amount of employment that this industry generates. I think a unified body with a five-year plan will help the industry grow futher.
While the Indian hospitality industry has a big pool of manpower to draw from, is it skilled enough at all levels?
We do skill people and that is very critical for a country like India. But yes, getting the right talent is an issue. You ask any of my peers and they will say the same thing. There is a paucity of talent. We have to work towards attracting the best of talent and ensuring we have great employment practices that allow people to grow their careers. Given that we are a people-focused industry, we need to emphasise more on talent generation.
If you were to set an agenda for the government to first, what would the top three points be?
I think I mentioned demand generation. We need to invest in demand generators such as convention centres and resorts. Even in Tier-I cities we don’t have large convention centres for big conferences; they just don’t come to India. A number of years ago we talked about bringing Marriott’s Asia-Pacific general managers meeting to India ,but we didn’t have facilities large enough to host them. We are talking a thousand people here. You could name two or three locations, but they won’t be in Tier-I cities. You could still pull it off, but not in the way that you would do in other destinations geared up to handle groups like these.
India also needs to work on the resort market, on our tourist sites and on improving regional connectivity. I think the government is doing a great job on the regional connectivity aspect. Beyond that, India needs to have a tourism policy that gets all the stakeholders on the same table, if we truly want to see India convince the world that it is a great leisure destination. Today, there are a couple of sites people travel to, but beyond that, there is no mapping out the vast India experience.
A few high-end operators bubble-wrap travellers and take them from one destination to another. But as I said before, people are craving for authentic experiences. But it has got to be safe, it has to be seamless, it has to be hassle free.
The third agenda would be to ease the licensing and taxation systems. The number of licenses we have to acquire can range from 35 to 50, depending on the category of hotel you are looking at.
We also need to exhibit a little bit more patience. We are moving in the right direction and good times are around the corner.
What are your takeaways from 2018 and what will 2019 be like?
The last year was great for us at Marriott; we opened about 100 hotels in India. We are pleasantly surprised by the amount of traffic we see in our resort destinations. Most of our resort hotels are doing extremely well, and that is just a tip of the iceberg. Few cities do exceptionally well, including Tier-I markets which tells us a lot about the resilience of the industry.
When we look back at 2018, the hotel industry in general will tell you that we have had a good year. We have seen some good occupancy numbers translating into profits. 2019 is shaping out to be strong. Everyone talks about the elections, but the Indian economy is far more resilient. Q1 is shaping up to be great and I am pretty bullish. We are going to see the rates come up and the driving force would be the domestic consumer. We are betting heavily on them.
The leisure or luxury segment has always looked at the international traveller getting in the money. Has there been a shift towards domestic travellers in that segment?
There was a time when many of our hotels in Tier-I markets had a very high proportion of foreign guests in the hotel. Today the pendulum has swung completely and most of our hotels in Tier-I markets would have about 75% domestic guests. As the international companies are localising, more and more business travellers are now Indians. We have to gear up to deliver the best of experiences to this customer.