This story first appeared in DNA Money edition on Thursday April 7, 2011.
International hotel chains that have been mostly managing hotels in India are finally betting their own money on the Indian hospitality market.
They are taking equity positions in upcoming mid-market business hotels, if the recently concluded two deals are any indication.
InterContinental Hotels Group (IHG), the world’s largest hotel group by number of rooms, has signed a joint venture agreement with Duet India, a hotel investment fund, to set up 19 Holiday Inn
Express hotels across India.
Similarly, Marriott International, America’s largest hotel chain, has formed a joint venture with a newly formed hotel fund — Samhi Hotels Pvt Ltd — to build a chain of 15 Fairfield branded hotels in the country.
Interestingly, this is for the first time that international hotel companies are investing in hotels rather than doing pure-play management contracts.
“It’s a very positive development showcasing the confidence level in the Indian hospitality market and the willingness from international hotel chains to actually invest as against management and franchising. This certainly paves the way for more such arrangements,” said a top official from a leading hospitality consulting firm requesting anonymity.
Paul Logan, vice president - development, IHG Asia Australia, said, his company will hold a 24% stake by investing $30 million in the venture formed with Duet India.
“The decision to invest was motivated by the fact that Duet very well understood the hospitality space, the team has vast experience in developing hotels in the country and most importantly, it has demonstrated capability by opening two hotels,” said Logan. Navneet Bali, chief investment officer, Duet India, said a new JV entity - Duet Smart Hotels (India) Ltd - has been instituted with a corpus of $150 million. “We have already identified a few sites in cities like Ahmedabad, Hyderabad, and Chennai for developing the first few Holiday Inn Express hotels.
The Ahmedabad property is scheduled to open mid next year. We are already looking at a host of sites across Tier I, II and a select few Tier III markets and hope to close the transactions post the final due diligence. All 19 hotels with a total of approximately 3,300 guestrooms will be operational in three to five years from now,” he said.
Bali said his fund is open to more such partnerships with other hotel chains.
Marriott will take 30% stake in its joint venture with Samhi, according to a report in the Wall Street Journal, which will decrease to 10% over time. The venture is expected to operate around 15 mid-tier hotels in India by 2015.
Samhi Hotels, the investment fund, has been set up by Steve Rushmore, founder of hotel consulting group HVS, Ashish Jakhanwala, a former development director with Accor India / InterGlobe Hotels and Manav Thadani, a former HVS honcho. Samhi will raise around $150 million in a first round of financing from GTI Capital Group, an India-focused private investment and advisory firm and expected to raise up to $250 million by 2012 or 2013, the report said, quoting Jakhanwala.
International hotel chains that have been mostly managing hotels in India are finally betting their own money on the Indian hospitality market.
They are taking equity positions in upcoming mid-market business hotels, if the recently concluded two deals are any indication.
InterContinental Hotels Group (IHG), the world’s largest hotel group by number of rooms, has signed a joint venture agreement with Duet India, a hotel investment fund, to set up 19 Holiday Inn
Express hotels across India.
Similarly, Marriott International, America’s largest hotel chain, has formed a joint venture with a newly formed hotel fund — Samhi Hotels Pvt Ltd — to build a chain of 15 Fairfield branded hotels in the country.
Interestingly, this is for the first time that international hotel companies are investing in hotels rather than doing pure-play management contracts.
“It’s a very positive development showcasing the confidence level in the Indian hospitality market and the willingness from international hotel chains to actually invest as against management and franchising. This certainly paves the way for more such arrangements,” said a top official from a leading hospitality consulting firm requesting anonymity.
Paul Logan, vice president - development, IHG Asia Australia, said, his company will hold a 24% stake by investing $30 million in the venture formed with Duet India.
“The decision to invest was motivated by the fact that Duet very well understood the hospitality space, the team has vast experience in developing hotels in the country and most importantly, it has demonstrated capability by opening two hotels,” said Logan. Navneet Bali, chief investment officer, Duet India, said a new JV entity - Duet Smart Hotels (India) Ltd - has been instituted with a corpus of $150 million. “We have already identified a few sites in cities like Ahmedabad, Hyderabad, and Chennai for developing the first few Holiday Inn Express hotels.
The Ahmedabad property is scheduled to open mid next year. We are already looking at a host of sites across Tier I, II and a select few Tier III markets and hope to close the transactions post the final due diligence. All 19 hotels with a total of approximately 3,300 guestrooms will be operational in three to five years from now,” he said.
Bali said his fund is open to more such partnerships with other hotel chains.
Marriott will take 30% stake in its joint venture with Samhi, according to a report in the Wall Street Journal, which will decrease to 10% over time. The venture is expected to operate around 15 mid-tier hotels in India by 2015.
Samhi Hotels, the investment fund, has been set up by Steve Rushmore, founder of hotel consulting group HVS, Ashish Jakhanwala, a former development director with Accor India / InterGlobe Hotels and Manav Thadani, a former HVS honcho. Samhi will raise around $150 million in a first round of financing from GTI Capital Group, an India-focused private investment and advisory firm and expected to raise up to $250 million by 2012 or 2013, the report said, quoting Jakhanwala.
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