Transforming ugly ducklings

HOSPITALITY: Private owners turn around disinvested ITDC properties into profit-making business ventures.

Since the disinvestment of 18 hotels owned by the government-run India Tourism Development Corporation (ITDC) approximately five years ago, the private sector has made significant investments in giving these properties a facelift.

There have been renovations and refurbishment giving the hotels a new look, overhauling of the indifferent service, adding of amenities like swimming pools and spas, an improved food and beverages and completely changed and upgraded rooms.

To achieve this, the new owners have made hefty investments, much more than what ITDC could have ever hoped to or done. For instance, the Leela Group alone invested Rs 50 crore in renovation and Rs 20 crore in building a new wing at the Kovalam Ashok. This beachside property is today considered one of the best and most popular resorts in the country.

The owners have been suitably rewarded for making these investments. The room rates for these properties have been heading north, the occupancy levels have shown a vast improvement and these hotels seem financially viable. Industry experts mention one more advantage from disinvestment.

The staff unions of the ITDC hotels had been very strong and had an adverse effect on operations and profitability. The private sector was able to arrive at a settlement with these unions and while many of these hotels' staff is still unionised, they no longer enjoy the same power.

In Delhi, ITDC had disinvested four hotels: Kanishka (which is now the popular Shangi-La Hotel), Ashok Yatri Niwas (which will be a Ramada, but is still not operational as the new owners are embroiled in litigation with each other), Qutab Hotel (that is now known as Clarion Collection Qutab Hotel) and the Lodhi Hotel (which Aman Resorts had broken down and is under construction).

Of these, according to industry experts, Shangri La has been the most profitable. The Kanishka, prior to disinvestment, was considered a seedy hotel, popular with Russian backpackers but has today been transformed to one of the top four hotels in the National Capital Region.

Owned by the Eros Group, this property is centrally located at Ashoka Road and in demand from corporates as well as well-off leisure tourists.

The new owners have pumped in $70 million to upgrade the hotel, which has an average yearly occupancy rate of 85 per cent. Shangri-La is able to command an average room rate of Rs 12,000-15,000 per night through the year and Rs 18,000 in the peak winter season when it is overbooked.

Choice Hotels has invested close to Rs 20 crore in the last five years for renovating, refurbishing and upgrading the Qutab Hotel. Known once for a bowling alley and cheap beer, Clarion Collection is today being positioned as a smart upmarket hotel.

It has decided to increase its room inventory and has already applied for licenses to add another 120 rooms and 50 apartments. This hotel, after disinvestment, started gaining popularity once the pub-cum-restaurant, Laidback Waters, opened a few years ago.

"When we started, 90 per cent of our guests had no idea where this hotel was. We had to send directions. That reflects on ITDC's poor show," said Dheeraj Arora, managing director, Mahima Hospitality that owns Laidback Waters. Arora recently opened an Indian restaurant at the hotel.

Though Aman Resorts, owned by the Singapore-based Silverlink company, has completely demolished the Lodhi Hotel (which was known more for one of its south Indian restaurants) and continues to remain tight-lipped about its plans, industry sources said the new property would be a super-luxury one with room tariffs being in the $600-700 range.

According to industry experts, Bharat Hotels, then promoted by the late Lalit Suri, too had managed to pick up three good deals: Bangalore Ashok, Khajuraho Ashok and Laxmi Vilas Palace Hotel at Udaipur.

Bharat Hotels has made significant investments at turning these hotels around, which includes a spa at Bangalore and 42-inch plasma TVs in all rooms at Khajuraho.

The company (owner of The Grand banner of hotels) has worked hard at renovating and refurbishing the Bangalore property (reshaping the pool, redoing the lobby, changing the elevators and bringing in three successful restaurants), and opened it only earlier this year in February. Corporate travel to Bangalore has been surging in the last few years and Bharat Hotels is looking to benefit from that.

Its property at Khajuraho is supposed to be the best in the city, but this tourist destination has taken a slight beating due to poor connectivity. Indian's daily flight IC407 that used to fly daily from Delhi to Agra to Khajuraho and Varanasi has been reduced to only three times a week now.

Another hotel that has done remarkably well is the Temple Bay Ashok Beach Resort at Mahabalipuram. The GRT Group had bought this resort and is today a favourite with tour operators. As hotel rates in Chennai are peaking, tour operators arrange for travelers to stay at the beach resort and make day trips to Chennai, thereby "offering the best of both worlds".

"We were initially hesitant of offering holiday packages comprising disinvested ITDC properties. But today, we safely have these hotels, especially the Shangri-La, The Grand Laxmi Vilas and GRT Temple Bay, on our itineraries," said Himmat Anand, chief operating officer, Sita Travels.

Even Oswal Overseas, a company not known for hospitality, has managed to turn around the Hotel Agra Ashok. Within a span of a year, the hotel showed a distinctive turnaround with a growth rate of more than 30 per cent in turnover.

This property is now christened as Hotel Yamuna View and the new owners have spent a few crores in upgrading the property, introducing a massage from Kerala, redoing the swimming pool, adding a Chinese restaurant and bringing in a dedicated team of professionals. The hotel's occupancy has improved from 20-30 per cent to around 50 per cent in off-season and above 70 per cent during winters.

As these ITDC hotels have shown a remarkable turnaround in the hands of the private sector, a few industry experts are still questioning why the government insists on continuing to run hotels.

"To be very fair, The Ashok at Delhi has improved phenomenally in the last two years. But given its location and size, it is still under-performing. The government should exit the hotel business," said Anand.