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Sunday, August 18, 2013

Berggruen plans 75 hotels by 2016

This story first appeared in DNA Money edition on Friday, Aug 2, 2013.

Berggruen Hotels, a six-year-old hospitality firm, plans to have a total of 75 hotels by 2016 from its earlier target of 40 hotels.

The new hotels to be launched by the company backed by New York-based investment firm Berggruen Holdings would be through a mix of owned, managed and franchise routes.

It currently has a guestroom inventory of over 1,300 across 14 operational hotels, of which six are owned and rest management contracts.

Sanjay Sethi, MD and CEO, Berggruen Hotels, said, “Seventy-five hotels will give us a total guestroom inventory of 6,600 across key metros, mini-metros and leisure destinations. We currently have 21 hotels under various stages of development, of which six (including two owned) will open in this fiscal. We will have one hotel getting operational every five weeks in the next eight months.”

He said the company is targeting a revenue of  Rs 410 crore for fiscal 2016 and Rs 135 crore for the current one. It is expecting operating profit of Rs 45 crore for this fiscal.

Berggruen Holdings, which had committed equity of $75 million at the time of inception of the hospitality firm in September 2006, has invested $62 million so far.

An additional Rs 135 crore through debt funding has been pumped in as well.

On further investment by Berggruen Holdings, Sethi said, “They are not averse to the idea, but new investments will be very opportunistic in nature and will be done on a need-to-do basis.”

A majority of the new hotels will be targeted at the mid-market segment under the Keys Hotels brand.

The company on Thursday added a new upscale hotel brand ‘Keys Klub’, which will largely cater to the top management personnels in the corporate world.

These hotels will come up in metros including Pune, Mumbai, NCR, Chennai, Kolkata, Jaipur, Ahmedabad and Hyderabad.

Berggruen, which plans to enter luxury segment in the future, is negotiating a land parcel to construct its own greenfield Keys Klub branded hotel in Mumbai, details of which were not disclosed.

“Discussions are currently on for 4-5 properties and our first Keys Klub hotel under management contract should hit the market in the next 10-12 days. Each Keys Klub property will have a guestroom inventory of over 100 and room size will be upwards of 275 square feet. The per-room development cost in these projects will be Rs 45 lakh excluding land cost,” said Sethi.

The first Keys Klub is likely to come up in Pune with guestroom pricing in Rs 4,000-6,000 range.

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