Under the plan, all new ITC hotel projects will be hived off to this new company in which Sheraton will have a substantial equity. Analysts feel that this development reiterates BAT's thinking that the ITC group should keep out of hotels and paper businesses.
An alternative route being explored by ITT Sheraton is to float an entirely new company in which the US hotel major and ITC Hotels will have equity stakes.
ITC Hotels, in which the cigarette major ITC holds 72 per cent, has drawn extensive expansion plans which will involve an investment of around Rs 700 crore, sources said.
ITT Sheraton will be the first foreign hotel chain to invest in India.
At present, ITT Sheraton and ITC Hotels have a franchise agreement. Besides, the two enjoy a reverse franchisee agreement under which the Welcomgroup has franchised two of its existing hotels in Bangkok and Hong Kong to ITT Sheraton.
The hotel business of ITC group is run through its subsidiary, ITC Hotels which runs the Welcomgroup hotel chain. ITC Hotels owns two properties in Bangalore and Jaipur. Cigarette major ITC, on the other hand, owns three properties -- the Maurya, Chola and Mughal Sheraton hotels.
Chola and Mughal are run by ITC Hotels under an operating licence. In the case of the Maurya, ITC and ITC Hotels have a management contract.
The Hyderabad and Vadodara hotels are run through separate equity joint ventures in which ITC Hotels is a partner. The rest of the Welcomgroup hotels operate under either franchise agreements or management contracts.
