Unlike most other hoteliers, Keshav Baljee, president and co-promoter of Royal Orchids Hotels Ltd, does not believe in adopting a single approach to his business, instead going for multiple categories and business models.
"We take hotels on lease, we manage hotels, we enter into joint ventures and we also fully own a hotel in some cases," Baljee, a third-generation hotelier, said in an exclusive interview.
Royal Orchid owns, leases and operates 13 hotels in Bangalore, Mysore, Pune, Jaipur, Goa, Ahmedabad and Navi Mumbai. The group is present across three different categories—mostly mid-market business hotels—that target senior, middle and junior executives.
"We are not hugely dependent upon the leisure market," Baljee said. However, he concedes that ideally, the firm would "only want to manage hotels" but market dynamics dictated that they also own their own properties.
Consequently, Baljee, an alumnus of the Wharton School in the US, is now looking to set up a national network of business hotels in India and expand the number of properties from 13 to 19 in the current fiscal.
"Our plan is to have a hotel in every city with one million population or an industrial town with a half a million population," he said.
Baljee—who worked in the US with the now-defunct Lehman Brothers Holdings Inc. and UBS AG in their mergers and acquisitions divisions before returning to India to help his father raise funds through an initial public offer (IPO) four years ago—is getting his hotel chain a national footprint through management contracts, joint ventures, taking hotels for lease or owning them fully.
To be sure, the expansion means Royal Orchid is wading into uncharted waters, given that most of its peers—such as Lemon Tree Hotels and Taj GVK Hotels and Resorts Ltd—are focusing on either owning a hotel or managing a hotel for a fee.
Rashesh Shah, an analyst at ICICI Securities Ltd, endorses the multi-pronged business model. "This is most suitable model for a small and medium enterprise as it will mitigate the risks, such as delays in project execution and stretched balance sheet," he said, adding that this would also keep debt under modest levels as the firm expands.
Also, the company is not overstretched in terms of balance sheet to fund future expansions as it is adopting multiple strategies, including joint ventures, management contracts, and in certain cases, 100% ownership, Shah said.
Since its IPO in February 2006, when it raised `112.53 crore, the company has been profitable—making profits of `30.68 crore, `19.29 crore and `8.28 crore, respectively, in fiscals 2008, 2009 and 2010—a fact Baljee attributes to cost-controls at all levels, including building and project execution helps his hotel chains to remain profitable.
"Three star hotels are the way to go," said Baljee of the future of the industry, adding that the company will focus on growth in India, saying the country "is on the cusp of growth".
In fact, even as the rest of the world was struggling with a deepening economic slump, Royal Orchid was tying up with developers for management contracts.
"We took a conscious call during that time. We knew that lot of hotels would get deferred, and during recessionary times you have chances to get better rates," Baljee said. Taking advantage of the downturn, the group finalized property management deals for a number of its hotels, including in Hyderabad, Ahmedabad, Jaipur and Goa.
http://www.livemint.com/2010/09/13214334/Baljee-bets-on-multiple-models.html?atype=tp