Comments on: So Who’s Down To Start A Chain Of Budget Hotels In India?

By: Chris Phippen

Chris Phippen — Fri, 19 Mar 2010 23:35:39 +0000

This is very true about tourism lacking in India due to outrageous pricing. India has a good transportation system with all the readily available bus and taxi services, so creating a decently priced hotel system would have an overall effect of greatly boosting the tourism market. My best guess for why India does not already have Holiday Inn type hotels is because of the difference in quality and standards between American people and Indian people. Although some Americans will sleep in their cars if they have to, most would prefer a nice queen bed with a mini-fridge and possibly a continental breakfast served until the late afternoon. Even though it would cost a pretty penny for India to invest in a chain of Holiday Inns or Best Westerns, in the long-run the income from tourism will greatly surpass it.

By: Jeff

Jeff — Fri, 19 Mar 2010 18:41:13 +0000

I agree with William Ary. There hasn’t been a market for Hotels because in general, Indians didn’t need them. With the condition of their roads being what they are, and low incomes, they haven’t had a “car culture” like we have in the United States. They don’t, as a rule, cart their whole family back and forth across the country to visit Wally World. Many stories I read talk about people not really leaving their village their whole life. India hasn’t been up to this point very mobile. There are signs that this is changing. Domestic tourism is rising as middle class incomes rise and there is an awareness that there is a severe shortage of hotel rooms.
Because of this awareness of need, and because available land is scarce, people that can sell land are doing so at a high price…lowering the attractiveness to developers, or forcing them to build high-end hotels that aren’t really the type generally needed.

http://hotel-online.com/News/PR2004_4th/Nov04_HVSIndia.html

Looking at Google Earth or satellite view of India, it’s also curious to see how the whole country is cut up into a patchwork quilt small parcels.

By: Vitus Holzner

Vitus Holzner — Fri, 19 Mar 2010 06:06:51 +0000

Very interesting post James! Not too long ago my dad toured India for two months or so. When he showed us the (millions of) pictures he took over there, I noticed that he always stayed in pretty shabby hotels. Knowing my dad to be very low key I was not expecting him to stay in a Ritz-Carlton but what I saw was really substandard.
So I asked him why he chose these hotels and he told me that European/US style hotel rooms are at least as expensive as somewhere in Munich and he had not anticipated this in his travel budget.
I had no idea that a shortage of land is the reason for this situation. It is really surprising to me that a country like India that is all about economic growth stifles its development by basically restricting the development of an essential business resource.

By: Michael Minasian

Michael Minasian — Wed, 10 Mar 2010 18:54:56 +0000

It seems to me that this for the most part is all a problem of space. In the urban areas, both China and India tend to be very tightly packed.

When the government is putting up roadblocks it will always stifle small business. The government is democratically elected, and there are enough political parties, that it is up to the citizens to decide if they want a change.

By: Danielle Steussy

Danielle Steussy — Sun, 07 Mar 2010 20:17:18 +0000

I definitely see an opportunity for any entrepreneur in this case. As many have already said, India is becoming more of a tourist and business destination and as demand continues to rise for new hotels, there is no better time than the present to capitalize on foreigner’s needs for hotel rooms. There might not be many rooms available currently because there may not have been the increased need until now.

Taking a slightly different perspective, I can see why the rooms haven’t been in demand until now. Domestically, it doesn’t sound like many people have the resources or ability to travel and vacation around their own country, a luxury that we have in the United States. Until people have that luxury, it will be hard difficult to rationalize building more hotels.

By: John Barry

John Barry — Wed, 24 Feb 2010 03:56:24 +0000

I’m down to start a chain! This is clearly the perfect time to do it assuming the figures from last year still hold. Growth in China is not expected to rival that in other BRIC nations, namely Brazil and India, as China has already had a huge run up in recent years. This leaves the doors open for people looking to get in cheap before the prosperity torch is officially passed from the Republic of China to India. As India continues its ascent as a recognized business center, the demand for hotel rooms where business travelers, and eventually vacationers can stay will surely increase tremendously. While close family ties keep the Indian need for hotel rooms low, foreigners will surely make up the difference.

By: William Ary

William Ary — Mon, 22 Feb 2010 03:59:56 +0000

There are no hotel room because there are no people who need them. Unfortunately, the vast majority of Indians cannot afford hotels at any price, and with the advent of the Internet there are relatively few reasons for business travelers to come to India, barring a few high powered executives. We are the exception rather than the norm: a group of middle class people who will be staying in many cities and demand a certain level of service. As more people find reasons to go to India, I’m sure we will see the trends shift and there will soon be demand sufficient to justify the larger number of hotels we’d expect.

By: Phil Hamer

Phil Hamer — Thu, 11 Feb 2010 07:15:46 +0000

The facts in James’ post were really surprising to me. With all the tourism and sites in India and with the economic growth and need for business travel, I would have expected hotels to be dotting the land, and I would also have expected cheap prices.

Today’s WSJ actually had an article about the opportunities being utilized by the big name hotel chains in China and India. Here is the article. It didn’t mention anything about the complexities in starting a hotel in India, but I do not doubt they exist. I’m sure the bureaucracy of land ownership will slacken as many other strict government regulations ihave in India over the last 10 years.

It does sound like a great opportunity. Where can I find a couple million in capital?

By: Erika Bylund

Erika Bylund — Wed, 06 Jan 2010 03:44:42 +0000

I (and I’m sure many others) take it for granted that the seleciton in accomodations to which we are accustomed here in the U.S. and in other developed countries is the standard. I would never guess that India of all placeswould have such severe shortages of something as basic as hotel rooms, especially considering that the country is quickly becoming a hot spot for international travel and business.

But this issue isn’t isolated to India or China. During my travels in Suriname, a minimum price for a half-decent hotel room would run a tourist no less than $300 per night. The next category up (resort quality) ran 1500 euro per night! I spoke with a some of the guys I worked with about the paltry selection and exorbitant rates, and they told me that the primary barrier to hotel development (and building in general) is the country’s difficulty in obtaining raw materials like rebar, concrete, lumber, hardware, and paint. Other issues, also inhibit real estate transactions. In Suriname, one cannot “buy” a piece of land; one can only lease it from the government for a period of 70 to 100 years.

Another example is Indonesia. On some Indonesian islands, it’s next to impossible for locals to purchase land (and therefore build) because the country lacks a uniform agency to record property deeds, titles, and property boundaries. Furthermore it is very difficult to enforce property rights there.

I never realized how much I took for granted the opportunity to own property here in the U.S. It’s no wonder that our forefathers took such great pains to protect property rights. Who knew that so many other issues could affect something as simple as a hotel room!

By: Emily Schaapveld

Emily Schaapveld — Mon, 28 Dec 2009 15:33:33 +0000

I agree with Alex. Sounds like the goverment and land owners do not want to sell of their land, especially if it is unoccupied. Whether its the Hilton empire or a group of Cal Poly MBA’s, there may be an opportunity to lease land for an amount the will cover the new property take and provide a profit for the land owner. Unfortunately I do not think that the GSBA budget can afford the investment, but it may not be a far cry for big US corporate hotel companies. Once the big guys from the US come start investing, maybe the Indian government will realize the benefit of expanding the hotel market and revise the decades-old property laws that are currently inhibitiing growth of the industry.