Hyderabad: VBC Group of Hyderabad has joined hands with hospitality major East India Hotels Ltd (EIH) that owns Oberoi group of hotels and a city-based infrastructure player, My Home Group, to set up a five-star deluxe hotel.
The proposed hotel, under the Hilton Group brand will be named ‘Trident Hilton Hyderabad’, and would come up in the city’s busiest information technology hub, Madhapur, said M.S.P. Rama Rao, director of VBC group. The group currently has interests in ferro alloys, power and finance and has three listed companies.
“We have recently entered into a lease agreement with the Andhra Pradesh government for a long lease period of 66 years and paid an upfront fee of Rs18 crore for the 4.5 acre land,” Rama Rao told Mint, adding that the company has to offer 3% of the hotel revenues to the government under the agreement.
A special purpose vehicle titled Golden Jubilee Hotels Ltd was incorporated to execute the 20-storied hotel project and civil works were commenced last week. The hotel project with 500 suites and 140 service apartments is estimated to involve an investment of Rs600 crore. It would be executed through debt and equity components of 60% and 40%, respectively. The company has already tied-up the debt with banks that include State Bank of Hyderabad, Canara Bank and Union Bank of India.
Rama Rao said VBC group would hold an equity stake of 42%, My Home group 42%, while East India Hotels would have the balance 16% equity. ”We expect the project to be completed in 36 months by 2010-11,” he said.
Citing details of a survey on the Indian hotel industry by the Federation of Hotel and Restaurant Associations of India, in cooperation with the hospitality consultancy services company HVS International, Rama Rao said Hyderabad is expected to see an addition of between 7,000 to 8,000 rooms in the city’s current room inventory in the next 4-5 years.
At present, the Hyderabad hospitality industry has about 1,100 rooms in five-star category and 2,400 rooms in three and four-star category.
HVS reported that the occupancies in markets such as Bangalore, Kolkata, Chennai, New Delhi, Hyderabad and Mumbai approached or exceeded 80% in fiscal 2007. The Indian hotel industry has seen a steady increase in room rates, revenues and profits since fiscal 2002, driven by high GDP growth and increased tourist arrivals, it said.
”The recently opened Hyderabad International Convention Center has put the city on the map of key conferencing destinations nationally and internationally, and will drive significant demand for hotel accommodation in the city,” Rama Rao said.
The key demand driving sectors in Hyderabad includes the information technology, BPO and KPO sectors located in the Hitec city area, where the proposed Hilton hotel project is coming up. The hotel industry in the city is expected to witness frenetic activity in the next few years with the new International Airport scheduled to take off by March next year, Rama Rao said.
While the existing hotels in the city such as Taj GVK group, Marriott, Emaar and The Park have initiated steps to expand the room strength, hotel majors such as Leela Group, Hyatt, Best Western and Choice International announced their plans to set up star hotels in the city.
Attributing major portion of city hotel industry’s prospects to the booming IT industry, the President of the Andhra Pradesh Hoteliers and Restaurants Association, Vir Vijay Singh, said the IT boom spurred the occupancy ratios in city hotels to as high as 85% last year from 45% few years back.
However, he said there is going to be an oversupply of rooms with another 3,500 rooms to be added in the next 2-3 years. ”There has already been a fall in the occupancy ratio by 5-6 percentage points during this year and going forward the city hotel industry could see further fall in occupancy ratio and also in tariffs on account of oversupply,” Singh said.