Hotel Leelaventure, which operates luxury hotels and resorts under The Leela brand, has put the launch of its proposed mid-scale hotel brand on the backburner. The mid-scale brand Leela Gardens was to be positioned as a three-star property.
"We had planned to go to tier II cities with this product. We will go for it after a few years. Right now we plan to reduce our capital expenditure and consolidate," Vivek Nair, vice-chairman and MD, Hotel Leelaventure, told Financial Chronicle.
In April 2011, Capt CP Krishnan Nair, chairman of Hotel Leelaventure, had expressed the desire to enter the mid-market segment by setting up 30-40 room hotels in pilgrimage spots. Capt Nair had then said that the brainchild behind the budget brand was his granddaughter, Samyukta Nair, who was pursuing a hotel management degree in Lausanne, Switzerland. "She will also be heading this subsidiary of The Leela Hotels that will manage this venture," he had said in April 2011.
Himani Singh, hotel analyst at Elara Capital, said, "The mid-scale hotel brand will be through management contract. So it does not require any investment by Hotel Leela. There is a possibility that the delay might be either because the company might not be getting an investor or good location for it." This is the second time since 2007 that the launch of the budget brand is being deferred.
The Leela competes with a number of large Indian and foreign hotel chains that are increasingly bringing their entire range of brands across price points to India. While EIH focuses on the luxury segment with its Oberoi and Trident brands, Indian Hotels Company has its luxury Taj brand, Vivanta by Taj as an upper upscale brand and Gateway hotels as an upscale brand apart from the economy Ginger brand. ITC, which has reportedly been eyeing Leela, too, has a slew of brands like ITC Hotels - Luxury Collection, WelcomHotel/Sheraton, WelcomHeritage and the mid-scale brand Fortune.
The attempt by Leela to go down the ladder to set up a mid-scale brand was to cater to this segment, which is expected to grow smartly in the future. "More and more hotel companies in India will have mid-scale hotels because during slowdown mid-scale hotels help companies cut discretionary spending," said Rahul Gaggar, hotel analyst at Centrum Broking.
Reduction of its huge debt load is a top priority of the company. As of March 31, 2011, Hotel Leelaventure had total debt of Rs 3,900 crore. The company plans sale of developed land in areas like Pune, Bangalore and Hyderabad to raise Rs 700-900 crore over the next couple of years. It has also been trying to raise around Rs 1,000 crore through issue of fresh equity at a premium to the current market price.
The hotel chain recently opened The Leela Palace New Delhi, a 260-room luxury hotel in the capital's tony Chanakyapuri area. "We expect to get cash breakeven at this hotel in the first year itself with a forecast occupancy rate of 68 per cent and average room rate of Rs 18,000 per night," said Vivek Nair. With rooms that are considered among the largest in the capital spanning covering more than 550 sq ft each, the Rs 1,800-crore hotel has already made it to the Conde Nast Travellers Hot List 2011.
Nair is confident that in the second year the Delhi property will be able to increase its occupancy rate to 72 per cent while increasing the average room rate to Rs 22,000 per night, making it one of the most expensive large luxury hotels in India. "The interest costs for this project will only get covered in year four or five," admitted Nair. With the strain of this property weighing heavy on the balance sheet, the company is exploring an asset light management contract model to expand its reach and presence.
http://www.mydigitalfc.com/companies/leelaventure-puts-mid-scale-brand-launch-plan-hold-781
"We had planned to go to tier II cities with this product. We will go for it after a few years. Right now we plan to reduce our capital expenditure and consolidate," Vivek Nair, vice-chairman and MD, Hotel Leelaventure, told Financial Chronicle.
In April 2011, Capt CP Krishnan Nair, chairman of Hotel Leelaventure, had expressed the desire to enter the mid-market segment by setting up 30-40 room hotels in pilgrimage spots. Capt Nair had then said that the brainchild behind the budget brand was his granddaughter, Samyukta Nair, who was pursuing a hotel management degree in Lausanne, Switzerland. "She will also be heading this subsidiary of The Leela Hotels that will manage this venture," he had said in April 2011.
Himani Singh, hotel analyst at Elara Capital, said, "The mid-scale hotel brand will be through management contract. So it does not require any investment by Hotel Leela. There is a possibility that the delay might be either because the company might not be getting an investor or good location for it." This is the second time since 2007 that the launch of the budget brand is being deferred.
The Leela competes with a number of large Indian and foreign hotel chains that are increasingly bringing their entire range of brands across price points to India. While EIH focuses on the luxury segment with its Oberoi and Trident brands, Indian Hotels Company has its luxury Taj brand, Vivanta by Taj as an upper upscale brand and Gateway hotels as an upscale brand apart from the economy Ginger brand. ITC, which has reportedly been eyeing Leela, too, has a slew of brands like ITC Hotels - Luxury Collection, WelcomHotel/Sheraton, WelcomHeritage and the mid-scale brand Fortune.
The attempt by Leela to go down the ladder to set up a mid-scale brand was to cater to this segment, which is expected to grow smartly in the future. "More and more hotel companies in India will have mid-scale hotels because during slowdown mid-scale hotels help companies cut discretionary spending," said Rahul Gaggar, hotel analyst at Centrum Broking.
Reduction of its huge debt load is a top priority of the company. As of March 31, 2011, Hotel Leelaventure had total debt of Rs 3,900 crore. The company plans sale of developed land in areas like Pune, Bangalore and Hyderabad to raise Rs 700-900 crore over the next couple of years. It has also been trying to raise around Rs 1,000 crore through issue of fresh equity at a premium to the current market price.
The hotel chain recently opened The Leela Palace New Delhi, a 260-room luxury hotel in the capital's tony Chanakyapuri area. "We expect to get cash breakeven at this hotel in the first year itself with a forecast occupancy rate of 68 per cent and average room rate of Rs 18,000 per night," said Vivek Nair. With rooms that are considered among the largest in the capital spanning covering more than 550 sq ft each, the Rs 1,800-crore hotel has already made it to the Conde Nast Travellers Hot List 2011.
Nair is confident that in the second year the Delhi property will be able to increase its occupancy rate to 72 per cent while increasing the average room rate to Rs 22,000 per night, making it one of the most expensive large luxury hotels in India. "The interest costs for this project will only get covered in year four or five," admitted Nair. With the strain of this property weighing heavy on the balance sheet, the company is exploring an asset light management contract model to expand its reach and presence.
http://www.mydigitalfc.com/companies/leelaventure-puts-mid-scale-brand-launch-plan-hold-781