Battle for Taj Mansingh: Saraf turns brand owner, may bid for iconic hotel

Saraf Hotel Enterprises, which owns 10 luxury hotels in the country (most of them managed by Hyatt), is keen to bid for Taj Mansingh Hotel in New Delhi. Saraf was not eligible to bid for the property under the tender norms issued by the NDMC, which said a bidder should own 500 rooms in five-star properties as well as a brand. The group launched its own luxury brand recently and that makes it eligible to bid for Taj Mansingh. 

“We were not eligible in spite of having 5,000 rooms. We complained to the authorities concerned and the government,” said Umesh Saraf, joint managing director at Saraf Hotel Enterprises. The NDMC’s tender has lapsed and it is likely to come up with a fresh tender and revised norms.

Saraf Hotel, with several marquee properties such as Grand Hyatt (Mumbai, Hyatt Regency (Kolkata), The Grand and Andaz (New Delhi), did not own a brand. Earlier this month, it got a brand with the launch of its own luxury hotel.

The first hotel under the new brand, Azaya, was opened in Goa last week. The 114-room south Goa beach hotel has been built with an investment of Rs 2 billion on land acquired from SBI. Saraf said the company would have spent Rs 600-700 million on the land. The group may use the Azaya brand in some future properties as well. 

Referring to Taj Mansingh, Saraf said the company was keeping a watch on the next announcement and dates for the auction. “It is a prized asset in the heart of Delhi. Wewill bid for it. You are not paying anything for the property. So, there is no capital cost,” he said. 

Tata group’s Indian Hotels, the current operator of 294-room Taj Mansingh, had signed a lease agreement with the NDMC in 1976 and the hotel was inaugurated two years later. In 2011, the 33-year-old lease ended. When NDMC decided to auction the property, Indian Hotels challenged the decision in the Delhi High Court. After much back and forth and several lease extensions, the Supreme Court approved the auction last April.

The next operator of this property will have to assure a minimum revenue share of 17.25 per cent and a minimum guarantee fee of Rs 29.6 million per month, with a clause for escalation. There is also an upfront non-refundable fee of Rs 530 million. 

Saraf said his company would be in acquisition mode and buy assets in metro cities, particularly Delhi. “It is not worth it to buy land and construct and bear with the long government approval process. The cost will go up to Rs 50 million a key and you will make no money. That is a reality. It is not viable to go and build a hotel today. So, people will not mind paying a premium to acquire an existing asset,” said Saraf.