After Grosvenor check-in, Sahara gets down to work

A little over a week after India’s Sahara Pariwar announced purchase of London’s legendary Grosvenor House hotel, there are indications the group is planing to play a bigger role in day-to-day operations of the property.

The Lucknow-based group paid £470-million (Rs 3,300 crore) for the hotel, which counts the royal family and numerous state heads as patrons.

On Wednesday, a source in the group’s interests in London said it would sink its teeth deeper into the day-to-day operations of Grosvenor House. A team from Sahara is soon expected to move to London to collaborate with the current management, led by JW Marriott, to ensure that decisions on important aspects such as finance, operations, human resources and strategy are taken jointly.

 

Even though Sahara owns Grosvenor House fully, the operations are with Maryland-based JW Marriott under a 50-year lease. Though the lease is in its eighth year, it is learnt that Sahara Pariwar may, if need be, exercise the right to terminate it, taking on itself the day-to-day operations.

Under the agreement, transferred from Royal Bank of Scotland (which sold the hotel to Sahara), JW Marriott has to share 80 per cent earnings before interest, depreciation, tax and amortisation with Sahara.

Sahara insiders say there is no immediate plan to change the arrangement but if there is a need, the company will be keen to change the contract, so that Marriott receives just 10 per cent fee for running the hotel. In such a case, Sahara can bear the cost of day-to-day operations, after taking on its rolls all 590 employees, they say.

Sahara also has big plans to expand the business. This includes opening a spa, an Indian restaurant, a casino, and even exhibiting the large library of Indian movies the group owns in India.

Without revealing the current revenues, Sahara said it hoped to take the top line to £35 million (Rs 245 crore) by adding new verticals.

The group believes 25,000 sq ft space is unused and can be developed to improve finances. The new owner is also taking a hard look at room rates, which it believes are lower than what other five-star hotels in the vicinity charge. The rates for the hotel’s 494 rooms, many of which overlook Hyde Park, are between £249 (Rs 17, 480) and £1,500 (Rs 1,05,300) a night, with summer occupancy touching a peak at 80 per cent.

The new owner is also looking at exploiting conventional income sources by improving the bar stock. “Why should a customer staying at our hotel go to Dorchester (Hotel) 30 metres down the road for a drink?” said a source.

Elucidating the group’s plans for Grosvenor House, a Sahara insider asked, “You didn’t expect us to pay £470 million (Rs 3,300 crore) just for a building, did you?”

Theatrics apart, Grosvenor House is more than a lavish building in Central London. The Edwardian monolith is a pre-Great Depression landmark that once hosted the who’s who of Europe and America, including Winston Churchill, Dwight Eisenhower, Jacqueline Kennedy, Henry Kissinger and Ella Fitzgerald. Among its English patrons, Grosvenor House counts the royal family as the most prominent one. More than three generations of the family have used the facilities the hotel offers. Even though the Queen’s last visit to the hotel was three years ago, the king-in-waiting, Prince Charles, and his son, William, are frequent customers for charity banquets at the hotel. The last G-20 summit in London in 2009 saw Grosvenor House playing host to 14 heads of states. Its recent visitors include US Secretary of State and former first lady, Hillary Clinton.

At present, Indian patrons account for two-three per cent of room revenues. Despite its popularity, a little over 50 per cent business comes from the domestic market, followed by the trans-Atlantic countries and the Middle East. Howard Hartley, a 29-year sales veteran at the hotel, says he has been targeting only India’s crème de la crème. But he is quick to add that this is a substantial number and growing. The new Indian owners can only help improve this.