Hotel companies find a short cut through India's red tape

Wed Apr 10, 2013 5:10pm EDT
 
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By Aditi Shah

MUMBAI (Reuters) - Starwood Hotels & Resorts Worldwide Inc got a 104-room hotel up and running in India in less than 12 months, bypassing years of red tape by rebranding an existing property instead of building a new one.

Capitalising on distress in the Indian hospitality sector, international operators such as Starwood and France's Accor SA are teaming up with investors to acquire hotels from debt-laden domestic owners and reopen them under their own corporate banners.

Such conversions can help global players expand more quickly in a country where hotel construction has slowed since the downturn in 2008 as developers shun capital-intensive projects often delayed by bureaucratic and regulatory hurdles.

"This is the first time we are seeing a reasonable number of assets on the market at the same time," said Gaurav Bhushan, chief development and investment officer for Asia Pacific at Accor. "There have been hotel assets for sale in the past but they have been more sporadic," he said.

Slowing economic growth, an increase in the supply of hotel rooms and growing competition from foreign operators is hurting local chains such as Hotel Leelaventure Ltd Royal Orchid Hotels Ltd and Kamat Hotels (India) Ltd, which are selling assets to ease debt in a country with high interest rates.

"In India, some people are seeing the writing on the wall and are trying to get ahead of that," said Nikhil Manchharam, vice president of acquisitions and development for South Asia at Starwood. "The debt stress levels are getting higher, triggering existing owners and operators to look for options," he said.

International operators hope to succeed where local players have stumbled because they have deeper pockets and economies of scale that allow them to wait longer for an economic recovery. India's growth likely slowed to a decade low in the fiscal year that ended in March.

Early this month, Starwood, in partnership with Samhi, a Delhi-based hotel investment firm backed by U.S. real estate investor Sam Zell, launched its first conversion property in India - a 104-room hotel in the western city of Ahmedabad under its Four Points by Sheraton brand.   Continued...

 
A private security guard stands outside the Four Points hotel in the western Indian city of Ahmedabad April 9, 2013. Capitalising on distress in the Indian hospitality sector, international operators are teaming up with investors to acquire hotels from debt-laden domestic owners and reopen them under their own corporate banners. Picture taken April 9, 2013. REUTERS/Amit Dave