Hotel chains go for management deals

Due to high cost of funds and project delays, hotel chains of both global and Indian are increasingly opting for management contracts rather than to invest in properties in the country. While global chains, such as the UK's InterContinental, Accor of France and Dubai-based Rotana Hotels, will open most of their new properties under management contracts, Indian chains such as The Leela Group and Lemon Tree Hotels, too, are now adopting an asset light-asset right model.

An asset-light strategy helps faster expansion and higher efficiency. Also, it is a win-win for reputed international hotel chains. In a management contract, the owner of the property benefits from the global sales and marketing capabilities of the international brand, while the brand gets access to one of the biggest emerging markets in the world with minimal capital investment, said Siddharth Thaker, Managing Partner at hotel and tourism consultancy Prognosis Global Consulting.

Dubai-based Rotana Hotels is negotiating for multiple management contracts as it looks to check into India. India is a very important market for Rotana and it is in talks with multiple builders to manage hotel properties but the biggest challenge is valuation, Aman Aditya Sachdev, senior vice president at Rotana, said. The chain plans to operate 20 hotels from no-frills to 5-star across four brands in metros and tourist-centric cities, such as Jaipur, Surat, Udaipur, Kochi and Goa, in ten years.