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US hotel chain Best Western scouts for franchise partner to expand in India

The Economic Times:  May, 2015

Mumbai: US hotel chain Best Western is scouting for a new management partner to expand its presence in India, according to three people familiar with the matter, as the company gears up for growth in the country's hospitality sector.

Eight years after signing on a franchise partner in India, which it calls an "important" market, Best Western has fallen behind targets due to what industry experts say are quality considerations and the absence of a strong sales and distribution network.

"Best Western needs more focus on the top management to be able to grow the brand in India. The international partners need to give more commitment and attention that this territory deserves," said one of the people, who earlier worked with the company.

Best Western had inked an agreement with existing master franchise partner Cabana Hotel Management Services in June 2007. At that time, Cabana had planned to invest over $1.2 billion to add more than 100 Best Western hotels and 10,000 rooms in India by 2017 — targets that are likely to be missed. The hotel chain's India president, Sudhir Sinha, quit last year to form his own hospitality venture.

While Cabana acknowledged that growth hasn't taken place as planned, it denied that a change of partner was being contemplated. Best Western International, headquartered in Phoenix, Arizona, was noncommittal.

"We consider India an important market and we will continue our steadfast efforts to meet the hospitality needs of customers in this significant market," David Kong, president and CEO of Best Western International, said in response to ET's e-mail query, without responding to specific queries on scouting for a new partner.

A Cabana (Best Western India) official said the company is currently discussing the terms of an extension of its agreement with Best Western International.

"In terms of the global Best Western development pipeline, India stands at number 4 amongst all Best Western Affiliates internationally," Gaurav Sarin, associate vice president of Best Western India, said in an email response to ET.

While Best Western India's website mentions 25 operational properties with about 1,250 rooms in the country, he said the company runs 29 hotels.

Sarin attributed the slow signing of deals to the overall slowdown and financing issues facing the hospitality industry since 2010-11. "Signup numbers might be proceeding at a slower clip in the past twothree years compared to earlier. However, it is still much higher compared to other chains."

Sarin said the company is confident of setting up over 85 hotels by December 2017, "marginally short" of the target of 100.

Over the past five years, Best Western India has terminated the franchise of some hotels due to quality issues, said people familiar with the decisions.

"The brand has been in India for quite some time but the problem with them is lack of due diligence when signing new properties due to which the quality suffers," said a hospitality industry expert. "Some of their hotels are not in line with the brand standards when compared to its properties in the US."