How To Participate In India, China Middle Class

By Steven Rushmore -- HOTELS Magazine, 3/1/2007

By Stephen Rushmore, MAI, CHA, CRE, president and founder of HVS International, a global hotel consulting firm with offices in New York, Miami, Denver, San Francisco, Vancouver, Mexico City, London, New Delhi, Singapore, Saão Paulo and Toronto. Mr. Rushmore can be contacted at 1.516.248.8828 Ext. 204.

Almost every hotel investment conference I have recently attended has had a discussion focused on the investment opportunities in India and China. These huge population centers with growing middle classes and improving transportation infrastructures appear ideal for new development.

I see India as the United States was during the 1950s-a growing middle class where many bought one or two automobiles; a progressive government that saw the benefit of developing a modern highway and air travel system; and cities that recognized the need for convention, sports and entertainment facilities to attract trade and commerce. When this occurred in the United States we saw Holiday Inns, Ramada Inns, Days Inns and Sheraton Inns constructed at every Interstate interchange. Large Hiltons, Hyatts and Marriotts were developed next to all of the major convention centers. Embassy Suites, Radissons and Doubletrees were situated near expanded airports. I predict this hotel growth model will soon be repeated in India, China and other developing nations.

Yet, while these internal middle class and infrastructural trends look very favorable, most hotel owners and operators will probably not benefit from the new hotel development currently taking place in India and China. Doing business in these countries is completely different than most European and North American countries. Numerous challenges face prospective developers, including legal systems that don't always guarantee ownership; government regulations that slow the development process; the high cost of land relative to the total project cost; the fact that fee simple title is not available in China; and potential corruption along with many other unique development and operational challenges.

So if an hotelier does not have the capital or stomach to make a sizable investment to become a player in India or China how can he or she benefit from the economic trends taking place in these countries? The answer is simple: Start to focus on the Indian and Chinese middle class that will soon begin traveling outside of their countries. The world has become flat as communications, news, videos, music and the Internet now make it possible for millions of people around the world to see and learn about the fun and opportunities of travel. It is only a matter of time (probably three to six years) before the middle class of India and China has the funds, visas and access for world travel.

When this occurs the numbers are staggering with the middle class populations of India and China alone at 300 million. In 1992 outbound tourism from China reached 3 million; today it is 31 million. One can only imagine the economic impact when many more of these people begin traveling globally.

Now is the time to start positioning your hotel property or company to accommodate these travelers. As with most foreigners, they will have special needs and unique requirements. Their desired destinations will probably be similar to most international travelers and include cities such as London, Paris, Rome, Sydney, New York, San Francisco, Las Vegas, Orlando, Rio and Buenos Aires. They will want to visit the typical tourist sites, shop and be entertained. They will usually travel in groups and have a highly controlled itinerary.

The biggest challenge will be obtaining the required visas and entry permits, particularly for highly restrictive countries such as the United States. As an hotelier, you need to start investigating the visa requirements and build relationships with tour operators and packagers who will form the groups and make travel arrangements. In Asian countries, relationships are very important and often require many face-to-face meetings before sufficient trust can be built to develop profitable businesses. A well-connected local partner can be a huge advantage in establishing relationships and building business in these countries.

Before a tour comes to your hotel, you must be prepared to serve their special needs. Here are a few items to consider:

Members of your staff need to have the required language skills to communicate to your guests. Signage, menus, directories and informational materials must be translated into the appropriate languages. Your staff must be sensitive to the customs and traditions of your guests.

Your foodservice, particularly breakfast, needs to include items familiar to your guests. For the Indian market, a vegetarian menu would be an important consideration. The Chinese market would enjoy a specialty restaurant serving their ethnic cuisine.

Access to familiar medical and pharmaceutical care is important.

Religious, cultural and ethnic customs need to be observed. Since customs vary from country to country seek advice from knowledgeable consultants before welcoming your guests.

Over the years, hoteliers have done a magnificent job at serving travelers from all over the world. This next wave of Asian travelers will undoubtedly receive excellent treatment from those who start preparing now