Mumbai-based Phoenix Mills today announced that it would set up a 30-storey luxury hotel in central Mumbai at a cost of Rs 300 crore (Rs 3 billion), launching the company into the league of big property developers who have ventured into hospitality.
The property at Lower Parel, will be developed by a subsidiary, Pallazzio Hotels and Leisure, and managed by Hong Kong-based Shangri-La.
The property, which will be called The Shangri-La Hotel Mumbai, will have 350-400 rooms and is expected to become operational by Q4 2009.
"Hospitality is a critical part of mixed use development which we have initiated earlier. There is space for good quality hotels in Mumbai and elsewhere in the country. We will primarily target business travellers," said Shishir Shrivastava, CEO, hospitality, Phoenix Mills.
Atlas Hospitality, another subsidiary of Phoenix Mills, is also developing luxury hotels at Pune, Bangalore, Chennai, Mumbai and Agra.
Each of these hotels will have about 300 rooms and will be executed through special purpose vehicles floated for this purpose.
"We have not tied up with Shangri-La for the other hotels, but we will explore the possibility of working with them in other locations as well," Shrivastava said.
Shangri-La manages 53 hotels under the Shangri-La (five-star) and Traders (four-star) brands, totalling 24,000 rooms across various locations.
Phoenix Mills recently raised Rs 980 crore (Rs 9.8 billion) through a qualified institutional placement of 49 lakh (4.9 million) equity shares. About Rs 350 crore (Rs 3.5 billion) of this would go towards subscription of 30 lakh equity shares of Atlas Hospitality.
According to estimates by the hotel industry, there are nearly 7,000 rooms available in the three-star and above category in Mumbai against a demand in excess of 11,000 rooms. This is expected to increase to nearly 20,000 rooms by 2012.
Over the past year, several top real estate developers have announced hospitality projects in conjunction with international hotel chains.
DLF, the Delhi-based real estate major, has a joint venture with the Hilton hotel chain for 25,000 hotel rooms.
Emaar MGF, another property company, has tied up with hotel chains Whitbread PLC and Accor.
Bangalore-based Nitesh Estates is developing a hotel in Bangalore that will be managed by the Ritz Carlton.
"As on date, whatever is planned is enough to meet the requirements," Shrivastava said.
"With the surge in domestic demand and growth in tourist arrivals, we see a sharp increase in demand. We are very bullish on growth."
He explained that whereas star hotels in Mumbai charge anywhere between $275-$300 for a one-night stay, Shangri-La would offer much lower tariffs.
The hotel has set a target of Rs 275 crore (Rs 2.75 billion) in revenues after the first three years of operations.