Royal Orchid plans Rs 500 cr star hotels

Hospitality chain Royal Orchid Hotels Limited (ROHL) is looking at investing Rs 500 crore over the next two years on a major expansion plan that includes setting up five-star and four-star hotels in major cities in the country. It will also enter tier-III cities with budget hotels.

"We plan to open six five-star hotels in major metros and about 10 to 15 four-star hotels in metros and mini-metros in the next two years. We already have Royal Orchid Harsha, a budget hotel in Bangalore, and plan to open 15 to 20 budget hotels in tier-III cities across the country," Chender Baljee, chairman and managing director, Royal Orchid Hotels said. The company is going in for a mix of leased and revenue-sharing models for this expansion.

Last year, the Bangalore-based hotel chain had raised about Rs 112 crore through an initial public offering (IPO) to support its expansion plans. The company plans to raise the rest of the amount through internal accruals and bank loans.

"We already have cash reserves of Rs 140 crore and expect to earn substantially in the next two years. The rest of the fund will come from internal accruals as well as bank borrowing," he added.

The Royal Orchid Hotels presently own four hotels in Bangalore, including its flagship property Royal Orchid (five-star), Royal Orchid Central (business), Royal Orchid Harsha (budget) and Doddi's Resort in Bangalore, which will soon be known as Royal Orchid Resort.

It will be converted into a 150-room five-star hotel. Besides, the company also owns Royal Orchid Metropole (Heritage) in Mysore.

Royal Orchid will start five-star hotels in Delhi, Mumbai, Chennai and Kolkata. "We have got land close to the airport in Delhi for a 100-room five-star hotel and the project is expected to be completed by the end of next year," Baljee said.

He added that plans for projects in Mumbai, Chennai and Kolkata are in their preliminary stage. The four-star projects in Jaipur, Hyderabad and Pune are under way and are expected to be complete in a year. The company has leased properties in Hyderabad and Jaipur, where it will open 65-room and 70-room hotels respectively.

For the project in Pune (115 rooms), the company has entered into a revenue-sharing agreement.

On plans to open budget hotels in smaller cities, Baljee said that the company was working on a strategy, as these cities are more dominated by the unorganised sector with little known brands.

"We are the fastest growing hotel in the budget segment and expect to make a big difference in the smaller cities with our brand name," he added.

For the first quarter ended June 30, 2006, Royal Orchid posted an 82 per cent jump in its net profit to Rs 8.32 crore on a consolidated basis. Baljee added that as a small company, it has good control over the situation.

"We are putting systems in place so that as we grow both in size and revenue, we will be able to maintain the same profitability."