The Economic Times: March, 2015
Mumbai: US-based Vantage Hospitality Group, the world's tenth-largest hotel company by number of properties, has signed afranchise agreement with Indian company Miraya Hotel Management to establish its mid-market brands in the country. "We believe the Indian hotel market is very vibrant with great opportunities. India has a very strong and growing economy, yet there is an imbalance of supply and demand among its rapidly-growing middle-income economy," said Bill Hanley, group president of international development, Vantage Hospitality Group.
Sudhir Sinha, the erstwhile country head of American hotel brand Best Western, recently founded Miraya Hotel Management with an aim to bring international mid-market and economy hotel brands into India. "We formed this company to be present in the mid-market space, and Vantage, which is one of the fastest growing brands in America, fits the segment where we want to be," said Sinha, managing director and chief executive of Miraya.
Through one of its arms, Miraya will invest over $100 million (about Rs 620 crore) in acquiring assets in India to rebrand them under Vantage brands, apart from growing through management contracts. The company is scouting for opportunities in the Tier II and III cities, along with industrial townships and religious circuits that are still unexplored by the big brands. The company is planning to set up 100 hotels under the Vantage brands in the economy segment in India over the next 5-7 years.
However, Sinha did not disclose the brands as Miraya is likely to make an official announcement in the first week of April. Formed in 2002, Vantage, which has over 1,200 properties worldwide, will provide international brand, marketing and technology assistance while Miraya will develop the properties and operate the hotels in India.
"There is a huge demand-supply gap in this segment (mid-market) especially when it comes to internationally branded hotels," said Rohit Yadav, one of the investors in Miraya and a member on its board. "Return on Investment (RoI) on the economy and mid segment hotels is the highest."
According to Yadav, the mid-market segment will offer an RoI of over 15-18% after two years of operation and the returns will only increase thereafter. With luxury and upscale hotels finding it difficult to make money, top global chains are betting on mid-market brands as they expand in newer markets.
More than 60% of the hotels that are coming up are in the mid-market category, which involves less capital expenditure and quicker profits, according to industry experts. "While the mid-market space has huge growth potential, it's no longer a cake walk for the brands as Indian owners are very discerning and they understand the nuances of this business well," said Mandeep S Lamba, managing director-hotels and hospitality group at Jones Lang LaSalle India.