Wyndham's optimistic growth plans around India's strong market fundamentals are great, but the company can't lose sight of the pandemic's continued grip on hotel recovery timelines.
The catastrophic impact of coronavirus on travel demand isn’t keeping Wyndham Hotels & Resorts from expanding and even introducing a new brand to the Indian subcontinent.
Wyndham announced plans this week to open its first hotels in Nepal and Bhutan over the next year while also moving forward with plans to grow its Hawthorn Suites brand in India. The company sees strong market fundamentals in the region for more of its economy and extended stay brands like Hawthorn, Howard Johnson, and Days Inn as well as the midscale Ramada brand, currently its biggest brand in India.
“I believe, in the post-Covid world, the brands will have a far stronger story to tell,” said Dimitris Manikis, president of Wyndham’s Europe, Middle East, Eurasia, and Africa division. “Why? Because we bring confidence, create the right infrastructure for owners and consumers to feel comfortable, bring technology, bring safety, and bring protocols and distribution channels.”
Wyndham’s initial growth in the Indian subcontinent is almost exclusively expected to come from conversions — where an owner of an existing hotel changes to a Wyndham-affiliated brand — rather than new construction.
The Ramada by Wyndham Valley Thimphu, with views of the Himalayas, will be the company’s first hotel in Bhutan when it opens in March 2021. A Ramada Encore slated to open in Kathmandu’s Thamel district in August will be Wyndham’s first affiliated brand in Nepal.
The new properties come amid ongoing Ramada openings throughout India as well as the introduction of the company’s first extended stay Hawthorn Suites brand in the country — a 202-room “eco-spiritual resort” near Dwarka Beach in northwest India.
“Over the last few years, Bhutan and Nepal have seen a steady increase in tourism, making them ideal destinations for us to expand into,” said Nikhil Sharma, area director for Wyndham’s Eurasia division, in a statement. “As the Indian subcontinent continues making waves in the hospitality industry, Wyndham remains laser focused on tapping into its key markets and fulfilling our mission of making hotel travel possible for all.”
Wyndham executives have been among the most vocal in recent months stating they see growth opportunities through brand conversions during a downturn like the pandemic.
The company grew its room supply by 3 percent during the last recession from independent operators converting to a Wyndham-affiliated brand, according to an investor presentation in May.
“We have a long-proven track record of growing net rooms through lodging cycle downturns by igniting our conversion engine, which is fueled through the strength and flexibility of our value proposition,” Wyndham Chief Financial Officer Michelle Allen said during the company’s first quarter earnings call this year.
The Indian subcontinent is particularly ripe for Wyndham conversions, Manikis said Wednesday to Skift. Nearly 70 percent of the roughly 4,400 hotels in India are independent and operate without a branded flag affiliation, according to STR.
Like most hotel analysts and executives, Manikis sees drive-to and leisure travel recovering from coronavirus downturns in demand before business and group business. Wyndham estimates as much as 80 percent of the Indian travel market comes from domestic travel, which offers plenty of growth opportunities in a country with a population of 1.3 billion people.
Wyndham plans to focus on the economy segment of the market in its initial expansion, leveraging its brands like Days Inn and Super 8. The growth plans make sense given Oyo’s meteoric rise in the economy tier of the market.
“The economy segment, done properly and with a brand that provides safety and security, has enormous potential,” Manikis said. “Especially in the post-Covid world, I think there’s going to be a lot of focus and duty of care the brands will have in making sure they deliver and the value proposition you put on the table.”
Wyndham currently operates 48 hotels across India and Sri Lanka, and the company is clearly bullish on future growth across the subcontinent. But it also has to accept current realities before throttling ahead on optimism over strong market fundamentals.
Growth plans from the beginning of this year are obsolete, and Manikis recognizes hotels in places like the Himalayas almost exclusively rely on guests arriving by planes or trains that are operating at limited or no service.
While he did not disclose specific occupancy figures for Wyndham in the region, Manikis said there are hotels still temporarily closed due to weak demand.
The Indian government gave the green light on hotels and temples reopening with limited capacity restrictions in early June, but international flights are still banned until at least the beginning of August. Domestic flights are allowed to operate at 45 percent of their normal capacity.
“The airlines will play a huge role. I want to see them surviving and getting back on their feet because look at properties in various locations. If you can’t fly to Mykonos, you can’t get there,” Manikis said. “India is a vast country. To go from Mumbai to Goa or the hill stations, you need to fly.”
But when travel is allowed to resume, Wyndham’s leaders think the foundation for their long-term vision will be in place to appeal to a growing customer base.
“It has 1.3 billion people, is enormously diverse, and has thousands and thousands of unbranded hotels with an enormous variety of things to offer,” Manikis said. “I believe those hotels we are bringing in are in the right locations, have the right quality, and cater to different segments of consumers. For me, that’s the best place.”
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Photo credit: Wyndham's Indian subcontinent growth strategy is focused on the economy scale of the market. Wyndham Hotels & Resorts