PiPeline : China and india
The global brands continue to be inundated with deal offers from China and India , but these days they face increasing competition from domestic players .
Local developers are becoming more confident about their ability to manage hotels under their own brands after working with and learning from the global brands . In China , the local players were working predominantly in the budget segment but today are increasingly more upmarket , while India has seen the same trend take place in the reverse order . “ It is interesting to see the exchange of learning between homegrown brands and their international counterparts ,” says Manav Thadani , chairman , HVS Asia Pacific , Gurgaon .
This is occurring as demand in China is shifting away from luxury — partly because of oversupply as well as the government ’ s recent restrictions on officials spending money at 5-star properties , which has some operating hotels now trying to eschew this rating . At the end of the day , this is shifting China ’ s pipeline away from luxury into other segments . “ Hotel investment in China will become more focused on the domestic middle class ,” says Mandy Lee , general manager of Skyline International Construction and Consulting Co . and business development director of Skyline Design Group , Beijing .
Generally speaking , China ’ s pipeline is proving the most resilient of the pair , buoyed by higher GDP growth at 7.7 % for on
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hotel developers in China and india are inCreasingly operating under their own brands .
by NaTHaN GrEENHaLGH , aSSOciaTE EdiTOr the final three months of 2013 compared to India ’ s 4.9 %, and financing for deals being more readily accessible in China than in India . However , both countries ’ pipelines remain robust ; despite slowing economic growth compared to past years , China and India still have the largest hotel pipelines in Asia Pacific .
Meanwhile , India ’ s hotel pipeline has decreased its size as it has seen available financing for hotel deals tighten as banks have been shying away from lending to the sector after being burned on overleveraged projects in recent years . Although it has recently shown signs of increased stability , the depreciation of India ’ s currency has also restricted liquidity , as up to a third of development costs are often dependent on the U . S . dollar-to-rupee conversion rates . This has pushed Indian hotel developers to seek new sources of capital and will likely lead to the formation of more real estate investment trusts . “ External commercial borrowing and funds raised through mezzanine investments are becoming progressively more popular ,” Thadani says .
India ’ s slowing economy has hurt demand in its primary markets , although demand in leisure markets has increased . Analysts predict the country ’ s overall hotel performance will rebound over the next 12 to 18 months as recently opened supply is absorbed and a reduced amount of new supply enters operation compared to the past five years .
www . hotelsmag . com April 2014 HOTELS 41