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Executives weigh importance of brands in India
January 22 2013

Brands are playing an increasingly important role in India’s crowded hotel landscape, executives said during a panel discussion at the Hotel Investment Forum India.

Highlights
  • Branding brings with it a certain level of credibility in India’s emerging hotel sector, executives said.
  • Brand standards are important to promote consistency, although flexibility should be exercised to accommodate regional variations.
  • Choose a brand carefully, because hotel management agreements are incredibly difficult to break, said Canyon Equity’s Homi Vazifdar.

GURGAON, Haryana—Brands are more important than ever as travelers seek clarity in India’s increasingly crowded hotel sector, according to a panel of executives during a breakout session at the 2013 Hotel Investment Forum India.

“Branding creates some kind of identity and distinguishes the product,” said Christopher Wong, VP of development for Four Seasons Hotels & Resorts.

Gopal Rao, regional GM of Southwest Asia for InterContinental Hotels Group, agreed. “It’s incredibly relevant in today’s time,” he said.

Nowhere is that truer than in India, where the proliferation of brands has accelerated dramatically in the country’s nascent hotel industry. Here, it’s not just a matter of identity but also one of credibility, said Homi Vazifdar, managing director of Canyon Equity LLC, which owns six luxury properties worldwide and is exploring opportunities in India.

“To call something a brand, you have to be able to define it and measure it in same way, shape or form. You have to be able to drive some consistency,” said Andrew Clough, senior VP of development for the Middle East and Asia/Pacific for Hilton Worldwide.

And likewise, the brand companies themselves have to be able to control it, he said.

Both credibility and control are rooted in brand standards, which promise travelers a consistent quality from one property to the next, the panelists agreed.

An inbound, global traveler should have confidence a hotel in Delhi will offer a similar—but not identical—experience to one of the same brand outside of the country, Rao said. While the brand DNA will always be the same, standards should be flexible enough to allow for variations based on local customs and cultures, he added.

“Cultural adaption is completely different than standards adaptation,” Vazifdar added.

Fast-food franchisor McDonald’s always offers the same core menu in addition to regional specialties, Rao offered as an example.

Hotel franchisees in India must adapt accordingly, offering more food-and-beverage outlets that specialize in traditional Indian cuisine, he said. But the core elements of the brand must always remain the same.

The global brand executives admitted they’re still refining those cultural variations as they establish their footing in India.

Rao offered that same explanation when asked if IHG might offer an India-specific brand as it did for China with Hualuxe Hotels and Resorts.

“We want to make sure we’re focused on establishing ourselves as a credible international brand that can not only delight customers but also operate good hotels and make money for owners,” he said. “We want to make sure we learn how to walk before we start running.”

Clough said Hilton is doing the same before investigating an India-specific brand.

Brands and the bottom line
Franchisors such as Canyon don’t care about the brand as much as they care about the bottom line.

“We live and die by (earnings before interest, taxes, depreciation and amortization),” Vazifdar said.

Certain brands do a better job of driving revenue to the bottom line than others, he added.

“We look at their brand standards and the manuals … you’ve got to have a manual to guide you by,” he said. “… If the brands bring it to the bottom line, then the management company is happy, the owner is happy, and we never bitch and moan about who is doing what to whom. It’s only when things go (bust) … that all that goes out the window.”

Rao advised attendees to carefully evaluate a brand’s offerings before signing a contract. The mindset of brand and owner needs to be aligned, he said.

“Entering into a brand agreement is no different than getting married. You have to go into it for the right reasons,” he said.

“It’s incredibly important you get it right,” Clough said, adding Hilton has had tremendous success satisfying its franchisees; 70% of the company’s 4,000 franchisees come from repeat customers.

But Vazifdar warned of rigid hotel management agreements that handcuff owners from taking action if the relationship turns sour.

“We as owners get real frustrated, we get pissed off at the brand and ultimately when all hell breaks loose we say, ‘Screw this. We’re prepared to fight this battle in court. Get the hell off our property.’ Saying it is one thing, but legally to get a brand off a property is excruciatingly difficult, especially in the ultra luxury situation,” he said.

“The management company will never come to the owner and say, ‘If you don’t like us, throw us out.’”

 

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