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Best Western to develop 100 hotels in India

The world's largest hotel group will develop 100 hotels in India's emerging business centres over the next seven to eight years by bringing in an investment of $1.2 billion.

business Updated: Jun 02, 2007 13:13 IST

Cabana Hotel Management Pvt Ltd, the Indian master licensee for Best Western, the world's largest hotel group, will develop 100 hotels in India's emerging business centres over the next seven to eight years by bringing in an investment of $1.2 billion.

After signing an agreement in Mumbai this week, a team of officials from the Mumbai-based Cabana and Best Western are going around the Indian metros and tier II cities to finalise their plans.

The Cabana group will develop 3.5 to 4 star hotels in various cities and 5 star capable hotels in major cities. It would also look at acquiring hotels in tier II cities and converting them into Best Western brand hotels.

Cabana has finalized plans to establish six hotels in Ooty (Tamil Nadu), Bangalore, Jaisalmer (Rajasthan), Kanyakumari and Rameshwaram (Tamil Nadu) and Bhubaneshwar.

The construction of these hotels is likely to be completed in two years.

"We are now looking at Delhi, Mumbai, Chennai, Chandigarh, Indore, Lucknow, Patna, Ahmedabad, Surat, Nagpur, Aurangabad and Hyderabad," Prabhu Goel, co-chairman of Cabana Hotel Management, told IANS.

"Business centres are our priority. We would like to cover all metros and state capitals," said Prabhu, whose group owns and runs eight Western-branded hotels in the US.

The master licensee agreement with Cabana is part of US-based western International's aggressive development plans for India to leverage the country's growing business travel and tourism market.

"The Indian economy is growing at incredible speed and the growth potential in Indian hospitality industry is immense," Anil Wad, CEO, Cabana, told IANS.

There is huge under supply in hospitality industry.

"The airlines industry is growing at 25 per cent for five years but there the hospitality industry is not keeping pace with this growth. The hotel tariffs are going sky high and even exceeding the tariffs in the West," said Anil.

India has an estimated 110,000 hotel rooms across all categories, 40 times less than the total rooms in the US. "The number of hotels in India is less than the hotels in Las Vegas," he said.

Cabana says that the hotels it would build in India would offer premier services but at the pricing will be lower than the luxury hotels.

Best Western will not participate in equity while Cabana will finance the investments through a mix of equity, debt and private equity placements.

"The funding will be on our own. There are private equity prospects and we will also do public financing," said Prabhu.

"We are going around the country to see potential sites to invest in. The Best Western people are keen to see the kind of growth India is experiencing. We are taking them to tier II cities like Bhubhaneswar," he said

Cabana hopes that the six properties it was building would break up in the very first year of their operations. "It usually takes two years to break even but we expect it in first year," he said.

The revenues for first few years from each of these hotels are expected to be $2-4 million and they will scale up to $4-5 million. The revenues from the luxury hotels in metros are expected to be $20-25 million.

On the advantages of being master licensee for Best Wester, Prabhu says, "There is lot of flexibility in operating hotels. They have set of standards but you can exceed that set of standards. It is the largest chain of hotels in the world and the licensing fee is also very low."

Best Western wants to have a strong brand in India to target the large number of Indians going abroad, especially to the US, Europe and China, where the Best Western already has strong presence.

Headquartered in Phoenix, Arizona, the Best Western owns and operates 4,200 hotels in 80 countries.