Lemon Tree Hotels eyes 4,000 rooms by 2016

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Patu Keswani, CMD, Lemon Tree Hotels
Patu Keswani, CMD, Lemon Tree Hotels

Lemon Tree Hotels, which currently operates 24 hotels with 2,800 rooms, plans to own at least 4,000 rooms across 28 properties by 2016. The hospitality firm is also looking to hive off its assets into a real estate investment trust (RIET) and list itself as a hotel management company in two-four years.

Meanwhile, market regulator SEBI has deferred finalising the regulatory framework for REITs because there is no clarity on the taxation issue.

The company recently opened its twin properties — Lemon Tree Premier and Red Fox — at Delhi Aerocity near the airport after a delay of nearly a year due to security concerns.

The company is awaiting final clearance from the Defence Research and Development Organisation for bullet-proof window panes at the Aerocity properties. Due to this, nearly 166 rooms in the two properties are not yet operational. While Lemon Tree Premier has 287 rooms, Red Fox has 207 rooms. Patu Keswani, CMD, Lemon Tree Hotels, said the costs to build the hotels went up by Rs 50-55 crore while the delay in the opening of the two hotels led to a revenue loss of about Rs 40 crore.

The 13 hotels coming up on the auctioned plots near the Delhi international airport have been facing delays due to security concerns as several of them are overlooking the runways. J W Marriott was the first hotel to open at the Aerocity last month.

Keswani said the company would look at putting all its hotel assets, including those under the joint venture with Dutch pension fund manager APG called Fleur Hotels, together to form the REIT. He also said the company will look at a separate listing for Lemon Tree Hotels as a hotel management company.

The company hopes to run around 8,000 rooms in the long term, which will be a mix of construction and management contracts.

The company operates three brands — upscale Lemon Tree Premier, mid-scale Lemon Tree Hotels and economy brand Red Fox.

Asked about the outlook for the hotel industry, Keswani said: “We are not bullish. We are holding our bets. A lot depends on the elections and the new government and the boost in business confidence.”

He said the past five years had been challenging for the hotel industry, with supply growing higher than demand. Nearly 50 per cent of the hotel rooms are under severe stress in the country, Keswani added.

(This article was published on December 27, 2013)
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