Royal Orchid to add 3,000 hotel rooms

Bangalore-based hotel company Royal Orchid Hotels is planning to add 3,000 rooms over the next four-five years to cater to the expected boom in demand for affordable yet luxury stay in India, driven by the leisure and corporate sector.

The company, which has four brands under its fold — Royal Orchid, Royal Orchid Central, Royal Orchid Suites and Royal Orchid Resorts — has 12 properties and 1,000 rooms. It is already in the process of doubling this number through a Rs 500-crore investment which will add another 1,000 rooms over the next 20 months.

Royal Orchid Hotels (ROHL) co-promoter Keshav Baljee said: “A major portion of the expansion strategy will be focused on increasing the presence of the Royal Orchid Central brand. Further investment will depend upon ownership and managed properties. So it should be around Rs 600-1,000 crore.”

Royal Orchid Central is a 4-star contemporary, business and lifestyle hotel brand, which is also classified as an economy hotel. The flagship brand Royal Orchid is a 5-star brand.

The company has properties in Pune, Bangalore, Jaipur, Mysore and Goa, with more properties due to come up in Hyderabad, New Delhi, Shimla, Navi Mumbai and Ahmedabad.

It is inaugurating its 104-room Royal Orchid Central hotel in Ahmedabad next month, while a 70-room hotel in Navi Mumbai from the same brand will be opened in December or January through a management contract.

According to Baljee, the company is in talks with a number of developers who have expressed keen interest in having a management contract with the company.

“We have not decided on the number of properties we would have under management contracts, but we are certainly looking at that segment. We have three properties under Central brand, but maximum addition will come from this brand,” Baljee added.

A management contract involves no or very minimal equity participation from the hotel company that will run the property. The unit is, however, built and owned by a developer who can either be an individual or a company. In most cases, the developer is a real estate player.

Meanwhile, the management has been acquiring company shares from the open market to raise its promoter stake, which can ultimately be utilised later to unlock value to fund any of its expansion plans.

According to data provided by the Bombay Stock Exchange, as of June, the promoters held a 69.45 per cent stake in the company, with Chairman and Managing Director Chander Baljee holding a 47.66 per cent stake.

“We have been adding shares through creeping acquisition and will continue to do so. We consider it to be a part of our overall business strategy,” Baljee said.