Hotel firms mull ‘conversion-friendly’ brands for growth
Homegrown and international hotel chains are now looking at ‘conversion-friendly brands’ as opposed pure conversion that involves taking over a standalone or a bouquet of branded hotels and renaming them with one of their existing brands, which is time-consuming and may involve a lot of capital investment
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Lemon Tree Hotels share price soars 30% against issue price, despite being tagged as 'avoid'For India’s hospitality industry that is rife with deals and in the early stages of revival, being more fluid and versatile with the hotels is the latest strategy to be more efficient. Homegrown and international hotel chains are now looking at ‘conversion-friendly brands’ as opposed pure conversion that involves taking over a standalone or a bouquet of branded hotels and renaming them with one of their existing brands, which is time-consuming and may involve a lot of capital investment. British multinational hotels company InterContinental Hotels Group PLC (IHG) is working on such a brand to speed up its portfolio in India and globally. Indian firm Lemon Tree Hotels, which recently had a bumper listing on the stock exchanges, is another player that’s considering a conversion-friendly offering.
Sudeep Jain, vice president - development (South West Asia), InterContinental Hotels Group, said, “We would introduce a conversion-friendly brand very soon. It could be as early as three months if everything goes as per plans. The new offering will have attributes focusing more on hallmarks, service levels and things like that as opposed to room sizes, public space and so on. I think the fact that it’s very conversion-friendly, its launch, unlike other brands, will not be in the West but in the East. So it will be in this part of the world going outwards. This will be one of the few times when we’ll be exporting (a brand) from here versus importing.”
While IHG’s new ‘conversion-friendly brand’ will be a dedicated offering, Lemon Tree Hotels is taking ‘collection of hotels’ approach to addressing this market in India. Patu Keswani, chairman, Lemon Tree Hotels Ltd, explains that there are different ways of looking at conversion. “For instance, I want to take over other hotels and brand them. Since these hotels are dissimilar in product, I have some level of product dissonance. So what you do is don’t create a brand but a collection. Take, for example, XYZ, a collection of mid-market hotels. Then your customer would know that although there is some level of standardisation, mostly in experience, service, touch-points, etc, the product is not similar. It’s very easy to do. In our case, we now have 42 hotels operational or signed in our managed-portfolio but these are similar enough to be branded Lemon Tree or Red Fox. In continuation of the earlier example, we could also create a new set, XYZ - a collection of hotels managed by Lemon Tree. So if my brand has 100 attributes, this collection of hotels will have 60 of them standardised. So it becomes similar to a regular Lemon Tree hotel,” he said.
Hotel companies’ earlier approach of re-branding the hotels they take over is not only time consuming but also involves additional investments by the asset owner as the existing hotel has to undergo renovation to be able to fit into the new brand standards.
For example, in November last year, IHG partnered SAMHI to convert the latter’s Formule 1 hotels portfolio. Approximately 2,000 rooms, operating and under construction, within SAMHI’s India hotel portfolio will be rebranded as Holiday Inn Express hotels.
All the operational hotels have been closed and are being repurposed, refurbished and upgraded to ensure the portfolio fully represents the Holiday Inn Express brand globally.
“It is one of the biggest, if not the biggest, conversions in the country in the recent times. Fourteen hotels, including 10 operational hotels across key Indian cities are part of this deal. By the end of this year, eight or nine hotels will be ready to re-open under the Holiday Inn Express brand,” said Vivek Bhalla, regional vice president South West Asia, IHG.
Both Jain and Bhalla spoke to DNA Money on the sidelines of the recently-concluded Hotel Investment Conference South Asia (HICSA) 2018 in Mumbai.
(By Ashish K Tiwari, DNA Money)
