Royal Orchid is set to double room base

With a view to leveraging the rebound in occupancy rates and the possibility of an IT/BFSI sector revival, Royal Orchid Hotels Ltd (ROHL) plans to double its room base to about 2,000 rooms over the next three to four years from 989 in fiscal 2009. The expansion is expected to absorb a capex of Rs 370 crore.

Focussing on long term growth, the company has closed debt of Rs 300 crore since March this year, ROHL’s vice-president (finance) K V Rao said. “Rs 60-Rs 70 crore more will be raised through the equity route. We are in talks with various corporates for this,” Rao added.

The present phase of the expansion plan underway at the company will involve new 5-star hotels in Hyderabad and Jaipur at a cost of Rs 160 crore. Both properties will be operational by September next year, Rao said.

ROHL is presently developing a 4-star hotel at Powai in Mumbai with 250 rooms, under the name Royal Orchid Central, set to commence operations in 2011. ROHL has acquired 53 per cent of the equity capital of a joint venture company, Amartara Hospitality Pvt Ltd, for Rs 18.04 crore to implement this project. The company will raise its stake in this project to 74 per cent before December 2010. ROHL’s 4-star property at Ahmedabad commenced operations this month.

Royal Orchid Hotels has operations in most Tier 1 metros in India, though over half its rooms are in Bangalore. The company is expected to operate 1,750 rooms by the end of fiscal 2011-12, a CAGR of 21 per cent in its room base.

“We expect our occupancy levels to increase significantly in the coming fiscals,” Rao said. ROHL’s occupancy levels at the end of September 2009 stood at 53 per cent.

ROHL posted consolidated revenues of Rs 140 crore in fiscal 2009 ended March 31. Any revival in spending in the IT/ITeS and BFSI segment is expected to improve room availability in markets like Bangalore, Chennai and Hyderabad which have been hit by the global financial meltdown. Such a revival is expected to give a boost to the expansion plans of established hotel players like ROHL.