In an exclusive conversation with TourismFirst, Rajiv Kaul, President, Leela Hotels explains how the domestic hospitality major is battling the debt pressures trying to steer the company back on the growth path. Excerpts from this conversation…
PRESIDENT, LEELA HOTELS GROUP
You have recently negotiated the sale of your hotel in Goa which in a way would ease your situation but happy days may still be elusive?
The most important thing for us was to safeguard our assets. Having got into this debt trap , one had to be respectful of the wishes of the ARC, the banks consortia, etc. While we are reducing our debt which can only be largely done through disinvestment of assets, we are also looking to retain our portfolio because these are really irreplaceable assets. Each of them is a real gem. So that has been our number one priority.
The last unit to open was The Leela Palace Chennai, two years ago. In the last two years the company has not grown, we have primarily been in a stand still mode safeguarding our interests. I think we have been able to do that. And now moving forward aggressively, the company will be on the path of growth.
Ideally for me, whatever restructuring you do should be without any further asset sales.
That is precisely what we want. We don’t want any further asset sales. In fact, very soon we will be announcing a property in Bangalore which is under construction and has been signed. This is a management contract deal. The next cycle of growth will be through management contracts. We have a portfolio of eight hotels and we are very confident that we will double this in the next five years. The challenge is to double it while maintaining the same calibre of hotels. That we have to think through very carefully.
Who is your partner in Bangalore?
Our partner is Snehdeep Aggarwal from the Bhartiya Group. It will be a 270 room hotel along with a 45000 sqft banquet and exhibition area and also 140 Leela branded luxury residences which are on sale right now. It is located close to the new airport.
Then closer to home we are developing a property in Jaipur. This project presently is in choppy waters since we need Rs 100 crore to finish the hotel. We cannot put in any more money as there are restrictions from the banks. We are trying to bring in another investor into that. Then construction of Agra is expected to start soon. This will be a pure Leela Palace play and we will be managing this property. We are hoping to break ground just after Diwali. We find it a very exciting project.
How will that pitch you against The Oberoi Amarvilas, Agra? The ITC Mughal is still a prized possession as well.
I think we have a chance to trump hotels such as Amarvilas and the reason for that is when Amarvilas was built you could only build up to 50 ft height. This has now been enhanced to up to 80 ft. We are getting 3 additional floors that will have sweeping views of the Taj. Though Amarvilas is 600 mts from the Taj, and we are 1.1kms from the Taj, it is on the same road. Today you cannot build within 1km from the Taj. However you can go higher. You can now see the Taj right from the base to the crown. We want to do 90 magnificent rooms.
What about the Delhi property with Supertech?
It is not happening. However, we may get a new hotel in Delhi very soon-The Kempinski Ambience, Shahdara. We are looking at that and we will brand it as Leela Ambience Convention Hotel. With this, we will become the biggest player in Delhi/NCR with an inventory of 1200 odd rooms. I wish the Chairman was here, he would have been so proud.
How is Leela Gurgaon doing? It’s a very fine property.
It is doing well. The Oberoi, Gurgaon is the best performing hotel, and we are at the second slot. However, there is a gap in the rates which these two properties command. They have 200 rooms and we are 411 rooms unit. We have a larger inventory, and the larger the inventory, the more is the pressure to fill it.
How is the overall business climate happening for your chain ?
B asically , there is no denying that we are not out of the woods yet, but we have a plan of action to get out of it. It can’t spell it out in detail right now. It is a dynamic plan that changes every two weeks. However we can share the broad contours of what it will entail. Then the thing is really going to be that having built a brand, how do we monetize the brand? So the monetization of the brand is taking place through two major ways. One is, of course more management contracts being signed and taking the brand overseas. There is a luxury hotel in Seychelles that we are looking at.
What about Maldives, which is another high yielding tourism destination ?
See once you get one hotel overseas and it starts doing well, then things follow. So you have to make a start. Seychelles is a better market, in the sense that there are only three hotels. And our local collaborator in the government, and we will get an investor, but these are still early days. We are also working on a Leela Palace property in Abu Dhabi.
What about the second rung, the 4 star chain you had initiated a few years ago?
Still on hold. 4 star we will never do. But it would be an entry level 5 star category. Maybe a difference similar to what you have between a Trident and an Oberoi. I think we can wait for this. Because firstly we need to complete the Leela portfolio.
Once you have signed up the Ambience Shahdara, and with your 1200 room inventory, it gives you a different kind of feel and image and power in the city…
Then you think that you have so many people in the city, that you need two hotels in Agra, two hotels in Jaipur because with 1200 in Delhi, you can’t have only a 100 there. It doesn’t make sense. There has to be some balance.
And then you have the capacity to feed the leisure market?
Yes. There are different opportunities and possibilities that open up.
