Real-estate developers pitch for a piece of the hospitality pie
Hospitality firms are looking to expand their footprint in the country and in a struggling market, real-estate builders are trying to go beyond residential and commercial projects. And this has led both the parties to collaborate to change the hospitality sector.
The Prestige Group in Bengaluru has partnered with Marriott International to open six hotels in the southern belt; Embassy Group is working with Hilton and Four Seasons Hotels to open for more hotels in Bengaluru. Godrej Properties in Mumbai has collaborated with Taj Hotels to open a 5-star luxury property in their Vikhroli township called The Trees.
Such collaborations were common around 12-13 years ago, when there was high cash flow and the sector was doing well, says Jaideep Dang, managing director, hotel and hospitality group, JLL India. “Today, only a handful of developers are venturing into the hotel space. Managing risk, striking a balance in the mixed-use development (which combines residential, commercial and retail on the same plot) and adding sheen to one’s portfolio are some of the reasons realty developers dive into such a partnership,” he says.
Prestige Group plans to open luxury hotels W Bengaluru, Tribute Portfolio Resort in Bengaluru, Tribute Portfolio Hotel in Kochi, JW Marriott - Prestige Golfshire Resort & Spa in Bengaluru, Moxy Chennai and Moxy Bengaluru, all of which are expected to open between 2021 and 2025. The realty partner would represent nearly 1,000 rooms across four brands. Marriott’s Moxy brand is set to debut in India and it targets the millennial and Gen-Z travellers with modernised social spaces and guest rooms.
“The hospitality sector is witnessing an upward trend across mid-scale, upscale and luxury segments,” says Irfan Razack, chairperson and managing director, Prestige Group. Leading global investors and steady infrastructure development in metros as well as Tier 2 and Tier 3 are driving the demand for more hotels. “Industry-friendly policies, including GST reduction from 28 per cent to 18 per cent for premium and luxury hotels, reduction of corporate tax and UDAN, the regional airport development and regional connectivity scheme (RCS) aimed at making air travel affordable, will pave way for market demand,” he says.
In Mumbai, Godrej Properties and Taj Hotels are working together to create a 5-star hotel at The Trees. “Expected to be ready in 4-5 years, it will be a good example of mixed-use development at a place that is already home to the group headquarters Godrej One, the under-construction office building Godrej Two and three phases of residential development nearing possession. Our partners at Taj Hotels act as our technical advisors and operators. We come together regularly for workshops, chats and ideating sessions for this project,” says Anubhav Gupta, Zonal Head-Vikhroli, head, CSR and Sustainability and founder of GPL Design Studio, Godrej Properties.
Embassy Group, on the other hand, is coming up with Embassy Manyata Business Park in partnership with the Hilton Group. The 620-room hotel is set to be completed by 2021. They are keen on attracting the corporate executives travelling for meetings to Bengaluru. “Our tech park hotels are dependent on corporate travellers from large MNCs in the country and globally,” says Sartaj Singh, president, Hospitality Business, Embassy Group.
Collaboration brings with it unique challenges. Periods of supply often exceed demand, disruptive businesses such as OYO, Fab Hotels, Airbnb can make a dent in revenue. And the exorbitant construction financing puts a cap on dreams and ambition.
“It often takes a longer time to complete and open hospitality assets as compared to office, residential and retail projects of a similar size,” says Sinha.