The partnership between Interstate Hotels, based in Arlington, VA, and JHM Hotels, based in Greenville, SC, will be a 50-50 JV, known as JHM Interstate Hotels India. With an office in the Indian capital, the company will focus on securing management agreements on existing and to-be-built hotels.

[IMGCAP(2)]Interstate and JHM have also committed to invest in Duet India Hotels Ltd., a UK-based real estate investment fund dedicated to investment in hotels in India. To date, the fund has raised approximately $175 million in equity, with anticipated total equity contribution in excess of $200 million. The funds' mission is to develop approximately 25 three-star and four-star hotels in India targeted at business travelers. Interstate and JHM will invest equal portions of a $12.5-million total investment to acquire an interest in Duet India Hotels. In return, the fund has committed to providing JHM Interstate Hotels with the first opportunity to manage the hotels in which the fund invests.

"We've been exploring entering the Indian market for some time, and the match with JHM seemed like a good fit," Leslie Ng, CIO of Interstate, tells GlobeSt.com. Ng says that the companies are looking at major urban and suburban markets for new ventures, and that hotels will be geared toward the business traveler, with some resort properties as well. Although no projects have yet been revealed, Ng says that an announcement will be made "in the near future."

The JV also established a strategic relationship with JNB Hotels and Resorts Private Ltd. That company is a subsidiary of JNB LLC, a real estate investment group based in Artesia, CA. It has access to a pipeline of hotel management opportunities through India.

JHM already operates one hotel in India in the City of Surat, the five-star Gateway Hotel at Athwa Lines. Interstate's Ng tells GlobeSt.com that they are working toward bringing the Surat hotel under the umbrella of JHM Interstate.

H.P. Rama, founder and CEO of JHM, was in transit to India and unavailable for comment. In a prepared statement, he says, "India is the world's fifth largest economy, growing at a healthy 8.5% per annum. As a result of this rapid growth, international development in the country is surging and has created a strong demand for hotel rooms. It is estimated that India will need another 200,000 western-style hotel rooms, approximately double the current inventory, by 2010, to meet the demand."

In a recent survey on hospitality investment released last week, Ernst & Young's Hospitality Advisory Services Group reported that hotel investors clearly favor the emerging markets of Asia, including India, as providing the greatest potential return on their investments. Of those surveyed, 41% believe that Asia has the greatest potential for hospitality investment.

Thomas Hewitt, Interstate's CEO, says in a prepared statement that "the formation of this new management joint venture establishes a solid platform for our entry into India's fast-growing lodging market. By combining this platform with our investment in a hotel real estate investment fund we have a robust pipeline of management contracts and a strong foundation for future expansion. In addition, the joint venture is actively sourcing other management opportunities throughout key markets in India."

Hewitt adds that the need for experienced hotel management in India is significant. "The current lodging environment in India offers a limited selection of management and brand options. Our focus there will be to manage and opportunistically invest in hotels, as well as to provide hotel owners with franchise opportunities from well-established hotel brands," Hewitt says.

In addition to its Surat hotel, JHM owns and operates 30 US hotels, operating under brands such as Marriott, Hilton, Starwood and Hyatt. Interstate has ownership interest in 54 hotels and resorts, including seven wholly owned assets. It manages 218 hospitality properties, in the US as well as in Belgium, Canada, Ireland, Mexico and Russia.