Home-Grown Mid-Segment Hotel Brands have a Competitive Edge Against International Brands in India

In recent years, the emergence of rapidly growing domestic mid-segment hotel brands has significantly transformed the country's hospitality landscape. Although relatively young and small, these brands have captured the attention of domestic travelers, controlling about 60% of the total branded rooms available in the country. As they carve out a niche in the heavily competitive market dominated by international hotel chains, their journey stands as a remarkable testament to resilience, adaptability, and the spirit of innovation.

In this blog, we will examine a few challenges and opportunities hotels in this segment face while competing with international brands.

The Resilience of Indian Brands

Despite various challenges in a dynamic and often unpredictable market, Indian mid-segment hotels continue to flourish. Leaders in this segment emphasize the importance of understanding local needs, culture, and traditions to engage effectively with domestic customers. "The advantage of home-grown mid-segment brands is their ability to deliver customized services instantly based on guest needs," notes Akanksha Garg, Founder Director of Waxpol Hotels & Resorts. This localized approach enhances the guest experience and builds lasting relationships with customers.

Growing footprint in tier 2, 3, and 4 cities

One of the most significant opportunities for these home-grown brands lies in expanding into tier 2, 3, and 4 cities. As Aryavir Kumar, Managing Director of The Clarks Hotels & Resorts, points out, "In 2023, domestic mid-market brands accounted for about 66% of all hotels added. Of this, 53% were in tier 3 and 4 cities." This strategic focus enables local brands to thrive, establishing a foothold in regions where large international brands may struggle due to operational challenges.

The important point to note here is that home-grown mid-segment hotel brands can capitalize on their strength over international players by drawing flexible contracts with suppliers with competitive cost structures, flexible agreements, and exit terms, which helps them with rapid expansion in tiers 2, 3, and 4 cities.

Moreover, the flexibility to explore management contracts and franchise models significantly enhances their competitive edge over international chains. Home-grown brands quickly adapt and negotiate terms that align better with local market dynamics, leading to rapid expansion and increased market share.

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Catering to experience-driven travelers

Today's travelers increasingly seek personalized experiences that resonate with their cultural context. Mid-segment home-grown hotels have distinguished themselves by delivering unique offerings that reflect regional culture and traditions. Reports and surveys suggest that about 80% of travelers will likely return to a property that offers differential experiences.

In this context, domestic brands are a step ahead of their international rivals as they can easily integrate local culture and cuisine into their offerings. It enables them to foster a compelling narrative that invites guests to experience the true essence of India. This differentiating strategy helps them attract repeat business and creates a loyal customer base.

Access to cost-effective technology solutions

This is one of the most crucial aspects that helps domestic mid-segment hotel brands compete efficiently against international brands. How? They now have easy access to cost-effective and modern cloud-based hospitality technology solutions, including a hotel property management system (Hotel PMS), channel manager, booking engine, revenue management system, etc. This benefits domestic midscale brands aiming to enhance their operations and foster growth through budget-friendly "Made in India" options. Additionally, it enables local players to significantly reduce their capital expenditures by utilizing solutions trusted by top global hotel brands but customized for the Indian market.

Industry leaders suggest that domestic hospitality brands excel with their flexible IT strategies, allowing them to swiftly integrate home-grown solutions that cater to the unique demands of the Indian market while also gaining international acceptance. In contrast, international brands often face limitations due to strict adherence to uniform technology policies, which may not always align with local needs or cost-effectiveness.

Mitigating challenges for long-term success

While the opportunities are abundant, home-grown hotel brands must overcome considerable challenges. Attracting and retaining talent remains a significant hurdle, as many potential employees gravitate towards established international chains' perceived glamour and stability. "People like the glamour that comes with a great international brand," acknowledges Gagandeep Bindra - National Sales Head of Amritara Hotels & Resorts. To combat this, local brands must emphasize career development, training programs, and the unique benefits of working for a smaller, agile organization. 

Another pressing challenge involves navigating the complex and varied regulatory framework across India. For example, hotels require trade licenses, fire safety NOC, health certificates, pollution control clearances, liquor licenses, etc., which vary from state to state.

According to Suresh Kumar, a seasoned hotelier and consultant, the authorities must look at these issues and resolve them for entrepreneurs trying to create world-class properties out of India. The inconsistency in licensing and compliance requirements can also hinder expansion efforts, especially in tier 1 cities where competition is intense and operational costs are soaring.

The Path Forward

The future looks promising for India's mid-segment hotel brands. With a projected market value of US$ 47.50 billion by 2030, these brands stand ready to capture their share of the pie while competing head-to-head with their larger international counterparts. The emphasis on collaboration, innovation, and customized guest experiences will be crucial for their growth. As they continue to compete, innovate and expand, these brands will surely solidify their place at the forefront of the industry, proving that India is indeed for Indians.

The blog concisely summarizes the latest white paper compiled by Hotelogix in association with leading mid-segment hotel brands. This white paper explores the rising phenomenon of home-grown mid-tier hotel brands. By closely analyzing the unique challenges and opportunities these brands face, we aim to offer critical insights to industry professionals and stakeholders, sparking meaningful conversations that can help home-grown mid-segment brands flourish on a larger scale and in the long run.