Golden Tulip targets to double its size in India by 2017 end; toying with inorganic options

Golden Tulip’s journey in India since 2007 has been of slow and steady nature. But after the acquisition of the brand in early 2015 by the largest Chinese hospitality group Jin Jiang International Holding, the scene is likely to dramatically change. In an exclusive conversation with TourismFirst, Vimal Singh, Managing Director (South Asia), Golden Tulip says the company’s growth in India will be significantly accelerated since the parental firm is keen to put up more flags for strategic business reasons. Edited excerpts:

vimal singh Managing director (south Asia), Golden Tulip

Golden Tulip had made its debut in India in 2007. Please briefly take me through to its journey; how it has evolved in one of the fastest growing hospitality markets in the world?

We had started with one hotel in November 2007. And today we have 19 units in the country and signed properties are in the range of 25. We are expecting to open about half a dozen new hotels in the next few months in different parts of the country. We have gone through ups and downs in our journey so far and have learned some valuable lessons. We now have a target to do multiple brands and ultimately reach to a situation wherein we can choose one city and put up more than one brand. We have also gone through ownership change at the parental level. We were part of an independent group which was acquired by Starwood Capital in 2009. And in February 2015, it has been acquired by a Chinese group called Jin Jiang which today happens to be one of the leading hospitality players in the world. They are ranked at number five or six in the global hospitality business with over 7300 hotel units in their portfolio.

The general impression about Golden Tulip in India is that under the previous management, the approach was cautious. But now the Chinese parental firm is keen for making aggressive moves in the India market. How would you respond to this perception?

Golden Tulip Goa
Golden Tulip Goa

There is probably a greater synergy which Jin Jiang feels in the larger Asia markets. They have over 100 million members in their loyalty programme. So it’s a huge base for us to get business from. We are hoping to grow that India- China corridor in terms of tourism or business travel helping us in converting some of the traffic into our hotels which are already attuned to Jin Jiang properties. Surely, after the arrival of Jin Jiang, there is a different impetus for our growth because of their focus on Asia. And when you talk of Asia, China and India are the two largest markets. Therefore, their focus on India is quite understandable. There are also subtle indications of taking inorganic route to become a major player in India.

Louvre Hotels (operates Golden Tulip) has traditionally been strong in Europe. But after the acquisition of the firm by a Chinese group, are you noticing any conscious attempt to change your stronghold from Europe to Asia?

We have been number two hotel group in Europe after Accor. Jin Jiang has expressed an intention to develop some primary markets in their portfolio. The present management certainly looks at India as a major future market- both in terms of catering to the domestic tourism business and outbound business.

What is your next two years of roadmap look like when it comes to putting up more flags on the Indian turf?

Royal Tulip Bangladesh
Royal Tulip Bangladesh

If we talk of organic options, then we are looking at addition of 6-8 properties every year. We are right now, spread across from Manali down to Bangalore. We now want to open some hotels in Kerala. But our primary target is the major six metros. We presently have a smaller presence in Delhi and Mumbai and we want to put up larger inventories in these cities as well as other metros. We are toying with all kinds of options – organic or inorganic. When I am saying inorganic, it could be buy out of the existing units or through the strategic investment route. The broader idea is to create a hub and spoke model- you put up a large hotel in a metro and create supporting units in the adjoining region. For instance, we have two hotels in Bangalore. We can now look at more management or franchise agreements in the region with Banglore unit acting as the hub. Chennai and Hyderabad are our next big targets. So in the next two years, our major focus would be in developing major metro markets. On the basis of our signed contracts, what I can tell you is that by 2017 end, we will have anything between 37-40 units commissioned in the country.

Corpus for India and introduction of new brands

Is it true that the new management has earmarked something like $100 million corpus to expand your footprint in India? Some recent reports suggest this.

They have basically said that there is some fund available for us to look at. $100 million is the number that was bandied about but I am not too sure. Our sense is: if there is a good deal, money will be made available. And we are looking at multiple deals. We are looking at the possibility of a serious strategic investment in a local company. We certainly have the appetite to invest quite a bit of money. A critical point which needs to be understood is that we are not a fund. We are an operating company which has enough cash reserves which could be invested for future growth. So our approach will be transaction driven. That leaves the scope for both small as well as possible big deals.

You gave me a sense of possible property count in the next two years. Does it also entail introducing some new brands which have not been used as yet?

Yes, we are looking at those opportunities. For that, we will need to join hands with developers who are looking at multi-location options. We are looking to introduce Campanile brand and Golden Tulip premier class brand which is a hard core budget unit. Campanile is a 2-3 star property but distinctively stylized, boutique property in look and feel. The brands which are existing in the country are Golden Tulip (4 star), Tulip Inn is our 3 star and Royal Tulip is our luxury offering.

You also seem to have a decisive mandate to expand your footprints in South Asia now?

Yes, that is the plan. Apart from 19 units in India, we have recently opened a large unit in Bangladesh. In Nepal, we were close to signing a property which got stuck after the earthquake. Some structural issues have emerged which we are trying to resolve. In Sri Lanka, we have closed one transaction in principal. We are looking at some other opportunities in Sri Lanka since the tourism market is growing quite well there and India outbound is a major contributor. And we are also looking at more opportunities in Bangladesh, presently we are negotiating for two more projects.

Sentiments in the market

Is sentiment improving in the market? Do you anticipate any bullish phase round the corner?

Sentiments in the marketThere is certainly an uptick in our business. But not to the extent which could be compared with the bullish phase of pre-2008 spell. But it will eventually come back to the business. As the Indian economy is growing, it will need more hotels. What is holding back the hotel sector in India is the cost of money. The cost of borrowing is very, very high here compared to other places. So a lot of players are not entering into the business. But probably a couple of years down the line, an inflection point will come wherein it will be realised that room inventory growth is not matching the pace with the business growth rate.

What happens to the ARR pattern in the future?

The rates which we had seen in 2006-07 period in India were not realistic. So if anybody had looked at those rates as the benchmark and decided more projects on the basis of those trajectories, they have made a serious mistake. Those days even 4-star hotels on their best day were charging $150-200 which was totally unrealistic. It can’t be sustained. So even during the best bullish phase whenever it happens in the future, I don’t really see ARRs sky-rocketing. They will be more realistic.

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