2016 is going to be a critical year for the domestic hospitality major Leela Hotels which has undertaken a major financial restructuring exercise in the recent past. Buffeted by a heavy debt burden of around `5,000 crore which was on its balance sheet around the end of the last fiscal, the company recently sold off its Goa property to a Malaysian investor MetTube Sdn Bhd at a reported price of Rs.725 crore. Leela, however, still holds the management mantle of this 216 rooms luxury unit.
PRESIDENT, THE LEELA PALACES,
HOTELS AND RESORTS
The market remains abuzz with speculation pertaining to possible moves by Leela to get into fine fettle again on the financial front. A popular theory doing the rounds is that the company would eventually resort to a light-asset model and could well divest off its Chennai property too in the near run. Speaking to the media on the sidelines of a recently held hospitality seminar in Gurgaon, President of The Leela Palaces, Hotels and Resorts, Rajiv Kaul, however, refused to comment on any speculation. He maintained that the company is working on a long-term roadmap which will be ready soon.
“In consultation with an asset management company (AMC), we are working on a future roadmap. I think, this plan will be ready in the next six months’ time. At this stage, all theories floating in the market are mere speculations. Further divestments in any property may not even be required,” Kaul emphasised in his response.
But while Leela will be looking at solutions to fix its critical financial issues, the new year would also see its next line of properties – Jaipur and Agra – reaching to the ground breaking stage.
“We are going to start work in Jaipur next month and we hope to have this property ready in one year’s time. It will be a 56 room property under the brand of Leela Palace. In Agra, we are hoping to break ground in April or May. Agra will be a 90 room luxury property, all rooms giving a view of the Taj Mahal, and it is likely to take around three years to reach to the finishing line,” Kaul informed. While pursuing these projects, Leela will be adhering to the asset light formula – these will be joint-venture projects with developers wherein Leela will be operational partner.
Meanwhile, commenting on the current market trends, Kaul underlined that a slight uptick in the luxury segment is visible. “If you compare to the trends last year, there has been a growth in the room rate of about 5-8 percent this time which is a modest growth. Occupancy too has grown up by 2-5 percent. So on the whole there is a topline growth in the single digit - around 7-8 percent. However, before the season had started, we were expecting growth in the luxury segment to the tune of 15 percent,” Kaul pointed out. According to Kaul, trends in the luxury segment would have been much better but for some unexpected spoilers. “ Flood like situation in Chennai has affected the business across all segments in November and December. These months traditionally have been strong for us in the past because of a surge in conferencing which we missed out this time. The good news is: things are getting back on track again in the city and what we lost out could be a momentary blip,” he said. Speaking specifically on the performance of Leela units in the recent months, Kaul maintained that while Delhi and Bangalore properties have seen growth in the business, its units in Goa and Kovalam have seen somewhat subdued business. “It is primarily because of the fact that the Russian markets are in a serious turmoil and there has been a 70-80% decline from this market.” He further added that to push the small uptick in the luxury business, the country will need to attract more tourists from the US as well as some select European markets where growth momentum has been visible again.
