For regular visitors to India, one of the gratifying aspects of the country’s rise in economic prosperity is the improvement in hotels. India now has the fourth largest economy in the world, with an estimated GDP growth of 7.7 per cent for this year (according to international rating firm Fitch), and this has been led by a strong service sector and domestic consumption, in contrast to China.
For hotel brands, it’s a land grab as they sign multiple deals with developers to manage or franchise properties under many different brands – perhaps a Hilton in one city, a Doubletree by Hilton elsewhere and a Hampton by Hilton in a third city. Earlier this year, after a Hotel Investment Conference in Mumbai, announcements came thick and fast from Intercontinental Hotels Group, Hilton, Starwood and Marriott, all claiming huge growth in coming years. In 2007, Whitbread made plans to open more than 80 Premier Inns in India within ten years.
Although many of the properties that have been announced won’t start construction in the near future, the first are now opening. In some cases, the rates are even beginning to reflect the fact that with the new supply, international hotels can’t simply increase their prices by 20 per cent every year.
In Chennai, the capital of southern state Tamil Nadu, the need for new hotels is perhaps even greater than in Delhi or Mumbai. It was one of three Indian cities on Forbes’ Next Decade’s Fastest-Growing Cities list (the others being Ahmedabad and Bengaluru), and some 35 Fortune 500 companies have operations here.
Yet, as Vijay Shrikent, general manager of the long established, though newly branded, Vivanta by Taj Connemara, points out: “The city has only about 2,500 four- and five-star rooms. Delhi has 25,000 and Mumbai up to 18,000. Tamil Nadu is the fastest growing state in India, so it’s high time for that to change.”
It does seem that change has come. This year has seen the opening of not only the Hilton (click here for a review) but also the Hyatt Regency, while established operators such as Taj, which has four hotels here, and ITC Welcomgroup, which has two under the Sheraton brand, are opening new properties. ITC is about to open the 650-room ITC Grand Chola as its flagship Southern India property, and is investing in those it already has. Other brands here include Trident, Le Méridien and Radisson. Leela will debut here in 2012 and JW Marriott is planning further openings.
Nevertheless, challenges remain. New openings are often tangled in bureaucracy for months, sometimes years, and the moment there is a building boom, prices rise accordingly – though several developers I met maintained that the slowdown in the Gulf had helped with this, as both labourers and skilled expats had returned home to India, and even the price of cement had levelled.
Chennai is also in the middle of building its metro system, which will connect the airport – also being expanded – with the city. Drive anywhere and you’ll see evidence of the work, not least since the subway is an elevated system in the suburbs and the giant pillars stride down the middle of the congested roads.
This is one of the big four Metro (metropolitan) cities – the others being Delhi, Mumbai and Kolkata – and companies like Chennai because the standard of education is good. It has a 90 per cent literacy rate, with particular strength in engineering and medicine, according to UK Trade and Investment. Colleges include the Indian Institute of Technology (IIT) Madras – Madras is Chennai’s former colonial name – the Guindy College of Engineering, Madras Institute of Technology, Madras Medical College and Stanley Medical College.
The city has traditionally been home to major automotive companies such as Ford, Hyundai, Mitsubishi Motors, Renault-Nissan, Daimler India, BMW and local ones such as Ashok Leyland. Chennai produces three cars every 60 seconds and one commercial vehicle every 75 seconds. In 2008-09, it accounted for more than 30 per cent of all passenger cars made in India, and it is one of the largest tyre manufacturing hubs in the world – Michelin, Apollo, MRF, JK and Dunlop have large operations in or near the city, and the total capacity in Chennai is in the region of 2,700 tonnes per day.
It is also India’s second-largest exporter of IT and IT-enabled services, after Bengaluru. In this it was helped by the sudden and overwhelming popularity of Bengaluru in the past decade – the obvious problems that city’s infrastructure had in coping led companies to consider other destinations for their back office or outsourcing operations, and Chennai benefited. Electronics, led by companies Dell, Nokia, Motorola, Samsung, Siemens, Sony and Foxconn, is also booming. (To find out more, download the full UKTI report here.)
Virender Razdan, general manager of the Sheraton Park Hotel and Towers, part of the Indian ITC group of hotels (see review below), says: “It grew in a very conservative manner. When Bengaluru was doing well, so was Chennai, but when Bengaluru slowed down, Chennai did less so.”
Shrikent at the Taj Connemara believes Chennai’s appeal goes beyond the immediate city. “Tamil Nadu has a lot of cities quite close to one another – Madurai, Rameshwaram, Coimbatore and Kanyakumari – all of which are growing,” he says. It is India’s most industrialised state, with Coimbatore regarded as the “Manchester of South India”, being one of the country’s largest garment exporters and the manufacturer of 84 per cent of India’s textile machinery.
Tamil Nadu’s coast and mountains also mean it is at the forefront of renewable energy initiatives, and there are more traditional energy projects with offshore drilling out of Chennai port. All of these have involvement from UK companies.
“British firms are very much a part of the economic growth of this region and are keen to do more,” says Jamie Cribb, head of UK Trade and Investment in Chennai. “IPM [Integrated Project Management] is closely involved in the modernisation of Chennai’s airport. Eredene Capital is part of the consortium that will build and operate the container terminal at Ennore port. HR Wallingford has conducted feasibility studies for ports across South India. Rotork Controls is the market leader in India for valve actuators for power and process industries. Chennai represents global bank Scope International’s largest operation worldwide. IIT Madras has research links with BT.”
When Lord Stephen Green, the UK’s minister for trade and investment, made his first trip to India, Chennai was on the same itinerary as New Delhi and Mumbai. He visited India’s largest IT company, Tata Consultancy Services, and Asia’s largest private-sector healthcare group, Apollo Hospitals, as well as spending time with UK companies GKN, Laird, Caparo, Stadco, FG Wilson and Renold, among others.
Meanwhile, Singaporean and Asian firms are setting up in Chennai, helped by what is effectively a new airport being set up to cater for international flights, particularly with services connecting to Hong Kong, Singapore and Malaysia. Chennai also benefits from a widespread Tamil diaspora all over the world, which has seen non-resident Tamils come home to invest in the future.
The Sheraton’s Razdan says Chennai is a pleasant place to do business. “There are no trade unions and the people are balanced and good to work with,” he says. Still, he adds that for tourism to thrive it needs to be given industry status, which would then attract the huge investment the city and state needs. (For suggestions of what to see in the city, see “Star of India”.)
He also says there is a shortage of stand-alone restaurants and cafés, mainly because they don’t have liquor licences – an establishment must have ten rooms or 20 beds before one is granted – and licensing hours mean bars shut at 11pm, which can be disappointing for Western, and increasingly Asian, leisure travellers. For those arriving to do business, however, Chennai presents plenty of opportunities.
Visit chennaimetrorail.gov.in
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