Louvre Hotels-owned Sarovar to take over management contracts of Golden Tulip’s portfolio in India

This is an EXCLUSIVE story. Do not reproduce or use in any manner whatsoever without the writer's permission.

 

After acquiring a majority stake in India’s largest independent hotel chain Sarovar Hotels & Resorts back in 2016, one of Europe’s largest hospitality firms Louvre Hotels Group (LHG) is now looking to further consolidate its presence in the Indian hospitality market. This is being done by taking over the management contract portfolio of Golden Tulip Hotels & Resorts (GTHR) and bringing them under the management of Sarovar Hotels & Resorts.

Golden Tulip currently manages 24 hotels (as per https://www.goldentulip.com/en-us/hotels-india) under Royal Tulip, Tulip Inn and Golden Tulip brands across India. It is a separate hospitality firm in partnership between Louvre Hotels Group and veteran hotelier and restaurateur Vimal Singh who is managing director, Golden Tulip Hotels & Resorts, South Asia.

According to industry sources, as a result of this consolidation initiated by LHG, Sarovar Hotels is in the process of taking over the management contract of properties that are currently being operated by Golden Tulip Hotels in India.

“In fact, the management contract of Golden Tulip Hotel in Lucknow is already with Sarovar since a while now. It’s work-in-progress though for hotels in Jaipur and Navi Mumbai as we speak. Over the coming months, Sarovar will take over management contracts of a majority of hotels that are currently under Golden Tulip Hotels & Resorts in India,” said a source requesting not to be quoted.

The possibilities of properties in Golden Tulip Hotels & Resorts network in India coming under a single entity were being contemplated ever since Louvre Hotels Group acquired majority stake in Sarovar Hotels & Resorts. However, Saurabh Chawla, global chief development officer, LHG, during an earlier interaction back in September 2018, had said that Vimal Singh is a partner and that LHG was never looking at acquiring his stake in the company.

”He still is a partner. The commercial arrangements in the scope of the partnership, there is no intention to acquire his stake. I think the idea is to find synergies between the two entities because we are a shareholder in the two and that makes sense and that’s what we are evaluating at this point in time,” Chawla had said then.

The overall hotel industry scenario was considerably better back then and provided no compelling reason for a possible take over of the Golden Tulip portfolio. However, that’s not true anymore. The COVID-19 pandemic has completely devastated the hospitality business scenario globally and more so in India.

The Indian hospitality industry has been under lockdown since March 2020. As a result, owners and managers of hotels, resorts, restaurants across categories are struggling for survival. Furthermore, in the absence of any support, in terms of a financial relief package from the government, most business owners are contemplating shutting shop in the near future.

Continuous fixed costs coupled with no visibility on revenues whatsoever are adding to the challenges of business continuity. Hotel companies with strong balance sheet could probably weather the storm however, a large majority will succumb owing to the after effects of the corona virus outbreak. While efforts are being made to contain the spread of this deadly virus, the overall situation with numbers increasing significantly on a daily basis isn’t looking very encouraging.

An industry poised for growth is now staring at a bleak future. All the planned milestones and projected revenue and profitability targets have gone awry. These not so encouraging signs, industry sources said, would have possibly led to a rethink by Vimal Singh and Louvre Hotels Group resulting in a decision to hand over the management of hotels in the Golden Tulip portfolio to Sarovar Hotels.

“I believe the Golden Tulip partnership between Vimal Singh and Louvre Hotels Group will also complete its tenure over the next couple of years. In a growing business scenario waiting it out would have given a higher payout to the exiting partner. However, with uncertainty looming over the Indian hospitality industry, I think it’s best to move out if one has managed to negotiate a good deal,” said a hotelier on conditions of anonymity. Financials pertaining to this deal could not be ascertained.

In September 2018, LHG had partnered Indian firm Orange Tiger Hospitality (OTH) to introduce its new brand 'Kyriad' in the Indian hospitality market. As part of the master franchise agreement, OTH would operate and manage Kyriad branded hotels in India and the Indian sub-continent i.e. Nepal, Sri Lanka, Bangladesh, Bhutan, Maldives, Pakistan and Mauritius. 

The master franchise with OTH is for a 15-year tenure and the Indian partner had then committed to launch eight hotels under Kyriad. LHG had also said then that it plans to use a similar master franchise route to introduce its two other brands viz. Première Classè and Campanile in the Indian market over the coming years.

Owned by one of China's leading travel and tourism conglomerates, Jin Jiang International Co Ltd Louvre Hotels Group (LHG) is a major player in the global hospitality industry with over 1,500 hotels and in 54 countries. The hospitality firm operates in segments ranging from one-star to five-star with the its historic brands viz. Première Classe, Kyriad, Campanile, Tulip Inn, Golden Tulip, Royal Tulip), the five brands of the Sarovar Hotels network in India, the french Group Hôtels and Préférence and Chinese brand Metropolo.

(The writer is a Mumbai-based independent business journalist and has extensively covered diversified consumer businesses over the last two decades. He can be reached at hello@ashishktiwari.com)

Lemon Tree partners Al Waleed Real Estate for Dubai hotel foray

Lemon Tree Hotels, one of India's leading hospitality firm in the mid-priced hotel accommodation segment, in partnership with Dubai's Al Waleed Real Estate LLC has entered the Middle East hospitality market. Through its management subsidiary Carnation Hotels, the BSE-listed hospitality chain has debuted in the international market with the launch of its first Lemon Tree Hotel in the United Arab Emirates (UAE).

According to Rattan Keswani, deputy managing director – Lemon Tree Hotels and director – Carnation Hotels, said, the UAE market holds immense business potential for the hotel chain and their's is the first branded mid-scale hotel in the area. "We have a locational advantage, with the hotel strategically situated close to famous destinations like Burj Al Arab, Kite beach and the Mall of Emirates, and are equidistant from Business Bay and JLT, the two major business districts of Dubai. Such is our proximity to the Burj Al Arab, that our guests can enjoy unhindered views of the iconic building from the pool deck, and even some of the rooms," said Keswani adding that the hotel company is hoping to have many more hotels in the region in the future.

Owned by Al Waleed Real Estate LLC, the hotels is located on Al Wasl Road and is within a kilometre from Sheikh Zayed Road and Jumeirah Open Beach. Featuring 114 guest rooms, the property boasts of a multi-cuisine restaurant, Lemon Tree Café, with al fresco extension, a conference room, a swimming pool, a well-equipped fitness center among other facilities.

The addition of this hotel, Keswani said, opens a new location for the brand, thereby increasing its appeal to existing and potential customers. "We are confident that our partnership will enjoy mutually beneficial results within a reasonable stabilisation period after the launch. The UAE and Gulf Cooperation Council (GCC) is a resilient market in the long term and we could foresee the need for a recognised mid-market hotel in the branded space," he said.
 

Ideal for business and leisure travellers, the hotel is a short 20-minute drive from Dubai International Airport and close to Dubai Internet City, Dubai Media City, Barsha Heights, and Knowledge Park. It is also well connected by road and air to the other Emirates, including Abu Dhabi, Ajman, Fujairah, Ras Al Khaimah, Sharjah and Umm Al Quwain.

(The writer is a Mumbai-based independent business journalist and has extensively covered diversified consumer businesses over the last two decades. He can be reached at hello@ashishktiwari.com)

Pan India RevPAR of premium hotels to remain stressed in fiscal 2020

The revenue per available room (RevPAR) outlook, for hotels across India in the premium category, will continue to remain stressed in fiscal 2020 (FY20). As per a senior ICRA Research executive, this is mainly owing to subdued demand environment in the country. While individual hotels have initiated price hikes, their ability to sell at higher rates will primarily depend on their capability to manage daily demand and occupancy.



Vinutaa Sriraman, assistant vice president - large corporate ratings, ICRA Ltd, said, “While demand has recovered marginally during October to November 2019 period, overall revenues for FY20 are likely to be flat at about 0% to 3%. The margin outlook for FY20 is also expected to be largely flat. ICRA also does not expect the larger hotel companies to embark on debt funded capital expenditure (capex) programme given the experience of the recent past.”

In terms of city wise performance, majority of the key markets witnessed a decline in RevPAR in the first half of FY20. In fact, Bengaluru was the only key market that witnessed improvement in RevPAR. With negligible premium category hotel room supply additions over the past several quarters, Mumbai has continued its position as a city with the highest occupancy of over 70%. However, the south Mumbai market has performed better compared to north Mumbai.

While the up-cycle would be delayed, Sriraman said, the healthy demand expected over the medium term is likely to facilitate improvement in average room rates (ARRs) and occupancy. “Among major markets, Mumbai continues to post high occupancies, as fresh hotel room additions have been slow over the last four years. Being a gateway city, Mumbai’s healthy demand prospects would drive RevPARs over the medium term,” she said during an analyst call.

In the National Capital Region (NCR), Delhi has about 63% of the NCR inventory while the remaining is spread across Noida, Gurugram and Faridabad. While Delhi can support higher ARRs, Gurugram, which has been struggling over the last few years owing to the Delhi International Airport Ltd (DIAL) Aero City supply, is showing signs of improvement. The micro market of Noida is likely to witness muted growth in occupancies and ARRs over the medium term due to anticipated increase in supply in FY21, FY23 and FY24.

“Monthly occupancies were growing for about 48 months on a year-on-year basis. However, occupancy in the first half of fiscal 2020 (H1 FY20) declined following the increase in airfare post the shutdown of Jet Airways. Adding to the woes were muted corporate performance, weak consumer sentiment and slowdown in foreign tourist arrivals (FTAs) and domestic travel due to extended election period in the first quarter of FY20.



Pan India average occupancy declined by 1% to approximately 63% in H1 of FY20 compared to 64% in the same period of fiscal 2019. Market wise, Mumbai, National Capital Region (NCR), Pune, Kolkata and Goa witnessed some moderation in occupancy in this period. ARRs, which largely remained flat for nearly three years up to the third quarter of fiscal 2016, started witnessing some traction beginning fourth quarter of FY16. The traction continued for the whole of FY17, FY18 and FY19.

“When demand slowdown impacted ARR in the first quarter of FY20, rates recovered marginally in the second quarter. As per ICRA estimates, ARR across India stood at Rs 5,400 for the first half of fiscal 2020 compared to Rs 5,500 in the same period last year. Current ARRs are lower by 30-35% from the peak levels witnessed in H1 of FY19. Corporate request for proposal (RFP) rates have been negotiated about 4% to 5% higher for the cycle starting January 2020. However, effective pass through of the same will depend on demand pick up,” said Sriraman.

The ARR movement is city specific. While most cities have witnessed a decline in ARR for H1FY20, cities like Mumbai and Bengaluru have reported growth. Impacted by lower occupancy and ARR, revenue per available room (RevPAR) declined by about 3% to 4% to close at about Rs 3,400 in the first half of the current fiscal. While the RevPAR was higher by Rs 500 than the all-time low of recorded in FY14 and FY15, it was still 30% lower than the peak in H1FY2009. Having said that, it was still equal to the peak RevPAR witnessed in FY11.

In NCR, there was a marked variation in performance across micro markets. With a large part of the business travel into Delhi being government related businesses, there was a decline in both ARR and occupancy in Delhi. On the other hand, Gurugram showed positive traction in both ARR and occupancy with inflow of corporate guests despite the auto sector slowdown. “The second quarter of fiscal 2020 will witness some pick up in government related travel in the Delhi region. Overall, pan India ARR and occupancy remained under pressure in H1 of FY20,” she said.

Demand drivers and their performance
Demand for the hospitality industry is multi-pronged and depends on foreign tourist arrivals, domestic leisure and business travel and MICE or meetings, incentives, conventions and exhibitions segment. Domestic guests account about 75% of the total demand while FTAs account for the balance. Business travellers account for about 60% to 65% of the demand, while leisure travellers account for the balance 35% to 40%. The ratio varies depending on the destination.

“The calendar year (CY) 2018 was a strong second year of international tourist arrival growth in continuation with a 7% growth witnessed in CY2017. This was higher than the 4% yearly average of CY2005 to 2016. For H1 CY19 the growth slowed to 4% due to economic headwinds and the already high base,” said Sriraman.

While Asia Pacific witnessed a 6% FTA growth during H1 of CY19, growth in arrivals into India stood at 3% and was lower than the Asia Pacific or global international tourist arrival (ITA) growth. Foreign tourist arrival, in year-to-date October CY2019 has been impacted by global trade wars and the economic slowdown.

The Pulwama attack in February 2019, the Indian general elections during April and May 2019, the second bout of Nipah virus in Kerala in June 2019, diversion of traffic to the Cricket World Cup in UK in May to July 2019, the Kashmir crisis and ensuing travel advisories in August 2019, Thomas Cook UK shut down in September 2019 and extended monsoon have further worsened the situation. In December 2019, USA and UK have issued reason travel advisory for women visiting India, which could further impact arrivals in the country. Bangladesh, USA and UK were the top three FTA source markets for India in October 2019.

The e-tourist visa (e-tv) scheme
Tourist arrivals, under the e-tv scheme, accounted for about 25.1% of the overall FTAs in India in year-to-date (YTD) October CY2019. The e-tv scheme, which started in November 2014, with about 43 countries has since been expanded to include over 165 countries. During YTD October CY19, travellers under the e-tv scheme grew at a healthy 20.9% on y-o-y basis, also lower than the 44.7% witnessed in YTD October CY2018. This is due to high base effect and slowing FTA growth.

Foreign exchange earnings (FEE)
FEE grew by about 2% in USD terms during YTD October CY2019 as against a 7.5% y-o-y growth, during YTD October CY2018. In Indian Rupee (INR) terms, the FEE growth was higher at about 6.1%. However, this was also lower than 11.3% for YTD October CY2018. Per traveller USD spend, witnessed a 1.2% decline, while in INR terms, it was higher by about 2.7% for YTD October CY2019.

Domestic passenger trafficIt grew by a modest 2.9% during YTD September CY2019 compared to a strong 21% y-o-y growth for the corresponding previous year. On year growth in domestic passenger traffic was in double digit every month since September 2014 until December 2018. April 2019, was the first month of decline since June 2013.

“Increase in airfares following the grounding of Jet Airways aircrafts in January 2019 and eventual shut down in April 2019, slowdown in domestic travel due to an extended election period of six to seven weeks, Nipah vitus alert for the second time and Kerala, muted corporate performance and consequent cut on discretionary travel spends, lower consumer confidence as indicated by the RBI current situation index, extended and excess rainfall in several cities like Mumbai and Goa, and water shortage in cities like Chennai have also impacted domestic travel,” she said.

Corporate performance
With second quarter FY2020, revenue growth entering a negative territory in almost four years, the uncertain business environment and cost-cutting initiative could have a bearing on travel related spends in the near term.

Supply dynamics
The supply growth pipeline in the Indian premium hotel segment is expected to be about 4.5% compounded annual growth rate (CAGR) during FY19 to FY24. With the pickup in supply announcements over the last few months, the incremental supply pipeline for FY20 to FY24 is now in line with the addition during FY14 to FY19. However, the growth rate is lower given the higher base.

According to ICRA research, total inventory to be commercialised over the next five years has increased from about 98,900 rooms in November 2018 to about 1,08,000 rooms in December 2019. This is an increase of about 9% in the last one year. Incremental supply is largely focused on Bengaluru, Mumbai and NCR, and is likely to be opened in FY23 and FY24.

“Part of the incremental supply is because of up-scaling and re-branding of midscale hotels into premium category rooms. Over the FY20 to FY24 period, about 3% to 4% of the incremental supply in the pipeline, is from brownfield expansion. A sizable part of the supply pipeline in FY20 and FY21, in the top eight cities tracked by ICRA are owned by real estate players. The supply pipeline in Goa and Kolkata are expected to come in FY20 and FY21 while incremental supply in Hyderabad, Mumbai and Bengaluru is spread over the years,” said Sriraman adding that large real estate developers like Prestige, Bhartiya City, Oberoi Realty and DB Group are aggressive on the hospitality sector.

Red flags
These have intensified currently. Demand weakness and supply uptake will continue to weigh-in, in the near-term performance and demand will be contingent on the overall economic revival.


(The writer is a Mumbai-based independent business journalist and has extensively covered diversified consumer businesses over the last two decades. He can be reached at hello@ashishktiwari.com)

Thomas Cook India acquires rights to Thomas Cook brand for India, Sri Lanka and Mauritius markets

Thomas Cook (India) has acquired the rights to use the Thomas Cook brand in India, Sri Lanka and Mauritius markets. The deal involves a one-time payment of approximately Rs 13.9 crore (GBP1.5 million).

Madhavan Menon, CMD, TCIL

An agreement to this effect has been signed with AlixPartners, Thomas Cook UK’s (TCUK) appointed special managers. The agreement ensures that Thomas Cook (India) can now use the brand in perpetuity on a royalty-free basis. This move by TCIL also prevents possible new entrants into these markets, using the Thomas Cook brand name.

Madhavan Menon, chairman and managing director, Thomas Cook (India) Ltd (TCIL), said, "We have been able to sign an agreement to acquire the rights to the iconic Thomas Cook brand. It is one of the most respected names in the travel services space and one that we at Thomas Cook India have operated uninterrupted for 138 years now."

An integrated travel and travel-related financial services company, it has been operating under the Thomas Cook banner in India since 1881. In 2012 when TCIL were acquired by Fairfax Financial Holdings of Canada, it had entered into a Brand Licence Agreement with the erstwhile Thomas Cook Group of the UK to pay an annual brand licence fee of Rs 2 crore until 2024 for exclusive use of the brand in India, Sri Lanka and Mauritius markets until 2024. The brand license agreement also gave TCIL the right of first refusal to acquire the brand in the event of the Thomas Cook UK Group going into liquidation before 2024.

"So when this opportunity of complete ownership of the brand name came up, we had to grab it," said Menon.

Among the largest travel service provider networks headquartered in the Asia-Pacific region, Thomas Cook India Group's operations is spread across 29 countries and five continents. With a combined revenue in excess of Rs 6,718.7 crore for the financial year ended March 31, 2019, it currently employs over 9,700 people across its offices.

In addition to Thomas Cook, the Thomas Cook India Group operates leading B2C and B2B travel brands including SOTC, TCI, SITA, Asian Trails, Allied T Pro (ATP), Australian Tours Management (ATM), Desert Adventures, Luxe Asia, Kuoni Hong Kong, TC Travel, Private Safaris East & South Africa, Sterling Holidays and Digiphoto Entertainment Imaging (DEI), with strategic investments in Ithaka by Travel Junkie Solutions.

Thomas Cook India Group, according to a company statement, continues to remain financially strong with cash and bank deposits balances of Rs 1,088.3 crore as of September 30, 2019. On a standalone basis Thomas Cook India is debt free and the group generates an average annual free cash flow of around Rs 200 crore.

"Our teams will continue to build the Thomas Cook business across India, Sri Lanka and Mauritius, and grow sustainable value for all our stakeholders in the years ahead,” TCIL said in a statement.

(The writer is a Mumbai-based independent business journalist and has extensively covered diversified consumer businesses over the last two decades. He can be reached at hello@ashishktiwari.com)

Muted demand delays tourist season in Goa

This is an EXCLUSIVE story. Do not reproduce or use in any manner whatsoever without the writer's permission.

Business for hospitality and tourism industry players in Goa is unlikely to reach the heights this peak season. In fact, the overall market scenario that was expected to improve in November and December months is yet to pick up steam. While some industry players are of the view that green shoots of revival are beginning to show up, a few others feel business is already down by 30%, if not more.

Rattan Keswani, deputy managing director, Lemon Tree Hotels and director, Carnation Hotels, said, the situation in Goa is not as robust as it should have been. “Demand is a bit muted than it normally is at this time of the year but we are seeing green shoots of revival,” he said adding that hotels being operated and managed by Lemon Tree in Goa are witnessing inflow of domestic travellers.

Chapora Beach (Picture Courtesy -- https://goa-tourism.org.in/chapora-beach-goa)

A sought after beach destination by international and domestic tourists alike, Goa has had a tough 2019 so far. While off-season months were full of challenges including those arising as a result of Jet Airways shutting down operations, the business season that would have typically compensated for the loss of revenues, isn’t looking any better either.

Santosh Iyer, vice-president - sales and marketing, GlobeTrott Leisure and Events, said, the market scenario in Goa is very subdued. “The economic slowdown, both in India and international markets, has only made it more challenging for the hospitality and tourism sector players. Compared to last year, business has taken a considerable hit and is down between 20% and 30% already. We are hoping situation to improve and business to pick up towards the last week of December,” he said.

A key reason for this scenario in Goa is the fact that tourist inflow via chartered fights from the European markets has stopped completely after the collapse of 178-year-old British tour operator Thomas Cook UK Plc. This significantly impacted business as a large percentage of these holidayers, estimated to be over 35,000, are unlikely to make it to Goa.

The industry was hoping for some respite after Goa chief minister Pramod Sawant’s assurance in September about the possibilities of direct flights by Air India from London to Goa, before the season begins. However, it’s already third week of November and nothing has happened on that front yet. This basically puts an end to the possibility of a large majority of European travellers coming to Goa this season.

Aloo Gomes Pereira, chief operating officer - Charters & Goa, Trail Blazer Tours India Pvt Ltd, chartered flights from Russia and other Commonwealth of Independent States (CIS) countries are still coming but the numbers are nothing to write home about. “Tourists from Ukraine will start coming in from December, so we’ll have to see how that pans out for the tourism industry in Goa,” said Pereira adding that the beach destination will see scanty international traffic this season.

According to a top hotelier, a lot of hotels in their competitive set were dependent on CIS charters and the numbers this time around are far less. “All hotels banking on charter contracts are having a tough time. Those with a right mix and not having too many charter contracts are protected,” said the hotelier adding that room rates continue to be under pressure.

Hotels were also hoping for better room revenues after goods and services tax (GST) rate cuts were announced on room tariffs. For rooms priced at Rs 7,500 and above, the GST rate was reduced to 18% from 28% earlier. Hotels selling rooms priced between Rs 1,000 and Rs 7,500 would have to levy 12% GST and hotels charging less than Rs 1,000 for their guestrooms have no GST.

“Room rates were hiked in October in the hope of a good business season. However, sensing the ground reality, majority of the hotel operators have re-priced their guestrooms and are now focusing on boosting occupancy levels. It’s all about optimising the total room inventory now,” said a top executive from one of the hotel chains operating in Goa.

While foreign arrivals into Goa was and continues to be a challenge, industry players were anticipating that demand and supply gap would be taken care of by domestic tourists. Unfortunately, the shutting down of Jet Airways earlier this year has already impacted domestic tourist arrivals into Goa. While it’s starting to creep back the numbers are not as expected.

“It’s too early as it’s the first month after Dussehra and Diwali. Normally numbers start to translate now and build up in December, and then carry on in January, February and March. Occupancy wise I don’t think there is too much trouble but total revenue wise I think there is a bit of a shortfall,” said another hotel chain operator.

What’s also ailing Goa’s tourism industry is the deteriorating infrastructure in the state. Road conditions have gone from bad to worse making travelling within the state a very painful exercise.

“The current government is all about false promises and irresponsible statements. Nothing really is happening on the ground. It’s such a horrible experience just travelling from the airport to the hotel. Why would tourists come to Goa if the administration isn’t bothered about providing basic infrastructure facilities even,” said a local tour operator.

Caught in a situation, the hospitality and tourism industry players are left with no option but to find ways and deal with the challenging situation at hand on their own. And with increasing stress in the Indian economy getting pronounced every passing day, it will have to be seen if domestic travellers will have a role to play in bailing out Goa this tourist season.
(The writer is a Mumbai-based independent business journalist and has extensively covered diversified consumer businesses over the last two decades. He can be reached at hello@ashishktiwari.com)