DLF's $5 billion plan for 25,000 hotel rooms
Cheaper hotel rooms are something that India desperately needs today. Already the room rentals in India during peak season rival that of major cities like New York and Tokyo. Reason being, the lack of enough rooms and a heavy demand. If the government is indeed serious about attracting the foreign tourist to visit India for a holiday or business purpose, it needs to look into this issue soon and do the needful. Or else, it will lose precious tourist dollars to other cheaper countries. Meanwhile…
DLF will invest about $5 billion or Rs 20,000 crore to build and operate more than 25,000 rooms in the next 7-8 years. The New Delhi-based real estate major is also in talks to set up nine super luxury hotels across India.
Analysts said DLF could fund the $5 billion investment through a 30:70 debt-equity gearing. It costs about Rs 40-50 lakh to set up a high quality, five-star hotel room including the cost of procuring land etc, according to analyst estimates. Puneet Jain, analyst at Kotak Institutional Equities, told DNA Money that DLF will have as many as 75 hotels running in the next 7 to 8 years.
“However, the hotel segment will not have a significant impact on its revenue in three years,” Jain said. India’s top realtor will supply 4,000 to 5,000 rooms each year starting 2010 with the first hotel, the Hilton Garden Inn, set to open in Saket, New Delhi by end of 2008. It is already setting up a luxury property at the DLF Golf Course in Gurgaon along with Four Seasons, apart from a 200-room serviced apartments project in Goa with Hilton.
Of the $5 billion to be invested, around $2 billion will be spent on creating this “residential” category of hotels, sources said. Apart from this, DLF will also have all-India presence in recreational clubs and business hotels.Last year, it had acquired international chain Aman Resorts for a presence in the luxury hotel segment abroad.
Analysts say the challenge that DLF would face for its projects would be in execution. India is not churning enough architects and civil engineers to feed the real estate boom. But investment bank Goldman Sachs, in a recent report, said DLF is better-placed than most peers to execute on its pipeline given its strong management team, scale and strategic tie ups.