Analysis: In India, hotel operators invest and educate

At home, and in some markets abroad, companies like Marriott International, which owns the Courtyard and Fairmont brands and Starwood Hotels & Resorts, owner of Sheraton and W, have virtually eliminated real estate risk.

They have sold all or most of their own hotels, and instead make money by franchising their well-known names. This business strategy of minimizing in-house resources is known as "asset-light."

But in India, hotel companies are finding it hard to grow without getting bogged down in bulky assets like land and, well, hotels.

"All the brands, they still want to do the asset-light model, but they understand in some cases the price to pay for entry is to put some capital, some equity into it," said Sri Sambamurthy, whose real estate firm West Point Partners is investing in India. Sambamurthy used to manage global real estate projects for Barry Sternlicht's Starwood Capital.

Rapid expansion in China lends credence to the lodging industry's claim that its future lies mainly in emerging markets. But in India, growth will be slower, and more expensive.

CRITICAL MASS

In India, foreign operators see providing affordable lodging for middle-class domestic tourists and business travelers as the best growth opportunity, as the country already has a longstanding luxury hotel tradition.

The key to developing mid-level product lies in quickly building enough properties that consumers become familiar with the brand and confident that they will find the hotels where they need them.

Investment helps speed things up, said Christian Karaoglanian, chief development officer for French hotelier Accor, which has put $250 million into the country.

"In China, it's easy to be asset-light. They're building hotels and they're looking for managers," Karaoglanian said. "In India, we like to be a part-owner. The only way to grow, and to grow fast, is to invest."

Family-owned Carlson, which owns the Radisson and Park Plaza brands, acquired one of its Indian partners outright and owns 24 percent of another venture, said Chief Executive Officer Hubert Joly.