PDF: 2962 pages, 5.2 MB - Bay Area Council Economic Institute

Global Reach
through franchising agreements, but increasingly through regional and nationwide Indian-owned
chains like Diplomat Hospitality, Tarsadia and JHM Hotels. Traditionally, Indian owners have
focused on budget hotels with limited or no food service (easier to run, lower costs and no
dietary conflicts for vegetarian owners). But Indian-American owners and franchisees are now
moving up from Best Western and Days Inn motels to larger, full-service Sheraton, Hilton,
Wyndham and InterContinental properties.
In April 2007, San Francisco’s high-end Campton Place Hotel was acquired for $58
million by the Indian Hotels Company (part of the Tata Group) through its Taj Hotels
unit. The purchase is part of a U.S. acquisition strategy that has also included a 2006
agreement to buy the Ritz-Carlton Hotel in Boston for $170 million and a 2005 arrangement to
operate the Pierre Hotel in New York under a 30-year lease at $5 million per year. More recently,
Delhi-based Khanna Enterprises bought San Jose’s historic Montgomery Hotel in November
2008 for an undisclosed amount. In September 2008, Khanna also purchased the Holiday Inn
Northeast in Sacramento for $19 million.
Tourism investment is moving in the other direction as well. In December 2005, VC firm
Bessemer Venture Partners invested $8.5 million in India’s largest mid-market hotel
chain, Sarovar Hotels, to start a chain of budget hotels under the Hometel brand, in part
to address India’s chronic shortage of hotel rooms in major cities (beginning with Bangalore, Pune,
Mumbai, Jaipur and Hyderabad).
Hotel development has not kept pace with the rapid expansion of India’s economy, leading to
high room costs and restricted availability, particularly in major business centers like New Delhi
and Mumbai. With only 100,000 hotel rooms across the entire country, room rates can be as high
as $600 per night in large cities. Given the trajectory of India’s economy, India’s hospitality
sector presents major investment opportunities.
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