Hoteliers’ new strategy: ring in the old, ring out the new

Purvita Chatterjee Mumbai | Updated on March 12, 2018 Published on August 01, 2014

Asset-light No land acquisition, no equity participation. That’s thestrategy many hoteliers are adopting to move forward

Debt burden forces industry to take over existing hotels and rebrand them

Going brownfield is the norm in the hospitality industry today.

Burdened with huge debts, companies are giving new projects a wide berth. Instead, they have been partnering with the unorganised sector and re-branding the latter’s ventures with their own names.

Says Raymond Bickson, Managing Director of the Taj Group-owned Indian Hotels: “We are not that rich to build hotels, but face the challenge of getting a fair share of the market with the plethora of international hotel brands. We have … 14 new hotels of which 11 will be through management contracts.”

Keeping it simple

Adopting an asset-light strategy that does not involve land acquisition or equity participation is the way most hoteliers are choosing to move forward.

“The land bought during the Commonwealth Games was one of the reasons Hotel Leela Venture went into debt. We are now looking at joint ventures with sovereign wealth funds. We are taking back on management contracts the hotels we sold, to retain the Leela brand,’’ explained Vivek Nair, CMD, Hotel Leela Venture.

“Hoteliers are not necessarily adding new hotel rooms but partnering with unorganised players. There is a sizeable opportunity and we have been taking over hotels and re-aligning them under the Keys brand,’’ said Sanjay Sethi, MD and CEO, Berggruen Hotels, which owns the Key brand.

Key Hotels, the mid-market brand of New York-based proprietary fund Berggruen Holdings, plans to add nearly 100 properties by 2018 and recently took over the Ras resort in Silvassa.

The preferred way

Re-branding and converting existing hotels has been the policy of global hotel chains that have entered India, without picking up equity in any of the ventures.

Recently, the US-based Starwood Hotels & Resorts converted some local hotels to its Four Points by Sheraton brand.

“We are helping existing hotels reposition their assets in a cost-effective manner, with the backing of Starwood’s platforms,” said Sudeep Jain, a Vice-President at Starwood Hotels & Resorts.

Published on August 01, 2014

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