InterGlobe Hotels plans to invest Rs 10 billion, expand ibis hotels network

InterGlobe Hotels, a joint venture between Indigo Airlines owner InterGlobe Enterprises and the French hospitality major Accor plans to invest Rs 10 billion in expanding its portfolio of mid-market hotels in the country. The Gurgaon-headquartered company now owns sixteen hotels that are run under the ibis brand.

The fourteen-year-old JV has invested approximately Rs 20 billion in setting up multiple hotels since inception. The seventeenth hotel is ready for a launch in Kolkata next month. “We have another five hotels under various stages of development and will get launched by 2020. The committed investment in these is Rs 6 billion while we continue to look for more sites,” J B Singh, president and chief executive officer at InterGlobe Hotels told Business Standard. InterGlobe Enterprises has a sixty per cent stake in the JV.

Besides these hotels, InterGlobe Enterprises also has few special purpose vehicles with Accor under which it owns seven hotels run as brands like Novotel and Pullman. It also has a 49 per cent stake in the India operating firm of Accor.  “We have been growing at a CAGR of 31-33 per cent in capacity, higher than the industry average. We want to get up to a good number and execute projects efficiently. The market has a long way to go. Our revenues have been growing at 20-30 per cent annually,” said Singh. InterGlobe Hotels clocked revenue of about Rs 3 billion in FY18 and hopes to reach closer to Rs 4 billion in FY19.
 

He added that the company enjoys a gross operating margin of approximately 35 per cent and aims to cross 40 per cent as more and more recently opened hotels stabilise in operations. “That gives you a good cash flow…the problem is in getting to a portfolio of first 20 hotels….after that it is easier to add a few hotels without stretching…we are getting closer to that spot”. As a brand, ibis competes with Holiday Inn Express and Lemon Tree among others. 

Singh said the company is looking at 18-19 new cities for an expansion besides building more hotels in its existing markets such as Mumbai and Goa. “We believe we have created a good critical mass for ourselves. We also believe that the current big cities where we operate can take more hotels. If we get a good site in Mumbai, I will take it. The market is wide open for products like us,” he said claiming to have every second ibis user as its repeat customer. 

The company does not see a need to bring any investor on board or hit the capital market to fuel growth. “Our parent’s airline, Indigo, is now a public company but it went public after many years. We feel that we are in good shape. We prefer to put at least fifty per cent of company’s fund in a new project,” he added.
 

Number of operational hotels- 16
Hotels planned/under development -7
Number of operational rooms -2,870
Projected room count in 2021-22 -4,060
Projected revenues in FY19 (Rs bn)- 4 
 
Source: Company