Berggruen Hotels to invest Rs 450 cr on new projects

Berggruen Hotels, a mid-market business hotel chain funded by US-based Berggruen Holdings, plans to double its room inventory and invest at least Rs 450 in new projects across the country. The company operates under the brand Keys Hotels.

Managing director and chief executive Sanjay Sethi said, “Currently, we have 11 operational properties, and 12 more are in the pipeline. In addition, 45 more properties have been signed on. We are spending an average of about Rs 32 lakh per room.”

The company has pumped in Rs 250 crore as capital expenditure from its own equity contribution, while Rs 126 crore had been raised and invested as debt. Of the 45 signed properties, 14 are in advanced stages of achieving financial closure, and these would account for an additional 1,400 rooms. The added inventory would help the company exceed the target of 30 hotels by 2015-16 by five hotels, Sethi said.

Though the company was approached by private equity firms, it had backed out, citing lack of opportunity. Later, however, it may consider talks for private equity funding. “Our first source of funding is our parent company. Then, there are the debt and the private equity routes. We can expand our share capital to raise funds through the private equity route. But as of now, there is nothing concrete,” Sethi said.

The company aims to add 2,300 rooms in 18-24 months. This would be carried out through 23 properties, of which 10 would be managed by it.

“We have deployed Rs 376 crore till now. Of this, Rs 126 crore was through debt. So, we have a lot of room for raising debt. Most of the funding for properties in the immediate future would be through debt,” Sethi added.

Rooms at the company’s business hotels are priced at Rs 2,500-4,000 a night, while those at its resorts are priced at Rs 5,000-6,000 a night. Average occupancy figures are close to 50 per cent, with the highest at Trivandrum (65 per cent).

Keys Hotels currently owns and operates six hotels---three in Bangalore and one each in Trivandrum, Ludhiana and Pune. The brand also manages five hotels in Mumbai, Chennai, Aurangabad, Lonavala and Mahabaleshwar and plans to open hotels in Cochin, Vishakhapatnam and Shirdi this year.

Though the economic slowdown has hit investment in most sectors considerably, investment in hotels and resorts hasn’t been hit much.