Intercontinental Hotel Group has recently announced its plans to join a venture with Duet India to build 19 Holiday Inn Express hotels in India over the next five years. These new hotels are expected to add 3,300 rooms to Intercontinental Hotel Group's current development in India consisting of more than 10,000 rooms in 46 hotels and will be mainly located in major and secondary cities such as New Delhi, Mumbai and Bangalore. These hotels are expected to open by the year 2016 and will add to the 12 hotels IHG already has open in India.
IHG already has 2,075 Holiday Inn Express open hotels worldwide as well as 494 under development. More than 75% of the group's hotel ventures in India are with Holiday Inn, a mid-scale brand that mainly attracts business and leisure travelers.
The Duet Group stated that the mid-scale hotel brand category in India “offers a compelling investment proposition based on high demand and return on investment”. It seems that this venture really is a great investment opportunity, since it is responding to a high demand and need for more hotels in the country and therefore will experience lower risk.
IGH plans to expand its operations in emerging markets such as those of China, India and the Middle East within the next few years as it is taking advantage of the increase in traveling and global economic trends as well as increase in life expectancy, the use of low-cost airlines and Internet access.
Furthermore, Intercontinental Hotel Group will be taking a 24% stake in the India venture for a $30 million cash investment over three years. That is surely an enormous amount, but given that the company has taken all the above into account, it should be looking at great profit margins in the near future.
It is good opportunity to invest in developing conuntries such as India, China and the Middle East because they are increasing their demand for traveling continuously. In this moment, IGH invest mid-scale inn like holiday inn because this strategy reduces their risk and satisfies the increasing demand.
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