As Indian economic growth slows and a wider perception of the slowdown grips the country, established and newer domestic hospitality companies are increasing the pace of their expansion overseas.

The US$26 billion Sahara India conglomerate, for instance, is buying New York's iconic Plaza Hotel for US$570 million. The deal for the 282-room luxury hostelry, which underwent a $450-million makeover in 2008, will be the second major acquisition by Sahara India after it paid £470 million for Grosvenor House Hotel in December 2010.

The Sahara group, which includes financial services, media, real estate and retail operations, is also negotiating to buy Marriott Hotels in London valued at £750 million plus other properties as a part of the global expansion plans of its chairman, Subrata Roy. Sahara is also planning to acquire 85 percent of the US-based Indian industrialist Sant Singh Chatwal's flagship property Dream Downtown Hotel in New York through its Mauritius-based subsidiary Aamby Valley.

Roy, who owns a cricket team in the Indian Premier League and part-owns a Formula One racing team, is apparently keen to shore up his overseas business by buying undervalued hotel properties in the US and UK. The acquisitions will be a part of the group's expansion into the hospitality business and Grosvenor House will be the gateway for the company to introduce other business ventures internationally. The group owns and operates the 210-guest room Sahara Star hotel adjacent to the Mumbai domestic airport and the Aamby Valley City resort.

Top firms like Taj Hotels and East India Hotels (Oberoi Group) have always been at the forefront of international expansion, but now newer players like Sahara, Bird Group, Claridges Hotels, Sarovar Hotels, Zuri Group and Royal Orchid Hotels are also getting increasingly ambitious.

Bharat Hotels, which runs nine luxury hotels and resorts in India under the brand name The Lalit, acquired the 70-room Lambeth College building in London this April for conversion into a hotel. This will be the group’s second property abroad in recent times, with a project already under development in Koh Samui Thailand and another project in Dubai.

The Bird Group also acquired the Royal Park Hotel in London last year and is building six hotels in collaboration with the Thailand-based Dusit Thani in India. It is also looking at other markets like Greece and Southeast Asian countries for acquisitions.

Hotel consultants say that value of properties available in international destinations like Europe works out to be higher than in India. But the properties are evaluated on the business income they generate rather than real estate, which means better deals for prospective buyers.

“In the long run,” says Rajan Midha, a senior property consultant with the Reliance group, “it has a multiplier effect on the buyers’ overall business by upping their global profile and lubricating further overseas expansions. The low valuations of commercial properties in the wake of the Eurocrisis have only helped this passage to the West.”

Indian hotel chains are also tiring of the thicket of corruption and bureaucratic delays that plague their domestic operations. Several projects, especially those involving first-time developers, have run into time and cost overruns. Some projects of India's oldest hotel chain the Taj group, especially under the mid-scale Gateway brand, are running behind schedule. The debt-laden Leela Hotels is bedeviled by similar problems.

According to market analyst HVS India, of the 102,000 rooms currently under construction in India in the mid to luxury segment, only 75 percent may open in the next five years. With interest rates at least 300-400 basis points higher than during the planning phase and significantly higher construction costs, several developers have suffered from a liquidity crisis leading to delay in putting new inventory on stream, says HVS.

Apart from the UK and the US, East Africa too has emerged as a business opportunity. Even established players like Sarovar Hotels and Bangalore-based Zuri Hotels & Resorts are eyeing growth there. Zuri Hotels & Resorts, backed by investors from the Middle East, already operates a resort in Mombasa, Kenya and is looking at constructing more hotels in the region.

In fact Africa, say developers, is a key market where a lot of Indian companies are expanding. Sarovar Hotels is already operating two hotels in Dar es Salaam and Nairobi, positioned as upscale hotels and is looking to expand further besides looking at opportunities in the Middle East.

Another strong reason for the hoteliers’ high-powered expansion plans abroad, say experts, is that once Indian hotel firms achieve critical mass in the domestic market, they will look at international opportunities. Indian Hotels Company (IHCL), which owns the luxurious Taj Group, and is the second biggest in India by the number of properties, has bought properties in Boston, New York and San Francisco. It has also forged management ties with properties owners in South Africa and Egypt.

In other words, after having established a strong and sizeable pan-India presence, the real challenge for the hospitality players is to get to be known in the foreign market. Experts say Indian companies are looking for stand-alone properties in the US and Europe that are up for grabs following losses they made during the global slowdown, and also to use them tap into the growing breed of Indian travelers. Thus the move for overseas expansion is also driven with the idea of tapping into the growing market of Indians traveling abroad. An estimated 10 million Indians travel for leisure and official visits every year.

Outbound travel has been grown by 7-10 percent every year since 2009 with about 11 million Indians going abroad annually. “Most leading international hotels have set up shop in India and are introducing all their brands across all categories,” Midha added. “These hotel firms have strong loyalty programs that help them drive occupancies into their hotels not only from international but domestic guests as well.”