'Our target for the next five years is to have close to 2,000 play-schools in the country'

Prajodh Rajan

Prajodh Rajan, director – education services, EuroKids International Ltd, speaks about the company's decade long journey in the Indian market and the way forward. Edited excerpts...

Could you give us a brief overview of the pre-school business in India.
The pre-school segment is sometimes also referred to as pre-primary, kindergarten etc. But whatever the term used be, it by definition caters to children in the 2-5 years of age group. In India, this segment is largely dominated by the unorganised sector which is referred to as ‘aunty next door pre-school’ who operates a centre in her own house or courtyard and that’s where young kids were being taught. While it worked well as far as the care and welfare of the children is concerned, but didn’t make much of a difference as far as education of the children is concerned.

This is because while warmth and care could be brought easily it lacked the educational quotient required. When I say educational quotient, like primary or secondary school children, even pre-primary has some very specific goals that need to be met with and the ‘aunty next door pre-school’ setup wasn’t really able to meet this requirement as the person wasn’t qualified enough (in most cases) to be able to conduct it. That was the big gap branded / organised pre-schools have identified and are trying to make a difference here.

How has the EuroKids' business faired over the past few years?
EuroKids has completed a decade in this industry now. We started operations back in 2001 thereby bringing in the branded pre-school concept in India. It all started with just two pre-schools in Mumbai back then and today we are a nationwide network of over 812 such centres in 300 towns and cities across the country. The company has grown very aggressively over the years and the compounded annual growth rate (CAGR) for the last three years has been a steady 25%. We are pursuing rapid growth currently not only in the tier I cities but also in tier II and III cities of India.

Are you largely operating in the key metros or have established presence in Tier II and III markets as well?
Our presence predominantly has been in the metros i.e. Tier I and II, since inception. For example Bangalore as a city itself would have a network of 60 play-schools. Though we have branched out in tier III it would be correct to say that large proportion would still be in the Tier I markets.

Are there any plans to venture in the rural, Tier III markets as well? Is there a different model being followed here?
We do not have a rural model parse and the urban model in practice has been extended to the Tier III or rural markets with minor modifications in terms of suitability for a given town. So I have an urban model which is suited for a rural market.

What is the mode of expansion pursued?
Franchising is predominantly how we have expanded our business. Nearly 98% of our centres are through franchise arrangements and the balance (2%) is company owned and operated.

How have you priced the services in different markets?
Our Average selling price is fairly broad now that we have penetrated in the Tier III markets as well. While at the top end (tier I) market the ASP is around Rs 65,000 p.a. while at the lower end (tier III) the price is Rs 18,000 p.a.

Could you take us through some of the challenges faced by organised players like yourself in the market?
The market is currently unregulated and we are very much in support of regulations as we feel regulations will certainly help the sector. Its absence is only helping the unorganized operators as they can virtually open a centre any place, anytime with very little or no regulations of sorts. Having no regulations is detrimental to branded players mainly because of low entry barrier, there is tremendous competition not just from the unorganized players but also the branded operators. If you look at the market today, almost 90% is unorganised.

How do you see the growth panning out in the coming years?
I’ll be bullish on the way ahead mainly because the Tier III response has been very good. Initially there was this resistance for pre-school education but the scenario is gradually changing and people in those towns are starting to realize the importance of sending their child early to school. The whole concept had not sunk in till recently and with the emergence of nuclear families among other factors, we are seeing that tier II and III markets are responding positively to early child education. This is the key reason why I am fairly bullish at least for the medium term which in my opinion would be next three years or so. We are looking at either maintaining the 25% CAGR levels or possibly look to better the same in the coming years.

What kind of growth are you targeting say five years from now? How will you fund this growth?
Our target for the next five years is to have close to 2,000 play-schools in the country. In addition, we are consciously taking our business overseas. Taking the centres out of Indian borders has been a very recent foray for us. We have successfully established presence in SAARC nations in a very meaningful manner. In Nepal we have 10 EuroKids play schools, one in Dhaka (Bangladesh), we have just entered the Sri Lanka market with a master franchise and one in Gulf.

The international operations currently is a small part of the entire 812 centres but going forward we plan to very aggressively also grow the international presence. In some place it would be through overseas subsidiaries, while in others through master franchise arrangements. We might also look to appoint direct franchisees from the India entity itself.

The EuroKids business model doesn’t really require a lot of capital expenditure from the company as money is largely invested by our franchise partners.

What is the company doing to enhance its asset utilisation?
As for enhancing asset utilisation is concerned, we have taken various steps to ensure that the real estate is occupied with other activities post the pre-school sessions that get over by 2 pm. In this direction, we have launched new initiatives viz. the EuroStar Academy of Performing Arts where in the focus is on dance and we have tied up with Sandip Soparrkar’s ballroom dance academy. We should be launching this initiative across 100 centres in India in the first phase. Simultaneously we are also taking about theatre, other forms of art and similar such programmes. This approach, in a big way will help us increase asset utilisation going forward.

What is the size of the pre-school market in India?
The pre-school market in India according to CRISIL is a Rs 50-55 billion market and I think it’s a fairly decent assumption. The report further states that approximately 13% is organized and balance is unorganised.

What is the size of your business?
We are hoping to touch Rs 65 crore by the end of this fiscal i.e. March 2012.

What is Educom's role in your business?
In 2008, Educom acquired a 50% stake in EuroKids International and they are currently part owners of the business.

How is competition shaping up in this industry?
Competition is building up in the segment from not just domestic players but also international companies. I think the shift from an unbranded to a branded industry itself is a big development. More branded players in the business will help the cause because good quality education can then be made available to a large audience in the country.

Is consolidation anywhere on the cards as well?
 There is enough opportunity to grow organically and we are pretty far away from consolidation as of now.

Sunil Mittal’s next goal: To be a top-3 realtor

This story first appeared in DNA Money edition on Thursday, September 22, 2011.

Sunil Bharti Mittal, the poster boy of Indian telecom, is gearing up for a big splash in real estate.

The goal is to be one of the top three realty companies in India, and Mittal has set up Bharti Realty Ltd as the beachhead to achieve it.

Officials at Bharti Enterprises, the group mothership, were not available to share details.

Bharti Realty has started work on four projects including three mixed-use developments and a shopping mall in northern and eastern India. While residential developments are not a part of current activity, the management plans to enter the segment too.

Sources familiar with the development said Bharti Realty earlier focused on creating and leasing real estate for the Bharti group’s business operations in Delhi and the National Capital Region.

Among some of its existing developments include Bharti Crescent in New Delhi, which serves as Bharti Enterprises’ corporate office and Airtel Centre in Gurgaon.

The company’s 5 lakh sq ft mall project — called Pavilion — in the heart of Ludhiana is already underway.

The company has also acquired three assets to develop high-end commercial and retail space at the Delhi International Airport Ltd’s hospitality district / Aerocity near the new T3 terminal of the Indira Gandhi International Airport in the capital.

To be christened Worldmark, this integrated development is spread across approximately 1.5 million square foot and will be operational within two years from now.

The company has also acquired 6.7 acre on the Golf Course Extension Road in Gurgaon, where it will develop a shopping and office hub offering affordable and futuristic office spaces within an open and vibrant retail arena.

Christened Eldorado, this development will follow a mix of lease (for retail anchor tenants) and sale (for office and commercial space) model.

In Kolkata, the company is coming up with a 5 lakh square foot of mixed-use development in Rajarhat to be launched as Astra Towers.

Sources said Bharti Realty is currently identifying and negotiating for land parcels for similar developments across key Tier I and Tier II cities.

In Mumbai, the company is negotiating for a land parcel of around 20-25 acre, which is expected to be concluded in a couple of months.

Hoteliers tapping unconventional buyers for their assets

This story first appeared in DNA Money edition on Tuesday, September 20, 2011.

It all started in 2009 with Unitech’s 200-keys flagship hotel in Gurgaon, which was bought by New Delhi-based high networth individual Roop Madan, who is also a Tata Motors dealer, for Rs250 crore.

Since then, several high networth individuals and business groups from sectors like auto, petroleum, recruitments and telecom have grabbed hospitality assets, marking a whole new trend.

Among others, O P Munjal-led Hero group announced its foray into the hospitality market with the acquisition of a cold shell (unfinished hotel structure) at a strategic location in Gurgaon for over Rs400 crore, while Saudi Arabia-based Ravi Pillai, who is in the petroleum and recruitments business, acquired BSE-listed Hotel Leelaventure Ltd’s Kovalam beach resort for Rs500 crore.

Meanwhile, leading European telecom company Lebara Group also concluded a brownfield acquisition of a 190-key project in Chennai for an undisclosed sum and got on board the BSE-listed Indian Hotels Co Ltd to operate and manage the hotel under the ‘Gateway’ brand.

Indeed, as hoteliers, pure-play realtors and financial investors, including realty and hospitality focused funds, shy away from acquiring hotel assets, the sellers seem to be aggressively tapping the unconventional buyers, including HNIs and non-related business groups.

“Setting up hotel assets requires capital. While there are other capital sources available, their return expectations and investment horizon don’t necessarily match with those of the hotel assets. As a result, the funds are coming from HNIs and other unconventional sources with patient capital and the propensity that an investment in hotel asset requires,” said Sudeep Jain, executive vice-president - India, Jones Lang LaSalle Hotels.

Homi Aibara, partner and consultant, Mahajan & Aibara Management Consultants, seems to concur. “HNIs tend to pay a higher price as compared to strategic buyers who lay a lot of emphasis on the valuation of the asset and its strategic fit. As for reasons behind other business groups showing interest in this asset class is concerned, they have investible surplus and their return expectations are not as high as compared to a private investment firm/ fund looking at an internal rate of returns of over 20%. Business groups generally have a return expectation of 10-12% on such assets which is fairly achievable,” he said.

According to domestic and international property consultants mediating various hotel asset sale transactions, a number of hotel assets have been put on the block post the economic downturn of 2008, largely by real estate companies and a few others from the hotelier fraternity. Only a few deals here and there, like the acquisition of Dawnay Day’s hotel portfolio by hotels-focused fund Duet India Hotels got concluded.

Most of them are still in the market awaiting buyers as the valuation expectations are significantly higher than what buyers are willing to pay. However, going by the way hotel assets are being bought by a completely different set of buyers in the last few quarters, it is very likely the momentum will pick up going forward.

To cite an example, India’s largest real estate company DLF Ltd has been trying to exit its investment in luxury hotel chain Amanresorts International Pte, a chain of 25-odd boutique hotels and resorts it bought for $400 million back in November 2007.

According to recent media reports, LVMH Moet Hennessy Louis Vuitton is among some of the potential buyers of this luxury hotel chain. However, both DLF and LVMH have remained tight-lipped on this development.

Similarly, after selling The Leela Kovalam Beach Resort to Ravi Pillai’s Travancore Enterprises, the Nairs are believed to be now contemplating selling their soon-to-launch The Leela Palace Kempinski hotel in Chennai to the same buyer. Industry experts see it as a logical step as the company is trying to raise funds and reduce the huge debt on its books.

Another prominent seller of hotel assets is DB Hospitality, wherein the company promoters are mulling an exit from some of their operational projects including the Hilton Mumbai International Airport Hotel and Le Meridien hotel in Ahmedabad.

According to the company management, the proceeds could be used to improve the company’s debt-equity ratio.
Realtors and hotel owners in desperate need for money will be exploring possibilities with HNIs and other business groups to raise money... The strategy also augurs well with hotel companies pursuing the asset light strategy and focusing on their core which is operating and managing the business,” said an industry source.

On PE Street, exit doors hardly open

This story first appeared in DNA Money edition on Thursday, September 22, 2011.

The prolonged funk in the primary market has meant private equity players continue to stare longingly at the exit door.

With three quarters of the calendar year gone, there have been only 86 exits valued at $2.1 billion so far, about half the 174 worth $4.5 billion seen in 2010, according to data from VCCEdge.

Generally speaking, private equity firms head for the exit 3 to 7 years after investing in a company — with the most preferred route being initial public offerings.

Partha Choudhury, managing director, SEAF India Investment Advisors, a private equity firm, said the refrain in 2010 was that the optimism of the IPO market will continue into 2011, but that was not to be.

“As the year progressed, people realised that it wouldn’t make sense to take companies with just `100-150 crore turnover public. The IPO threshold was later identified as companies with over Rs250 crore in turnover with a potential for phenomenal returns. As a result, a lot of floats scheduled this year have been stalled,” said Choudhury.

According to VCCEdge data, of the 86 exits in 2011, 27 worth $633 million were through open market sales, and 22 worth $1,07 billion through mergers & acquisitions.

There were 14 exits through buybacks (company buying out the investor) generating $79 million, while only 12 were through IPOs which generated $78 million.

As many as 11 were secondary sales (private equity or venture capital firm buying out the existing investor) with an overall exit value of $241 million.

Consultants advising on exit strategies said the secondary market continues to be the preferred door.

Jacob Mathew, managing director, MAPE Advisory Group, an investment consultancy, said the current equity levels continue to offer great opportunities for secondary transactions.

“A lot of PE/VC investments are milestone-driven. There are times when the existing investor feels his investment milestone has been achieved and is fairly satisfied with the returns generated, he takes a call on exiting through the secondary route. This particularly happens with invested companies wherein the new investor is also able to achieve the investment milestone and return expectations. Once these conditions are fulfilled, it leads to a successful conclusion of a secondary deal,” said Mathew.

Very recently, MAPE advised Olympus Capital on a secondary deal wherein Olympus acquired Axis Private Equity’s (through its Axis Infrastructure Fund I) stake in Hyderabad-based Vishwa Infrastructures and Services for Rs240 crore, giving Axis over 4 times returns on its Rs60 crore investment (for a 35.6% stake) in 2008.

Sanjeev Krishnan, executive director - transactions group, PricewaterhouseCoopers, said exits this year will largely be a combination of secondary and strategic deals.

“Of the two options, secondary is certainly seeing more traction. Strategic sales as an exit strategy will be impacted because the markets in Europe and the US are not as buoyant as they were in 2010,” he said.

As far as the overall PE/VC exits momentum going forward in the current year is concerned, industry experts feel that the pace will be more or less the same with secondary transactions being the most sought after option for exits after M&A and open market sale.

But the broad consensus remains that sluggishness will continue in terms of exits because there are no data points indicating improving scenario.

Fundraising picks up among microfinance companies

This story first appeared in DNA Money edition on Thursday, September 15, 2011.

Investors are returning to Indian microfinance institutions (MFI), which faced difficulties in raising funds after the sector’s top firm, SKS Microfinance, faced regulatory scrutiny in Andhra Pradesh last year.

Andhra Pradesh had passed an Act in October last to stop microlenders such as SKS to collect dues from borrowers on a weekly basis and seek state approval for fresh advances, affecting prospects and fundraising ability of MFIs.

However, in the last few quarters, a few big-ticket placements have been made in microfinance companies by global and domestic investors, including at least three major deals since June, showing that investor confidence is being restored in the sector.

Ujjivan — a leading MFI and non-banking financial company (NBFC) — has received a funding approval of `100.50 crore ($21 million) from Sidbi and other public/private sector banks.

A week ago, Kolkata-based MFI Bandhan Financial Services Pvt Ltd raised Rs135 crore in private equity placement from the World Bank arm, International Finance Corporation (IFC). The deal, according to IFC, is its single-largest exposure in the Indian microfinance sector thus far.

In June, Bangalore-based MFI Janalakshmi Financial Services received `65 crore placement from investors led by Citi Venture Capital International. Among the few other players that managed to raise funds through the equity route is Delhi headquartered Satin Creditcare Network which raised around Rs100 crore ($22.3 million) from a bouquet of investors including $9 million from the US-based ShoreCap II Ltd and Danish Microfinance Partners K/S in December 2010 and February 2011, respectively.

Industry experts said that while SKS suffered mainly because of a large operations base in Andhra Pradesh, MFIs operating in other states have not been impacted so significantly. And after the Malegam committee report on the MFI sector, the Reserve Bank of India came up with its own set of guidelines which has helped instil some confidence and clarity in the sector.

Also, experts said MFIs like Bandhan, Ujjivan, and Janlakshmi raised money because they are different in their own ways.
Ganesh Rengaswamy, chief operating officer at the MFI-focused funding institution Lok Capital, said, “It could be the scale of operations, segment they cater to, transparency and customer satisfaction that are significant drivers for their fundraising. The second most important factor is their banking relationships and the confidence their banks or investors have in them or the individual promoters like Samit Ghosh (Ujjivan) and Ramesh Ramanathan (Janalakshmi).”

A few others feel the non-Andhra aspect also helped the MFIs attract equity and debt funding.

“There are institutions I am familiar with in AP which have scale and respectability but are still being looked at with some degree of caution when it comes to lending,” said a senior official from a leading PE firm.

Robin Roy, associate director, PricewaterhouseCoopers (PwC), said companies which have successfully demonstrated their ability and are operating efficiently will always be able to attract capital. “The better and more efficient players with economies of scale will have no issues accessing capital. Investors continuously keep looking at people with a good business model and a great performance track record,” he said.

Avinash Gupta, national leader - financial advisory practice, Deloitte Touche Tohmatsu I (P) Ltd, however, said a considerable portion of the funding being raised by the MFIs is debt.“It is more like a support to the MFIs because they do not have the ability to raise deposits. It would be interesting to see how the MFI story really unfurls in the coming years. There is a possibility that the MFIs may start functioning as pure-play NBFCs given the business prospects an NBFC offers are much more rewarding vis-a-vis an MFI,” said Gupta.

Update: September 26, 2011

Norwegian microfinance co. leads Rs 25 cr investment in Utkarsh's series B funding

Norwegian Microfinance Initiative (NMI) through its NMI Frontier Fund KS had led a Rs 25 crore series B investment in Utkarsh Micro Finance Pvt Ltd (Utkarsh). Intellecap was the sole advisor for this transaction.

The investment, according to Utkarsh senior management, will boost the company's growth plans. "It has come at the right time as the sector has started growing once again. Another important aspect is that all our investors have a strong bent for social sector and truly believe in double bottom-line approach. We strongly believe that this investment will facilitate further penetration of microfinance in the most underpenetrated geography in the country," said Govind Singh, MD and CEO, Utkarsh.

A registered Non-Banking Finance Company (NBFC), Utkarsh currently operates in 13 districts of Uttar Pradesh and Bihar. It has 56 branches, over 57,000 active clients and a loan portfolio of Rs 41 crore.

Henning Haugerudbråten, Investment Director, NMI Frontier Fund, said that NMI was attracted by Utkarsh's commitment to serving the poor in areas of India characterised by high population, high incidence of poverty, and very low financial inclusion. "The potential for well-run MFIs like Utkarsh to make an impact in this region is tremendous, and we believe Utkarsh has the professionalism and commitment required to make a difference and to achieve the joint mission of Utkarsh and NMI on financial inclusion, This investment is also an attractive complement to NMI's other activities in India," he said.

Aavishkaar Goodwell (AG), an existing investor in the MFI also participated in this Series B round of investment in the company. IFC, a member of the World Bank Group is also an existing investor in Utkarsh and has been supporting the firm since March 2010.

Anurag Agrawal, co-founder - Intellecap, and senior vice president of the investment banking arm, said, "This investment is a reinforcement of our belief that, in spite of all that has happened over the last year or so in the microfinance sector, there is still a fundamental business proposition for microfinance in India and informed global investors are willing to commit significant capital to quality institutions who are doing good work on the ground to serve the large unmet demand for microfinance services. We are optimistic that this space will see gradual growth over the next few years, as it adapts to a changed regulatory environment."

No kidding, pre-school business is a billion-dollar baby

My colleague Priyanka Golikeri is the lead writer of this story that appeared in DNA Money edition on Friday, September 16, 2011.

Every day, around 178 toddlers flock to a cozy little building located on a tree-lined lane off the main road at Basveswarnagar in Bangalore.

The walls of this building are painted in bright colours with pictures of animals, flowers and fruits. Inside the low-fenced compound sit a tiny swing, slides, see-saws, bicycles and a mini basketball court. The building has seven classrooms and a mini gym for the tots, who range from a year-and-a-half to four years in age.

There are eight other preschools in a 1-1.5 km radius around this one. Some of these are branded, while the others are run by neighbourhood “aunties.”

Still, demand is as strong as ever, says Suma Swamy, the coordinator. “Parents have started realising that this is a professional setup providing ample exposure.”

There is enough room for several schools to stand cheek by jowl, says a teacher at Little Crest, another preschool situated just behind Aarambaa EuroKids, who also goes by the name Suma.

Like in the Basveswarnagar area, preschools are sprouting within kissing distance of each other across almost every big and small city.

The scenario has changed a lot from a decade or so earlier, when preschools were still a nascent concept, say experts.

“When we started in 2006, we had just 10 kids. The number grew by four times the following year, and today we have 200 kids,” says Manjula K N, head (accounts & administration), Kara4Kids, a preschool chain having three centres in Bangalore.

Sumathi AR, a preschool teacher in the IT city, says earlier the idea was just to engage tots in a school environment in order to prepare them for the main school. “But today, the objective is also to educate them so that they are ahead of their peers in this competitive world.”

Experts say parents don’t think twice before spending as much as Rs30,000-50,000 per year for the education of their two- or three-year-old kids. Not surprisingly, some preschools have margins as high as 30%.

“The fees of good preschools start from Rs12,000 per year and go on till Rs50,000, depending on the city and location. Ten years ago, spending in thousands for the education of a kid who could barely walk or talk was unheard of. But today it is the norm,” says Sumathi.

No wonder then that estimates by Religare Institutional Research peg the preschool market in India at $770 million, and slated to reach $1 billion by 2016.

This $770 million currently comprises just 2.5% of India’s urban school going population.

“The potential is tremendous, not just from the metros but even really small places like Rudrapur, Tinjore and Yamunangar,” says Amol Arora, managing director, Shemrock Preschools, headquartered in New Delhi, with 130 preschools across India catering to 8,000 kids.

Shemrock aims to grow 20% every year.

Pritam Agrawal, director of Bangalore-based Hello Kids which has 137 preschools in 21 states, says the demand from small towns has increased so much that he is mainly looking at targeting places with 20,000 households.

EuroKids International, which has 812 centres in India, expects to grow at a compounded annual rate of 25%, says Prajodh Rajan, director, education services. “We want to have 2000 preschools in the next five years.”

Several factors contribute to this trend.Arora points to the increasing preference for all things branded. The spending capacity has also multiplied, given the booming private sector, particularly the IT sector, says Manjula from Kara4Kids, which has grown just through word of mouth.

Swamy of Aarambaa EuroKids says the organised players stand out for their curriculum and teaching methodology. “We take any theme and introduce different learning styles. If “fruits” is the theme, we explain by telling stories on fruits, holding puppet shows, taking the kids to the fruit market, bringing fruits to class, cutting them and asking kids to taste,” says Swamy, adding that this one concept goes on for a month and each day a different fruit is introduced. “Such a technique helps in better registration of the concept as the kid gets to touch, taste and see the fruits.”

Suma of Little Crest, which has five centres in Bangalore, says extensive training is provided to teachers on the teaching methodology as well as child psychology.

Also, most preschools keep a healthy teacher-child ratio of 1:10 along with a helper, a factor given importance by parents.

Despite being run in batches, as the operational time of preschools is less than six hours, several like Little Crest, Tree House Education have started utilising the space by incorporating daycare centres to mitigate the real estate expenses and rentals.

EuroKids, on the other hand, uses its centres for dance and theatre classes to increase asset utilisation.

Mumbai, Delhi hotels to hike room rates upto 67% this business season

An edited version of this news story first appeared in DNA Money edition on Tuesday, September 06, 2011.

Hotel rooms are set to get dearer between 4.76% to 66.67% as business season is expected to kick-start in a month from now. Despite concerns in the international markets, leading operators including the likes of Taj, Oberoi, ITC and Leela groups are hiking room rates across markets primarily in the key Indian gateway cities viz. Mumbai and New Delhi.

Independent data compiled by the writer indicated that best available rates offered by leading hotel chains are set to go up significantly mor so in Mumbai vis-a-vis New Delhi-NCR. The bookings being requested was for base category rooms on a single occupancy basis for a night's stay (in mid-September and mid-October) across 17 hotels hotels operated by Taj, Oberoi, ITC and Leela in Mumbai and Delhi hospitality markets.

The lowest increase in Mumbai is for base category rooms at The Leela Kempinski, Mumbai which are being offered at Rs 10,500 plus taxes in mid-September and Rs 11,000 plus taxes in mid-October showing an increase of 4.76%. The highest increase of 66.67% is with the rates offered by The Trident, Mumbai wherein the rate for superior room during the said period is Rs 7,500 plus taxes and Rs 12,500 plus taxes. Following suit is The Oberoi, Mumbai with an increase of 36% (Rs 11,000 and Rs 15,000 respectively) and The Taj Mahal Palace & Towers at 21.05% (Rs 9,500 and Rs 11,500 respectively.

On the other hand in Delhi, deluxe category rooms at The Oberoi, New Delhi showed the lowest increase at 13.33% offering rates of Rs 13,500 and Rs 17,000 – a hike of Rs 3,500. Indian Hotel Co's Vivanta by Taj Ambassador, New Delhi maintained its lead at 44.44% with the highest rate increase i.e Rs 9,000 vs Rs 13,000, an increase of Rs 4,000. Increasing from Rs 13,000 in mid-September to Rs 17,000 in mid-October, Taj Palace Hotel, New Delhi showed the second highest rate hike at 30.77%. The Leela Palace Kempinski, Chanakyapuri and The Taj Mahal Hotel, New Delhi followed suit with an increase of 21.43% and 20.69% respectively.

The Indian hospitality industry considers May to August months as off-season period while it is business season from October to March wherein business reaches to its peak in the last two weeks of December. The month of September and April are viewed as shoulder months wherein rates start heading northwards during September and vice-versa in the month of March. And beginning October, room rates across key hospitality markets and leisure destinations in the country will see an increase owing to increase in inbound travel coupled with increase in domestic travel with the advent of festivities and related holidays.

Echoing the sentiments, Noshir Marfatia, associate vice-president and GM, sales and marketing, The Park Hotels, said, Mumbai and Delhi are the two markets that will see substantial increase in the room rates this season.

"That's mainly owing to the market dynamics and the demand supply scenario prevalent in these markets. While new inventory in the NCR hospitality market may to some extent soften the rate hike depending on the hotel's profile, properties in certain pockets, for example, Greater Noida where F1 is scheduled in October will see a tremenduous increase in the rates going upwards of 60% to even over 100%. Similarly, there are other venues in Delhi-NCR that will witness events being hosted thereby creating a demand-supply imbalance which will eventually see hotel room rates going northwards,” said Marfatia.

The Bangalore and Chennai hospitality markets, according to industry players, are likely to remain flat though owing to increased inventory there. “Both markets especially Chennai will have to fight it out primarily on the occupancy levels as rates will continue to be under pressure. While 60% to 65% will be a good level to boast of during the business season, there is a possibility of minor uptick in rates once occupancies corss the 70-75% mark. We could then see a hike in the range of Rs 500 to Rs 800 across different properties,” said a top official requesting not to be quoted citing company policy.

The hospitality sector does not see the industrial slowdown having any significant impact on the business travel segment as well. “Industrial slowdown isn't much of a concern as we have experienced in the past that there is no immediate impact on the hospitality sector as such. However, given that we have entered the festive season wih Ganesh Chaturthi, followed by Durga Puja, Dussehra and Diwali, it is likely that business hotels may see some impact as travel will be skewed more towards leisure, holiday as compared to business. November will see a bounce back in business travel followed by another blip in December because of Christmas and New Year,” said a senior sales and marketing official from one of the four hotel companies being surveyed.

On the leisure travel front especially from the international markets, Marfatia is of the opinion that the segment is looking very healthy. “The only difference I have noticed is the fact that lead time for hotel bookings has come down from 30-45 days in the past to 10-20 days at present. A significant number or people are booking closer to their travel dates. The other interesting point is that, the overall number of days (international travellers staying in India) seems to be coming down to an average of 20-odd days as against 25-30 days in the past,” said Marfatia.

We only want to be part of best developments in India: Trump Organisation

This Q&A first appeared in DNA Money edition on Tuesday, September 6, 2011.

Known for creating landmark properties globally, Trump Organisation is now looking to tap the Indian hospitality market which is witnessing a tremendous demand for ultra-luxury real estate.

In an interview with DNA, Trump Organisation’s executive vice president Donald Trump Jr and executive vice president - development and acquisitions Ivanka M Trump elaborate on their plans while Trump International Development’s independent development consultant-India, Pranav R Bhakta, gives an overview of the company’s groundwork so far. Edited excerpts:

Donald Trump Jr

Why is Trump Hotel Collection eyeing the Indian hospitality market?

I have been to majority of the emerging markets and I am bullish on India. After visiting the country at least six times in the past five years, I have realised that our brand can add significant value to India. The increased global interest for India as a destination and growing number of high-networth individuals in the country translate into increased demand for ultra-luxury real estate.
The country is also experiencing increased development of iconic hotels and marquee mixed-use projects that are redefining cityscapes. With an increased appreciation for luxury lifestyle, the next natural step is to bring Trump Hotel Collection to India.

How is growth of Trump Hotel positioned in India and globally?

Last month we opened Trump Ocean Club International Hotel & Tower Panama, a 2.7 million-square-foot hotel and residential complex towering 70 stories, the tallest building in Latin America. Within two weeks it was completely sold out, breaking occupancy records.
By year-end, we will open Trump International Hotel & Tower Toronto, our second hotel outside the US. We are proactively seeking management contracts that are aligned with the company’s long-term strategic vision of operating a collection of iconic properties in key cities and resort destinations globally.
For India, this means a handful of hotels, likely ranging from approximately 150 to 500 rooms, depending on the market. With a level of customised service unrivaled in the market today and the ability to attract those seeking the modern day sensibilities of the next generation of luxury travel, we are positioned for continued growth at a consistent pace around the globe.

I understand that you have three verticals— Trump Hotels, Trump Branded Residences, Trump Golf. Also, as a part of Trump Organisation, you own Miss Universe, Apprentice (TV show). So will there be any cross-marketing forproperties in India?

We certainly cross-market across multiple platforms and create a buzz. We had the opportunity to showcase Trump Hotel Collection and two Trump Golf Clubs in the past season of The Celebrity Apprentice, which was aired in over 100 countries.
Trump golf course members and owners of Trump real estate are offered special promotions at Trump hotels. Over the next few years, Miss Universe will likely be hosted in international markets where we have Trump branded properties. We continue to identify unique opportunities to cross-market and will certainly do the same in India.

By when can we expect first property of Trumpin India? Will the India developments be primarily with asset owners with experience in developing hospitality assets or will you go with pure-play realtors with hotels/resorts as one of the assets in their overall real estate portfolio?

We have been looking at the market actively for the past five years. We continue to strategically review opportunities in major cities and resort destinations including Mumbai, New Delhi (Central), Bangalore, and Goa, and are working with local developers who carry strong track records to bring Trump Hotel Collection to the market. Selectivity is fundamental as we only want to be part of the best developments. Identifying hotel developers and pure-play real estate developers who share our values is a key component to bring the first Trump hotel to India.
We believe the successful execution of our marquee real estate projects and operation of our luxury hotels is rooted in relationships that are based on collaboration and flexibility.

Ivanka M Trump

How do you plan to place Trump Hotel Collection against the existing and upcoming luxury global brands in the country?

With decades of experience in developing luxury real estate across all asset types, Trump offers something other hotel management companies cannot. Most hotel management companies have pre-established development standards and are not comfortable moving away from a cookie-cutter approach to design.
We focus on ensuring that Trump Hotels are contextual to the city and neighborhood in which they are built. From inception, I work on selecting the best talent, and directly engage with the designers, architects and local consultants to create something unique.
Once open and operating we deliver innovative experiences and signature services and amenities, from exclusive restaurants housing celebrity chefs to our Trump Kids and Trump Pets programmes. There is also a certain cache associated with the Trump brand globally. People recognise the lifestyle we stand for and aspire to be part of it.

What is the nature of these developments - hotels, destination/resorts, serviced apartments, lifestyle properties including destination spa, golf course, mixed-use developments?

As an organisation, we continually focus on luxury condominiums, resorts, golf courses and hotels. However, the success of Trump Hotel Collection is extremely exciting and the preeminence of the Trump name in real estate markets around the world has provided us the opportunity to penetrate into the international luxury hotel and resort market.
A number of our hotels feature luxury branded residences; the golf course we are developing in Scotland will feature a Trump hotel on site; and most Trump hotels feature The Spa at Trump, which is distinguished by world-class facilities and an unprecedented level of luxury and personalisation.

What are your core strengths as a hotel management company?

Trump Hotel Collection ensures the highest quality product while maintaining the essence of ultimate uniqueness. We have raised the bar on the top-end travel experience with a style of customised service. Our personalised concierge, Trump Attache, is an example of our commitment to service. Trump Attache is a programme that dedicates an entire department to delivering uncompromising and individualised service to each hotel guest.
The programme is designed to create a sense that every hotel guest is a VIP and focuses on ensuring that no hotel stay feels like a first. Creating a sense of home is something that we are proud to offer to all our guests.

Which are the key brands you compete with in the current markets?

While Trump Hotel Collection offers a product re-imagined for the modern traveller, our competitive set includes luxury international legacy brands as well as independent luxury hotels. On a combined basis, Trump Hotel Collection properties are significantly outpacing the luxury segment’s global RevPar Index, which includes other international luxury brands that are presently enjoying success in India.

Pranav R Bhakta

What is your mandate as an independent consultant for Trump’s developments in India?

I serve as a liaison between India and Trump. I am focusing on sourcing opportunities in India for all three of the organisation’s real estate verticals—-Trump Hotel Collection, Trump Branded Residences and Trump Golf. The primary goal at the moment is identifying hotel management opportunities for Trump Hotel Collection.
I am doing business development in India, which includes educating local developers about Trump’s brand equity as a core competency, development capabilities and competitive advantages. I believe all three brands are well-positioned to enter the luxury real estate segment of India.

What kind of ground work have you done since assuming the role here?

Prior to starting my groundwork in India, I spent time in New York City with the Trump family and key members of the organisation to better understand their growth objectives for India. Over the past few months, I have been on the road throughout the country, spending most of my time in Mumbai, New Delhi, Bangalore and Goa meeting with legacy, institutional, and regional developers.
Till date, I have met over 55 developers, PERE groups and hospitality consultants, conducted many site visits, and I’m in various stages of negotiations.

What is the profile of hoteliers and real estate developers that you are in talks with?

Trump branded properties around the globe are known for their premier locations, landmark architecture and endless captivating views. Trump is seeking local developers that want to create the same standard in India that it has executed for the past 35 years.
Trump seeks developers that have the passion to redefine luxury, develop iconic buildings and, most importantly, have the desire to benefit from Trump’s experience in developing, selling and marketing luxury real estate. Trump brings unparallel experience to the table and is excited about developers that are keen on breaking away from traditional “India” construction methods to a more dynamic, institutional caliber — pushing the boundaries to deliver exceptional developments with unsurpassed levels of finishing and service.

What are the challenges and opportunities for Trump developments in India?

Opportunities are endless here. By blending core strengths in hotel, residential and golf, Trump has the ability to manage mixed-use hotel/residential developments and provide substantial reversionary value in the process.
Unlike other luxury hotel brands that require a hotel component, Trump can brand a luxury residential tower as standalone, manage a pure-play hotel, or it can blend all three verticals to create a true destination integrated resort with golf, hotel, and branded residential villas.
Trump Ocean Club International Hotel & Tower Panama is a fabulous example of a marquee mixed-use residential/hotel project that is operated by Trump. With 369 rooms, 645 branded residences, and over $400 million dollars invested, the project is the largest residential mixed-use property in all of Latin America.
Trump has added significant value to the development and marketing of the project, which is a world-class landmark and an architectural icon.

Madhucon to set up 2 hotels in Hyderabad

This story first appeared in DNA Money edition on Thursday, September 8, 2011.

Madhucon group, which is into construction, granites, coal, power and sugar, is foraying into the hospitality sector. Nama Hotels Pvt Ltd (NHPL), its associate company, is developing two hotel projects in Hyderabad, which would be managed by InterContinental Hotels Group (IHG) — the world’s largest hotel management company by number of rooms.

IHG said it has signed four new management contracts in India, of which two developments are from Nama Hotels. According to IHG, both these hotels will start receiving guests by 2013.

The two Madhucon hotels under construction are part of a mixed-use development consisting of a shopping mall and commercial and office space.
This entire project is spread over a nine acre land parcel located opposite Jawaharlal Nehru Technological University at Kukatpally in Hyderabad.

“The two hotels will be managed under Holiday Inn Express and Holiday Inn brands featuring 160- and 360-rooms, respectively,” said an IHG update.

A Holiday Inn property in India is positioned as a mid-scale product while a Holiday Inn Express is a select service offering for the value seekers.

Between both the projects Nama Hotels is likely to incur an overall cost of Rs140-150 crore.

The IHG update said that a 179-key project in Sarjapur in Bangalore has been signed under Holiday Inn Express brand to be developed by Duet Smart Hotels India.

Another Holiday Inn Express to be developed by realtor JMD Group on the Golf Course Extension Road in Gurgaon, Haryana, will feature 168 rooms in total.

Both hotels are expected to be operational by 2013.

With the four new agreements, the IHG’s under-construction hotels in India have risen to 47 across its InterContinental, Crowne Plaza, Holiday Inn and Holiday Inn Express family of brands. The new hotels will add approximately 900 rooms to IHG’s planned 10,000 India room inventory over the next two-three years.

The hotel company currently operates 15 hotels in key Indian cities and is on track to have a 150-hotel presence by 2020, Jan Smits, chief executive officer, IHG AMEA, said.

“A host of Holiday Inn and Holiday Inn Express hotels are being planned to serve guests across key Indian cities. And as we increase our presence in India,” Smits said.

Hero Group putting up a Rs650 crore hotel in Gurgaon

This story first appeared in DNA Money edition on Tuesday, September 6, 2011.

Hero Group, India’s largest two-wheeler maker, has added a new business vertical by acquiring a distressed hotel project at Club road in Gurgaon.

Pankaj Munjal, managing director, Hero Motors, told DNA, “This is the first step towards building a new business vertical in the group. The hotel is on a 3.9 acre plot and will have 280 rooms in addition to a host of other facilities required to position it as a destination property,” said Munjal.

Hero Motors provides integrated design, engineering, manufacturing & supply chain solutions.

The group is targeting to open the hotel by Diwali next year and is looking to set up more hotels.

The site, a cold shell, was acquired through a bidding process organised by Punjab National Bank (PNB). Industry sources said the project was on the block for over two years and it earlier belonged to Narsi Group, which is in the business of turnkey interior fit-out.

The Hero Group intends to build a landmark five-star deluxe hotel to be branded, operated and managed by one of world’s top-end hotel companies.

While Munjal did not share the acquisition cost of the project from PNB, he said the total cost, including finishing the hotel, will be around Rs650 crore. “This is an all inclusive cost and funding the development will be done through internal resources,” Munjal said.

The Hero Group has kick-started the process of identifying a hotel company to manage the property. It is considering international groups like Four Season, Conrad and JW Marriot.

“We have had initial discussions with a host of global hotel companies. We should be in a position to finalise the hotel management partner very soon after which interior work will start based on the management company’s guidelines,” said Munjal.

Munjal said the group has a healthy land bank thanks to a host of manufacturing units spread across the country. Some part of the land bank may be usedfor setting up hotels, he said.