Indore firm to sign deal with Sarovar Hotels

Indore-based Entertainment World Developers (EWDPL), in which Mumbai-based realtor Phoenix Mills holds 42 per cent stake, is all set to sign a deal with hospitality major Sarovar Hotels and Resorts to manage its 11 hotel properties in the country, according to a top company official.

The hotels, which will be under Sarovar's 4-star brand Sarovar Premiere and 3-star brand Sarovar Portico, will have a cumulative strength of more than 1,500 rooms. EWDPL will spend nearly Rs 450 crore on building these hotels that will be operational by 2010, and another Rs 500 crore on fit outs, said Manish Kalani, managing director of EWDPL India.

"We have finalised all the terms and conditions. We will sign the deal very soon," said Kalani. EWDPL will pay a management and operational fee to Sarovar Hotels. These hotels are being built on top of the malls, which EWDPL is building in tier-II cities such as Raipur, Udaipur, Nanded, Jabalpur, Chandigarh, Indore, Ujjain, Bhilai among others.

EWDPL is developing multiple-use properties, such as malls and hotels, in six cities and planning to launch similar projects in Thiruvananthapuram and Nagpur, which will create nearly 25.49 million sq ft of retail and commercial space in the next one-and-a-half years.

Recently, German realty fund MPC Synergy invested Rs 1,300 crore in various special purpose vehicles of EWDPL and Phoenix Mills, which are developing realty projects across the country. MPC Synergy picked up 16 per cent to 49 per cent in the respective SPVs.

After two years of growth, the Indian hospitality industry is going through a rough patch this year. Occupancy rates have fallen 10 per cent in the last six months and are expected to fall further by a similar percentage in the next six months to a year given the current economic conditions.

However, over the next two years, major hotel chains such as Oberoi group, Taj, Leela Ventures, Asian Hotels among others are expected to add 7,500 premium to mid-budget hotel rooms to the current availability of around 110,000 rooms.

But Kalani is optimistic that chains like theirs would attract more guests as companies cut premium travel and stays and opt for cost-effective expenses. "We will not be affected from this. We see an excellent business opportunity for our hotel chain when executives are asked to stay in three- and four-star hotels,'' said Kalani.

Shreenath Shastry, national director, hospitality and leisure for Knight Frank, said, "Hotel business is very cyclical and India has seen many such slowdowns in the past decades. There are concerns about short-term concerns. However, there are excellent opportunities in the medium to long term," he said.

"If you acquire land at reasonable rates and look for long-term returns, then hotel business is good," he said. Phoenix Hospitality, the hospitality arm of Phoenix Mills, is also developing nearly 14 hotels across the country. Phoenix has tied up with Hong Kong-based Shangri-La to manage its hotel property in Lower Parel in Mumbai and has also tied up with the Hyatt Group and US-based Marriott International to manage its other hotel properties.