An interesting observation was made about property appreciation in relation to hotel assets, at the recently concluded Hotel Investment Conference South Asia (HICSA) in Mumbai.
Leading hotelier Arun
Saraf, MD, Juniper Hotels and MD, Asian Hotels East Ltd (a BSE listed
company), said he is considering buying hotels not to run them as hotels
because the real estate value is significantly higher than the built
hotel. "It makes a lot of sense to demolish the hotel after a particular
period and sell it as a land parcel instead as part of your real estate
play," he said.
Saraf's current hotel development pipeline
comprises nine upscale and mid-market hotels in various cities such as
Raipur, Hampi, Lucknow, Sarnath, Guwahati, Ahmedabad, New Delhi, Jaipur,
and Thiruvananthapuram. These projects are being developed by two of
his companies viz. Juniper Hotels Pvt Ltd and Chartered Hotels Pvt Ltd.
Asset owners are of the opinion that that property appreciation has
got no meaning in hotel industry because when the asset owner wants to
sell the hotel, it will never be bought on the land or replacement
value. "The kind of business being done by the hotel decides its selling
price in the market," added Atul Chordia, CMD, Panchshil Realty.
Industry players were also of the view that if the buyer is a pure
institutional ownership company, the company is very likely t see some
asset reallocation within portfolio in the long term. "And if the
allocation gives the company a higher value than what a public or
private market offers then it certainly is time to sell the reallocated
asset," stressed Ashish Jakhanwala, managing director and CEO, Samhi Hotels Pvt Ltd.
Follow Ashish K Tiwari on twitter @ashishktiwari