A few hotel chains are looking to sell specific properties, while one hotel chain is looking for equity infusion.
Luxury hospitality chain Leela, for instance, is looking to exit its Chennai venture. JW Mariott Chennai and the Royal Orchid chain are among the others scouting for investors, according to people with direct knowledge of the scenario.
There are at least three more luxury hotels in Delhi and Goa reportedly wanting to sell off properties, but their top managers have denied such a move. “Companies for whom hospitality is not the main business will consolidate and some may exit the sector. 2012 will definitely see a lot of transactions,” said Kaushik Vardharajan, MD, HVS India. HVS India is a hospitality consultant, which has received many enquiries for such transactions from domestic as well as international companies.
The deals are taking longer than expected to fructify over issues of pricing. According to banking sources, the asking price for properties like the Leela (Chennai) is Rs 1,000 crore.
Viceroy-owned JW Marriott, Chennai, is likely to be on sale with an estimated price of Rs 800 crore. The Leela Hotels and Resorts declined to comment on the matter. Viceroy Hotels, too, did not comment. The promoter of a Goa chain, that is learnt to have definite plans to offload equity, quipped, "Where are the buyers?".
Royal Orchid Hotel chain, which has 20 hotels across India, is looking for partners to offload equity in its Hyderabad property as a part of its overall strategy to reduce debt exposure by Rs 100 crore this year, according to a top company executive. The chain has a debt exposure of Rs 300 crore. “We want to raise some funds for the chain’s expansion as we want to have a hotel in Mumbai and Delhi. Other than that, we want to retain management contracts,” said Chander Baljee, chairman and MD, Royal Orchid Hotels.
The biggest real estate company of India, DLF, too is in talks with potential buyers for Aman Hotels and Resorts. The company’s strategy is to divest stake in non-core businesses to reduce debt.
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“It is a buyer’s market, not a seller’s market,” a senior industry executive pointed out.
According to experts, there is quite a lot of international money coming into the hospitality sector with several private equity players sitting on funds which would be forced to deploy this year. Also, those who missed the chance to invest in hospitality assets during the 2008-09 slowdown, may get an opportunity in the coming months due to the weak economic and real estate scenario.
Sale of hotel at the project stage is also expected as many have failed to take off. “Those who cannot sustain high cost of development will go out. There is a lot of waiting in the hotel business to see the fruits of labour. However, if you can go through this year, you will emerge more valuable,” said P R Srinivas, senior director, Deloitte India.
The current level of activity for buying and selling of hospitality assets is high and the trend is likely to continue this year. “The impact of the economic environment is likely to add to the urgency of assets sale,” said Ajit Krishnan, partner, Ernst & Young.