GL Hotels to invest Rs 600 crore

The hotel founded by Ghai Enterprise aims to build 100-room boutique hotels in leisure and business destinations across the country.

"We are also expanding Mayfair, our banqueting business to five more cities. Beginning 2009-end, we will add one property in either segment every quarter," said Raman Mehra, chief executive, GL Hotels. Indian Hotels, which owns the Taj Group chain and East India Hotel, owners of Oberoi group of hotels among others, are building new properties to meet the surging demand for rooms from local and overseas business and tourists. The industry has a shortage of 1,50,000 rooms and this is fuelling hotel room rates across the country.

The Mumbai-based company will use its own cash and raise debt to fund the Mayfair expansion, while private equity investors have pledged money for the boutique hotels. The group may raise 40 per cent from selling bonds or bank loans to expand its hotel business and raise 30 per cent in debt for boosting banquets. Dunearn Investments, a unit of the Singapore-based Temasek Holdings, bought a 22 per cent stake in GL Hotels last year.

The enterprise is set to launch its own hotel brand soon. "We are in the process of acquiring a brand name,' Mehra added. It will develop leisure hotel properties in Goa and Jaipur, and a business resort property at Shirdi, the pilgrimage destination near Mumbai.

The company will have business hotels in Chennai, Hyderabad, Bangalore, Gurgaon and Ahmedabad. It also has plans for a small hotel and spa at Alibaug near Mumbai, to be be operational by the end of next year.

The boutique hotels will cost Rs 50 crore per key, exclusive of land costs. A 100 per cent subsidiary of GL Hotels, Kwality Resorts & Hospitality, is managing land deals and acquisitions in various cities for the company.

GL Hotels already has a boutique hotel in Mumbai, InterContinental, which is a 58 room property with a bar, lounge and banquet venue in the plush Marine Drive area.

Giving a boost to its standalone five-star banquet services, GL Hotels will open Mayfair Banquets in five cities, including Ahmedabad (unit starting end of this month), Gurgaon (2008) and Bangalore (2009). In Gurgaon, it has tied up with real estate major DLF for its banquet business. This expansion will make Mayfair the first branded banquet service to have a presence across country.

The hotel business contributes 55 per cent of the revenues and banquets account for the remaining 45 per cent. "In due course, banquets will contribute at least 50 per cent of the revenues. The idea is to bring both the businesses together for a synergy as the F&B revenues are substantial," said Mehra. Going into the next phase, the enterprise will look at getting into management contracts for operating hotels.

"Once our brand is established, we would go into markets where we would not have to invest but will operate hotels. Owing to the escalating land costs, the option of buying land and then having a property is not too viable," Mehra added.