[Congressional Record Volume 142, Number 41 (Friday, March 22, 1996)]
[Extensions of Remarks]
[Pages E427-E428]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




             INDIAN AMERICANS DOMINATE U.S. HOTEL INDUSTRY

                                 ______


                         HON. GARY L. ACKERMAN

                              of new york

                    in the house of representatives

                        Thursday, March 21, 1996

  Mr. ACKERMAN. Mr. Speaker, I call to the attention of my colleagues 
an article entitled ``Hospitality is Their Business, Indian-Americans' 
Rooms-to-Riches Success Story.'' This article appeared in the business 
section of today's New York Times.
  Mr. Speaker, as this article correctly points out, Indian Americans 
are now the dominant force in the domestic hotel industry. Today, 
Indian Americans own 12,000 hotel and motel properties. This translates 
into 46 percent of America's economy hotels and 26 percent of the 
United States total lodging. This is truly an amazing and impressive 
accomplishment.
  Mr. Speaker, Congress is in the midst of a long and protracted debate 
on how to reform our Nation's immigration laws. Many of my colleagues 
have endorsed the idea of sharply reducing the number of legal 
immigrants to this country as part of this overhaul of our immigration 
policies. I believe that any Member who reads this article will have to 
seriously question and ultimately reject that proposal. We are a nation 
of immigrants. Immigrants have built this country into the economic 
powerhouse of the Western World. Indian Americans are one of our 
country's most visible success stories. As Joel Kotkin, a senior fellow 
at Pepperdine University, stated in the article, ``These Indians are 
modern Horatio Algers.''
  Mr. Speaker, I urge my colleagues to closely review this important 
article. I know my colleagues join me in saluting the Indian American 
community on its speculator success in the hotel industry. We need more 
entrepreneurs such as the Indian Americans described in this article 
who are willing to become self-sufficient, productive, and profitable 
members of our society.

                [From the New York Times, Mar. 21, 1996]

                     Hospitality Is Their Business

                          (By Edwin McDowell)

       In the quarter-century that people of Indian ancestry have 
     been emigrating to the United States in sizable numbers, they 
     have carved out a steadily bigger share of the nation's hotel 
     industry. Starting with no-name motels, they soon graduated 
     to Days Inn, Econo Lodge, Rodeway and other economy 
     franchises.
       Today, with more than 12,000 properties, Indian-Americans 
     own 46 percent of America's economy hotels and 26 percent of 
     the nation's total 45,000 lodgings.
       ``We used to be isolated in a few states in the South,'' 
     said Ravi Patel, whose Charlotte, N.C., company, Sree Inc., 
     owns 20 hotels. ``Now we're almost everywhere.''
       They are also moving up. A new generation is buying 
     properties like Sheratons, Radissons and Hiltons, adding an 
     upscale chapter to an immigrant success story.
       The first wave of motel ownership was propelled by the 
     Indian-Americans' strong family ties, close-knit communities 
     and a willingness to invest years of sweat. This latest wave 
     represents a break with tradition and a willingness to tackle 
     bigger, more complex challenges. But the original community 
     still provides the backing, as today's entrepreneurs pool the 
     resources of extended families and borrow from fellow Indian-
     Americans, for whom a handshake is often sufficient 
     collateral.
       ``These Indians are modern Horatio Algers,'' said Joel 
     Kotkin, a senior fellow at the Pepperdine University 
     Institute for Public Policy in Malibu, Calif. ``They're 
     willing to start in marginal and sometimes risky areas that 
     native-born Americans are not interested in going into, and 
     working incredibly long hours.''
       Ramesh Gokal, who bought a 26-room hotel in North Carolina 
     soon after coming to the United States in 1976, is now 
     president of Knights Inn, a chain of about 180 franchised 
     economy hotels. Children of the industry pioneers are 
     establishing their own companies and using newly acquired 
     knowledge of capital markets to build budding empires.
       ``My parents' generation did business by having x dollars, 
     buying y goods and selling for z,'' said Karim Alibhai, the 
     kinetic 32-year-old president and chief executive of Gencom 
     American Hospitality, a family-owned hotel group in Houston. 
     ``At the roadside hotels they ran, the management philosophy 
     was get guests in and out, and have the maids clean the 
     rooms.''
       But these days, ``you have to know administration, 
     management and how to use Wall Street to invest and to 
     grow,'' added Mr. Alibhai, who was born in Kenya and majored 
     in economics at Rice University. (Many Indian-American 
     hotelkeepers came to America by way of Africa, where their 
     families had lived for several generations in many cases.)

[[Page E428]]

       In Mr. Alibhai's case, the big plans are not just talk. In 
     September, he co-sponsored a $350 million initial public 
     offering of a real estate investment trust, one of the 
     largest in United States history. Paine Webber was the lead 
     investment banker and Mr. Alibhai was initially the biggest 
     individual shareholder.
       Today Gencom affiliates, which began with a single Best 
     Western that Mr. Alibhai's parents bought in 1979 after 
     emigrating from Kenya, own all or part of 47 hotels in 13 
     states. Properties include the 759-room Radisson New Orleans, 
     the 650-room Sheraton Astrodome in Houston as well as 
     Marriotts, Hiltons and boutique hotels in Boston and San 
     Antonio. Revenues are expected to exceed $200 million this 
     year.
       Like his parents, Mr. Alibhai said, he ``worked the desk, 
     drove the shuttle van to the airport and learned to fix the 
     sewer plant.'' In the three years after finishing college in 
     1984, years in which the Houston hotel industry bled red ink, 
     he still did odd jobs at the hotel, but spent most of his 
     time learning the business.
       ``Operating during that recession was my M.B.A.,'' said Mr. 
     Alibhai, a trim, tennis-playing executive whose office is in 
     a sleek Houston high-rise. In 1987, with the economy looking 
     up but hotel values still down, Mr. Alibhai began buying 
     distressed properties, often jointly with other Indian-
     Americans.
       ``That's when the real learning process began,'' he said, 
     ``not just acquiring the properties but convincing lenders 
     who had tightened their purse strings to finance me. I had to 
     change their perception of Indians as being identified with 
     low-end hotels.''
       In many ways, Mr. Alibhai's world of revenue streams, 
     variable inflation rates for assessing potential purchases 
     and structuring deals with investment bankers is alien to the 
     generation of his 60-year-old father, Akber, who is in charge 
     of purchasing for Gencom.
       ``The older generation is still very cautious about sharing 
     information, like the cost of hotels,'' said Jay Patel of 
     Colorado Springs, a 43-year-old native of Zimbabwe who is 
     part owner of seven hotels in Colorado and California. ``The 
     younger generation is much more forthcoming.''
       There are other differences.
       ``When you come from India and Africa, your view of labor 
     is very different,'' Mr. Alibhai said. ``People are thankful 
     just to have a job. That's their bonus. Here, employees also 
     want to feel appreciated. I prefer this system.'' Most of 
     Gencom's corporate employees are given stock or bonuses, he 
     said.
       In the early years, Indian-Americans had problems typical 
     of many newcomers in trying to get financing and insurance. 
     By their account, insurers in the early 1980's suddenly 
     canceled property insurance to all Indian hotel owners, 
     believing them to be part of an Indian conspiracy to buy 
     properties and burn them down to collect insurance money.
       ``We were turned down by about 200 insurance companies, 
     until we convinced underwriters that these immigrants were 
     outstanding risks,'' said Ron Thomas, a vice president of 
     United Insurance Agencies in Muncie, Ind., who is widely 
     admired by Indian hotel owners for his early efforts on their 
     behalf.
       Discrimination also took other forms, including boasts by 
     rivals that their properties were ``American owned.''
       Much of the more blatant bias began to wane with the 
     formation of an Indian hotel owners' association in 1989, 
     vigorously supported by Henry R. Silverman, the chairman of 
     HFS Inc., and Michael A. Leven, then president of Days Inn. 
     Starting with about 100 members, the group now numbers more 
     than 4,000 hotel-keepers.
       ``Indian franchisees have been the engine of growth for the 
     entire economy-hotel sector,'' said Mr. Silverman, whose 
     company's franchises include Days Inn, Knights Inn and Super 
     8. ``They were willing to build with their own capital when 
     no one else was willing to.''
       For all their success, though, Indian-Americans have stayed 
     away from luxury hotels and five-star resorts, and often from 
     full-service hotels, mainly because of their cost but also 
     for cultural and religious reasons.
       ``Most Indian hotel owners here are Hindus from Gujarat 
     state and don't do well with anything involving alcohol and 
     meat,'' said Mr. Patel of Colorado Springs. (Most Hindus from 
     the western state of Gujarat are vegetarians, according to 
     the Indian Embassy in Washington, and most Gujarati women do 
     not drink.)
       But younger Indians feel differently. ``They realize you 
     can offer meat and alcohol to your guests, because it's all 
     part of the hotel business,'' Mr. Patel added.
       ``Within the next five years you'll see a lot of us owning 
     luxury properties, like Ritz-Carltons,'' said Tushar Patel, 
     the 31-year-old president of Tarsadia Hotels in Costa Mesa, 
     Calif. About half of Tarsadia's 13 properties--including the 
     440-room Clarion Hotel at the San Francisco airport--are 
     full-service hotels, with restaurants and bars.
       Tushar Patel, by the way, is not related to Jay Patel of 
     Colorado Springs, unless distantly, or to most of the 
     thousands of other Patels who own hotels in the United 
     States. Almost all Patels, even those from Africa, trace 
     their ancestry to Gujarat, where hospitality is highly 
     regarded.
       In the United States, many Indian immigrants turned to 
     lodging because they could buy cheap motels, they could live 
     rent free and the family could work the front desk, clean 
     rooms, do laundry and make repairs.
       When they stepped up to franchised properties, for as 
     little as $20,000 plus 8 percent of revenues, the Indians 
     acquired not only toll-free reservation systems and the 
     benefit of bulk purchases, but an education about prices, 
     payrolls and bookkeeping.
       ``We'll soon have eight hotels and we're looking to open a 
     200-room one soon, and it's no big deal,'' said S. Jay (you 
     guessed it) Patel of Alpharetta, GA. ``Now we're experienced 
     enough to know we can handle it.''
       His father, J.K. Patel, left a 10-year career with Barclays 
     Bank in Kenya to come to America in 1978, spending six months 
     looking for a business before buying a hotel in South 
     Carolina. The elder Mr. Patel attributes the Indians' success 
     in this country to ``the way we were brought up.''
       Parents instilled the need for education and trust between 
     families and among their own ethnic group. ``In January I did 
     a deal with an Indian partner in Dallas for two hotels,'' 
     said Mr. Alibhai of Gencom. ``We shook hands, and before the 
     contracts were signed I wired him several million dollars.''
       Arvind Patel, who with his wife, Bhavna, owns a 39-room 
     Days Inn in West Point, Miss., cites another factor--the 
     willingness of extended families and acquaintances to provide 
     financial help.
       ``We work together as a team,'' said Arvind Patel, a native 
     of Tanzania. ``A lot of families give you $10,000, even 
     $30,000, without charging you interest and without any 
     collateral. They figure one day you may help them.''
       But like many Indians, these Patels are branching out and 
     moving up, building an 81-room Wingate Inn and a 58-room 
     Hampton Inn elsewhere in Mississippi. Meantime, both continue 
     working a full shift each day behind the desk of their Days 
     Inn, with their 12-year-old son and 10-year-old daughter 
     pitching in on weekends.
       ``And if our help doesn't show up,'' Mrs. Patel said, ``my 
     husband and I still clean the rooms.''
       Many of the older Indian-Owned motels were long ago 
     refurbished, if only to measure up as franchises--a method 
     the Indians quickly saw as a route to financial independence. 
     Some properties have been kept for the next generation, but 
     most have been sold to a newer wave of Indian immigrants.
       When Indian-Americans graduate from college, many have 
     chosen to become doctors, engineers, lawyers and accountants. 
     ``But in most families at least one son or daughter will 
     become hoteliers, because they realize it isn't the hard work 
     it was for us,'' said J.K. Patel, the former Barclays banker. 
     ``The difference is, we used to man the desk ourselves. The 
     new generation likes sitting in the office and delegating the 
     work.''

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