From realty to hospitality — there’s room for all

SAMHI, a PE- controlled hospitality firm was born because Ashish Jakhanwala, who had led hotel development for Accor Group in India, spotted a gap in the way business functioned from the ownership standpoint. “A lot of people were looking at hotels as trading assets,” says the MD and CEO of SAMHI in which GTI Capital Group, and the US-based Equity International were early investors putting in $100 million, and now Goldman Sachs has invested $66 million.

“What was needed was for someone to look not just at the long term asset value but also the operational value that hotels have,” he says. Jakhanwala is clear that ownership of a hotel should be separate from its management.

World over, stock markets don’t like hybrid models, he says, pointing out that while owners look at long-term asset appreciation, management objectives are driven by factors such as gross revenues and return on capital employed. “It’s hard to create differentiated returns on the capital,” he says, but he is setting about trying to prove that he can. One way is through scale. SAMHI currently owns 16 operational hotels, operated by global players such as Marriott, Starwood Hotels, AccorHotels and Hyatt, and claims it is a positive yield company. It also has a joint venture with Marriott and Accor to develop budget brands Fairfield and Formule1 respectively. So far SAMHI has only worked with international brands, because Jakhanwala argues that the Indian customer is international in outlook.

They might run a thriving publishing empire, but Monica Malhotra and Sonica Malhotra of the MBD group areclear that they will micromanage their hospitality diversification as well. Their far-sighted father Ashok Kumar Malhotra had bought land in places like Noida, Greater Noida and Ludhiana, and also picked up Kolkata’s Ashok Hotel when ITDC was divesting it. The two sisters sold it off to invest in a parcel of land in Bengaluru, where they are developing the MBD Steigenberger hotel.

The first hotel in their portfolio was Radisson MBD in Noida, followed by the second in Ludhiana. Despite just two hotels in their portfolio, the sisters managed to drive a hard bargain with German luxury hotel chain Deutsche Hospitality to operate, manage and franchise hotels in India under the MBD Steigenberger co-branded name. Initially, the first few Steigenberger hotels will be owned properties, but the two sisters are confident they now have the acumen to operate hotels for others as well.

Real estate companies now have a focused strategy when it comes to their hospitality assets. Take K Raheja Corp, whose hospitality vertical Chalet Hotels has 2,700 rooms – mostly in the up-scale luxury segment, including the J W Marriott and Renaissance Convention Centre in Mumbai.

“In terms of room inventory we are the fifth largest hotel group in the country,” says Sanjay Sethi, CEO of Chalet Hotels. “And in terms of revenue, we are the fourth largest (ITC hotels generates ₹1,300 crore while we do ₹1,000 crore),” he adds. The secret of Chalet Hotels success says Sethi is that it has gone with tier-1 locations and category A hotels. Sethi says Chalet is playing two roles — driving performance and growth.

And with scale comes clout. As Sethi points out, Chalet Hotels is the largest hotel owner of Marriott brands in India. “Last year we owned 28 per cent Marriott’s room inventory in India. About 40 per cent of Marriott’s India revenue came from Chalet portfolio. They would actually consult us on strategy.” Today, post the Marriott-Starwood merger, Chalet has 16 per cent of the combined entity’s inventory.

Another example of a very pro-active real estate owner is Bengaluru-based Brigade Hospitality that has 780 rooms spread across six hotels. The promoter is focusing on building materials tech and building management software in its hotels. Nirupa Shankar, Director of Brigade Hospitality, says the company has set up an incubation centre for start-ups that can provide these solutions, pointing out that if building material management software could reduce wastage by 2 per cent, it improves efficiency.

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