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Royal Orchid Hotels Ltd is planning to focus on tier-II cities for expansion.
“Currently, major metros and tier-I cities are overcrowded with the entry of foreign hotel brands. There is lot of scope and opportunities for us to focus on first class business segment in smaller towns and cities,” Chander K. Baljee, Chairman and Managing Director, told Business Line .
“For expansion into tier-II cities, we are exploring management contract. At present, many standalone hotels in these cities need professional management. The present room inventory of the group is around 1,900 keys and is set to expand to 4,000 keys by 2015,” he added.
The group’s initiative to add on more hotels under its brand via the management contracts route has evinced encouraging response in some tier-II cities.
“The group’s focus on tier-II towns and cities has paid off. The company has been providing cost efficient management, attrition is low as staff members are locals,” he said.
Baljee said: “Our expansion plan revolves around two segments — Royal Orchid (mid-market and holiday destination hotels) and Regenta (5-star business hotel) brands.”
At present, the group has 23 hotels situated across 15 major cities. The group is also planning to set up its second hotel in Mumbai under joint venture with Amartara Pvt Ltd, Mumbai. Baljee said: “For expanding the company’s footprint, we are looking at a capex of Rs 180 crore. Money is being raised mainly through internal accrual and bank loans in the ratio of 1:2.”
Occupancy rates
Talking about occupancy rates, he said across the markets, the group has been experiencing the signs of improving occupancy rates, which are likely to result in higher ARRs in the near future.
Baljee said: “In tier-II towns and cities, occupancy levels are averaging 60 per cent during off-season and 65-70 per cent during peak season (October to March).”
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