Q: Could you walk us through the rationale of acquiring this 74% stake in Amartara, which holds some land in Powai and what's the plan over there?
A: We have acquired 74% in this special purpose vehicle (SPV), which essentially has a 50,000 square foot piece of land in Powai where we plan to build a 250 room four star hotel under our Royal Orchid central brand. The investment for the same is likely to be about Rs 120 crore in total. For our share of the land, we are paying about Rs 25.5 crore.
Q: We got some numbers of tourist arrivals and they looked much better than last year. What is the sense you are getting in terms of average room rate (ARR) and occupancies in your own hotel or set of hotels? How much better would it be compared to this quarter, but more importantly compared to last year same time?
A: As I mentioned earlier, we are currently doing occupancies about 60% and currently we are in the off season. This is as oppose to 40% last year. So, definitely, there has been quite an uptick in terms of occupancies and this is across all our 14 hotels. We are currently in negotiations with most of our corporate clients across all 14 hotels and we are expecting on an average about a 10% to 15% hike in corporate rates starting October. So, that should lead to some sort of increase in our ARRs. Of course, bear in mind that we don't only rely on negotiated corporate rate, we also have free and independent travelers as well as significant chunk from the leisure segment.
I think the general sense this year is a lot better than last year. There are no underlying threats of disruption to business from any such terror or any other angle like that. So, barring any of that will expect this year to be a lot stronger than last year.
Q: Just getting some more details on that acquisition of yours. Financially, what's the return that you are expecting and how would you expect it to pan out in terms of time line? Given that Powai does have some hotels, what's the ARR and occupancy that you foresee?
A: Powai definitely has some hotels. However, it's a pretty strong MICE (Meetings, Incentives, Conventions and Exhibitions) destination, so we definitely expect to do well with conferencing business here. Obviously, the hotel should take about 22 months to come on stream. So, we expect the market to further strengthen from here on until then.
In terms of ARR and occupancy, it's a little early to say that, but we typically expect our hotels to have a payback period of about four-five years. So, we are looking at from that stand point. Obviously we are hospitality players and we have been so for over 37 years. So, we have a long-term perspective in this, we believe that a strong presence in Bombay is essential for our national ambitions. It will go a long way towards also providing linkages with other properties in Navi Mumbai and Pune and in all the other cities across the country. So, having something in Bombay is essential for us which will help us better serve our corporate clients across the country.
http://www.moneycontrol.com/news/business/royal-orchid-plans-to-build-250-room-hotelpowai_483795.html