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Accor, Emaar MGF to spend $300 m in 100-hotel plan for India

France's Accor hotel chain has formed two joint ventures in the country to roll out two of its leading brands?Formule 1 and Ibis, reports Arun Kumar.

india Updated: Nov 27, 2006 21:10 IST
Arun Kumar

Eyeing an acute shortage of hotels in India, France's Accor hotel chain has formed two joint ventures in the country to roll out two of its leading brands—Formule 1 and Ibis. In the budget hotel category, it has formed a 50:50 joint venture with Emaar MGF, which will set up 100 hotels under the brand name Formule 1 over the next 10 years, entailing a total capital expenditure of $300 million.

Emaar MGF is a joint venture between Dubai-based real estate developer Emaar Properties and India's MGF Development Ltd.

For the Ibis Hotel chain in the business category, it has formed another joint venture—InterGlobe Hotel, with InterGlobe Enterprise Ltd. In this JV, Accor owns 40 per cent and InterGlobe the remainder. InterGlobe is backed by the founders of budget carrier IndiGo, one of the latest entrants in the Indian aviation sector. The venture, InterGlobe Hotels, will roll out around 25 hotels over the next four years.

The Accor–Emaar MGF joint venture has already identified potential locations across the country for the development of the Formule 1 chain, said Shravan Gupta, executive chairman and managing director of Emaar MGF.

"Starting with major metros, the company is looking at developing 50 hotels in the first five years of its operations, with the remaining 50 to be developed in the second phase. The total development will add 10,000 hotel rooms that cater to budget travelers," he added.

David Baffsky, chairman Asia Pacific Accor said that the average cost of building the Formula 1 hotel would be $30,000 per room and the room rent would be between $20 and $30 per day per room. "Depending upon the location and the real estate price, the cost may vary," he added.

Although the total investment in this JV is $300 million, it will be funded through the combination of equity and debt. The JV will build 10 hotels in the next two years with 1,000 rooms, 50 hotels in five years, and the entire plan to build 100 hotels will be completed by 2016.

However, in the case of the Ibis brand, the cost of building a hotel would be double that of Formule 1 and the rental would also be double, Baffsky said.In this joint venture—InterGlobe, Accor has committed to invest $50 million as its own contribution, he contended.

InterGlobe Hotel has already started the development of six hotels in India.

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First Published: Nov 27, 2006 21:10 IST