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Nov 06, 2012, 10.28 PM IST | Source: CNBC-TV18

Accor India's muted outing: Bets on low-cost hotels

French hospitality group, Accor's India trip hasn't been a memorable one so far. In 2009, Accor had committed to opening 50 hotels in India by 2012 but till date, operates only 19.

French hospitality group, Accor's India trip hasn't been a memorable one so far. In 2009, Accor had committed to opening 50 hotels in India by 2012 but till date, operates only 19. However now, Accor has stepped on the gas with a renewed thrust on low-cost hotels to ensure it does not miss its 2015 expansion target, reports CNBC-TV18's Farah Bookwala.

Slowing foreign tourist arrivals, demand-supply mismatch, high realty costs and dipping average room rates- the combined impact of all these factors has resulted in hospitality group Accor missing its target of having 50 hotels in India by 2012. However, now the French hotel major wants to ensure the same does not happen to it's new target of operating 90 hotels in India by 2015.

Also read: Indian Hotels targets 40% revenve from overseas mkts

Though scaling up from it's current 19 properties to 90 over the next three years might sound like a tall task, the company is confident that investing in budget, economy and midscale brands will do the trick.

Jean-Michel Cassé, Senior VP - Operations, Accor India says, “Today our major growth in our development programme and in the number of hotels I was mentioning is coming from the economy and midscale segment. So I'm referring to Ibis & Novotel. Today I would say its 70% of our growth.”

The pipeline for 2013-14 includes: 5 formule 1 hotels, 4 Ibis hotels, which Accor will open under its JV with Interglobe Enteprises and 3 Novotel hotels.

Accor is also looking at an alternative business model 'manchising' as it is called - that is, a mix of the management contract and franchising model. This is expected to remove risks associated with leasing and at the same time, increase operating margins, allowing Accor to remain asset-light as it scales up.

Cassé explains, "We are still in a situation whereby we are discussing internally the situation between a franchise and a manchise. However, altogether we do have dedicated brands that could be really made for that."

Despite the optimism, challenges are far from over. Accor admits that the next two years will continue to be tough as the mismatch between demand and supply and a dip in room rates continue.

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