Despite slowdown, there is enough demand: Patu Keswani

Interview with Chairman and MD, Lemon Tree Hotels

Delhi’s Aerocity is now ready with two more hotels — Lemon Tree Premier and the Red Fox budget brand — after getting the much-talked about security clearance. Patu Keswani, chairman & managing director, Lemon Tree Hotels, tells Ruchika Chitravanshi he expects the Aerocity hotels to increase the much-needed supply in Delhi and thrive in spite of the slowdown. Edited excerpts:

You have crossed many hurdles to finally open both the hotels. How much did the delay cost you?

The opening has been delayed by precisely one year. We were ready on Christmas, last year. This is our first year anniversary. In terms of direct cost there has been an impact of Rs 50-60 crore. But there has also been an opportunity cost of around Rs 50 crore. So, the total additional cost we had to bear due to the delay is around Rs 100 crore.

Have you opened the entire hotel or part of it?

We are opening 350 of the 500 rooms combined for Lemon Tree Premier and Red Fox hotels. The remaining 150 rooms have been sealed right now. They are the ones overlooking the runway and taxiway. They will open only when the Defence Research and Development Organisation will give the specification that the windows are capable of withstanding the impact of a bullet. We are hoping in the next two months they should give us a date to test it.

What are the opening tariffs for both properties and how do you see the average rates in the coming months?

We have opened with a tariff of Rs 6,000 at Lemon Tree Premier and Red Fox it is the range of Rs 3,500-4,000. This is a great location. For Delhi these are very good rates. As more supply comes in rates will change but we will maintain tariff in similar range.

You have opened after JW Marriott, although it is operating in the luxury segment how do you see the competition building in Aerocity?

If JW is not able to fill its rooms and brings its rates down, there will be cascading effect. But JW is not in our category, so that is not our competition. In our segments our competition would be brands like Holiday Inn, Novotel, Ibis.

By when do you see the supply of hotel rooms coming up in Aerocity getting absorbed?

Interestingly, I don’t see much supply coming in, first. People have slowed down their development. There is a mixture of reasons, first is the economy is slow and secondly there is uncertainty of approvals. I see supply coming in only in the next three years and I certainly see all the supply getting absorbed within five years if not earlier depending on the growth of economy. But now that we have got all the clearances, others will also be able to go ahead.

Having faced troubles in getting the final security clearance, are there any more challenges you foresee?

I am pretty confident that we will do very well here. The only challenge is that I hope that the economy itself would do better. In terms of specific hotel based risks, I don’t see much challenge. Slowdown will lower the demand, but there is enough demand.

How will you benefit by having your budget and premium brand together?

This is our second such format. You can share a lot of security, administration, finance. Guests from Red Fox can get many facilities.  They can visit many restaurants in Lemon Tree. It has its cost synergies, gives more options to the Red Fox users and I find it works very well.