We see a clear growth in midscale market in India: Ignace Bauwens of Wyndham Hotels & Resorts
Ignace Bauwens took charge of the Eurasia region at the global hospitality giant Wyndham Hotels & Resorts in May in addition to helming operations in Middle East and Africa. In an interaction with Business Today, Bauwens spoke about his plans for the Indian market. Edited excerpts:
BT: What is your big picture view of the hospitality market, and what do you plan to do in India?
Ignace Bauwens: I would like to zoom out. We have 20 brands; we have nearly 9,000 hotels with 792,000 rooms in across over 80 countries. My region has shown big growth over last couple of years.
In 2010, we kicked off with eight hotels and today we have 37 operational hotels in India and 44 operational hotels in Eurasia, and we have 3,400 rooms operating in India and just short of 4,000 hotel rooms in Eurasia. In the Middle East, Eurasia and Africa region, we are on target to open our 100th hotel before the end of the year. That's a milestone for us -- with a pipeline of over 70 hotels over next three-five years. So, that's the bigger picture for us.
When you zoom into India, our most known brand is Ramada by Wyndham, of which we have 27 hotels operating in Eurasia. We also have Days by Wyndham and Howard Johnson by Wyndham and Ramada Encore by Wyndham. These four we are operating in India as part of the 37 properties. In the next 3-5 years, we are hoping to double our portfolio with another 4,900 rooms that we will add to Eurasia.
If you look at the total demographic, we see that the biggest growth is in the mid-scale segment because there is more disposable income for the middle-class people. With people taking shorter trips, we believe that in India we will have a clear growth in mid-scale and economy market. We will continue growing Ramada by Wyndham brand, Ramada Encore, Howard Johnson by Wyndham and Days by Wyndham. However, we are now looking to bring into the market, basis the study that we have done in the Middle East, our upper mid-scale brand Wyndham Garden and our lifestyle mid-scale brand TRYP by Wyndham.
If you look at the economy segment, there is also growth happening but for the moment I think the growth is really happening at the mid-tier market and this is where we as a global player and the biggest hotel franchisors globally, will be one of the dominant players. It doesn't mean that we will not look into our up-scale product, which is the Wyndham or the Wyndham Grand. For instance, we have a Wyndham under development in Goa for the moment.
BT: Wyndham has followed franchise model in India and lot of foreign chains in India have been following management model. Will you continue to follow the franchisee model in future?
Bauwens: We are the biggest global franchisee in the world. But it's not only that we franchise, we also manage. Like when we acquired LaQuinta earlier this year in May, of the 900 hotels, we had 300-plus hotels that we acquired as managed hotels.
In my region, we do manage quiet a number of big boxes and that is where we do have the expertise. It has been proven a successful model in India to franchise, but moving forward, I will never say no if a rightly managed deal comes along. We have been known in the Indian market as the key player in the franchisers scene. I see that other companies are entering the market as well, but we will also enter the market with the managed model the moment we have the right opportunity.
BT: What are the key things required for you to have some hotels in the management model?
Bauwens: It is a variety of things. Some brands may prefer to have an up-scale and an upper up-scale brand managed, but it also has to do with location, right owners, and many other factors. In a franchise model, it is the owner that drives it and we give our assistance and our brands etcetera.
BT: I believe that franchise model is a faster way to grow the brand as compared to managed. What are your views?
Bauwens: I think the franchisee model is eventually for the owner to have an easier way to grow. There are so many denominators for an owner negotiating a franchisee deal. It might take a bit longer to come to the conclusion for managed deal as compared to a franchisee deal because in a managed deal, we manage the property on behalf of owner. Our responsibility as operators is way more, which means negotiation-wise, it may take a bit longer. When it comes to negotiation between a franchise deal and a managed deal, it takes longer to negotiate a managed deal.
BT: There are some green shoots in the Indian hospitality market. The occupancies have started to go up marginally and ARRs have been going up but at a slower pace. Do you think industry is reviving?
Bauwens: The hospitality is a cyclical industry. If you compare the numbers that I have seen in the first half of this year as compared to first half of last year for India, I think all major markets are in green - from Mumbai to Delhi to Pune. Pune is even 30 per cent up in terms of RevPAR growth. Every destination seems to be up. Delhi and Mumbai have above 70 per cent occupancy.
The economy is also growing in tier-2 and tier-3 cities, where we are clearly looking at. Wyndham Hotels & Resorts are very confident in the Indian market, and hence we have a pipeline that is very healthy, and you will see us growing in the Indian market. I think, every sign that we see today indicates that the market is going to grow but I don't have a crystal bowl.
BT: A lot of hotel companies are relooking at their costs because cost of doing business is going up. Do you have any plans to work with hotel owners to bring down the cost?
Bauwens: When we manage, we are responsible to deliver the GP but in franchise, the owner manages, and we have our brands and our systems. We are helping our owners even if it is for bathroom amenities. We have negotiated a deal especially for India through our procurement with interesting prices. But as a brand franchisor in the market, I don't control the bottom line of the hotel.
BT: What's big on the Wyndham global agenda?
Bauwens: As one of the global leaders, we always look at growth. We keep on studying and looking into opportunities as we keep on growing. I think one of our three pillars is technology. We have launched our responsible websites. We are one of the first global players that decided about two-and-a-half years ago that our full CR (central reservation system), should go in the cloud. Instead of having servers and issues around servers breaking down and also bringing down the costs for our hotels, the investors and the owners.
BT: Besides technology, which are the other major focus areas?
Bauwens: It's sales and marketing, technology and quality.
BT: The kinds of partners that you get to meet in India, how different are they as compared to other markets?
Bauwens: With regards to partnering up, last year we announced a deal with Nebula Infraspace LLP to develop 20 hotels under Hawthorn Suites by Wyndham. Every partner is unique. Every partner who invests money wants his hotel to perform at best. In my region, I deal with families, banks, and trust firms so they all have a different take on the partnership. A family partner can see it more as a trophy based asset; investment banker see it as a money-making machine because they invest and they have a clear target.
BT: For many owners who see hotels as a trophy investment, do they tend to over-spend at the time of development?
Bauwens: I have investors in my region who like to have a bigger room. We allow by a margin. It is our duty to explain to our investors because they have made an investment and our brand promise and brand essence is key, and that's why our guests come and choose us.
We want to have a hotel at every destination our travellers want to go. That is very important because that is how we see growth in general. We have solutions across our 20 brands. We have a solution for every traveller.