Indian hotel owners eye better exposure in global markets to tide over domestic pandemic situation

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Ashish Kulshrestha | The Clear Picture

Bengaluru, May 5, 2021: The Indian hospitality sector is eyeing global markets through strategic expansion or partnership to take advantage of the improving economic situation worldwide and to tide over the subdued domestic economy due to the pandemic. Companies like Tata group owned Indian Hotels Company Limited, Oberoi Hotels and Oyo are among the companies looking at global expansion even as they continue to scout new opportunities domestically.

While technology-led hotel group, OYO, launched an innovative new business development model to help scale the UK business by partnering with hospitality professionals and entrepreneurs, Oberoi Hotels and Resorts have entered into a long-term strategic alliance with the London Stock Exchange-listed hospitality firm Mandarin Oriental Hotel Group to collaborate across a range of initiatives to enhance global reach of both the companies.

According to ICICI Securities, FY22 is expected to be the year of major recovery in the international market followed by strong domestic recovery from FY23E with the beginning of the vaccination drive. Oberoi Hotels feels the occupancy has not been hit as strong as airline bookings, suggesting substitution of air travel for other methods of transportation.

While the international business currently accounts for a relatively smaller portion of these companies’ overall business, an improvement in global operations through strategic alliances provides a cushion in an otherwise gloomy domestic business.

“After India, the US and UK are Oberoi’s largest source markets followed by major Western European economies. The alliance offers a reach to a larger network of clients in these markets through MO’s well established network. MO also has a very strong presence in China and East Asia which is expected to increase contribution from these growth markets,” said EIH Hotels, which operates the Oberoi group of hotels, in its investor presentation for Q3 FY21.

Indian Hotels Company Limited (IHCL), the hospitality arm of the Tata Group has IHCL has 165 hotels operational with 19,425 rooms as of 31st Mar 2021, according to its Q4FY21 investor presentation. Of this, approximately 93 hotels across 55 locations in India, and 16 international hotels spread across Maldives, Malaysia, Australia, UK, USA, Bhutan, Sri Lanka, Africa and the Middle East (IBEF).

According to the 5-year plan unveiled in 2018, Puneet Chhatwal, Managing Director, IHCL said that the company has set a target to increase its room inventory by 50% to over 23,000 rooms in all categories and enhance its geographical footprint in India and abroad.

India has been facing the worst onslaught of the pandemic with the second wave of coronavirus affecting over 3.8 lakh people everyday. The surge in cases coupled with the delay in inoculation is likely to derail the recovery process. However, this has become a boon for the hospitality majors who are looking to cash in on the opportunity to build, buy more properties in their home market at relatively cheaper costs, courtesy the pandemic.