Lalit Suri Group plans foray into economy segment

After calling off its association with the Intercontinental Hotels Group last year and deciding to venture on its own, The Lalit Suri Hospitality Group is planning to mark a foray in the economy segment with an all-new brand.

The Delhi-based group has already announced Rs 2,300-crore (Rs 23-billion) investment in setting up a number of luxury and mid-market hotels across business and leisure destinations in India and abroad.

The Lalit Group will look to cash in on the absence of large-scale organised players in the segment, said a senior company official.

"The mid-market brand will address the customer who wants to have a stay which is less lavish than The Lalit brand but we will need an economy brand in the next two to three years, as the segment has shown impressive growth over the last few years," he said.

The Lalit (named after the company's founder and late chairman, Lalit Suri) is the name adopted by the group to brand its luxury and premium hotel properties, which were essentially branded Intercontinental earlier.

Due to its buoyant nature, the economy segment has drawn a host of hotel companies to India. The Accor Group (with Formula 1), Keys Hotels, Sarovar Hotels and Pride Group have recently made investments in setting up numerous economy or budget hotel chains in the country.

Despite the recent slide in economic activity hitting business across sectors in India, the economy-branded hotels continued to do upbeat business, with occupancy levels hovering above 65 per cent, while luxury and premium branded properties have suffered, with 25-30 per cent occupancy.

Bharat Hotels, the delisted entity of the group, will set up nine premium hotels by 2012, which will be in addition to the current tally of eight. The group will spend Rs 1,500 crore (Rs 15 billion) on these properties.

Another seven properties will be built for the mid-market segment, where the group intends to spend a further Rs 800 crore (Rs 8 billion). There is already a heavy presence of brands in this segment, including Gateway (by IHCL), Holiday Inn, Four Points by Sheraton and Fortune Hotels (by ITC) to name a few.

The Lalit group is finalising the brand name of the mid-market hotel chain, where it intends to have a network of 25 properties by 2014 in Tier-I and II destinations.

Work on seven properties under the fold in Pune, Drass, Jalandhar, Baroda, Mundra, Ahmedabad and Bangalore is on and the first property will be open by the end of 2010.

A major part for funding of the launch and expansion of the budget brand may come from the capital markets, when the group will look at relisting Bharat Hotels in 2012 for fund raising purposes.

Financial closure for the current scheme of expansion has been achieved by the group through a mix of internal accruals, debt securities and external commercial borrowings.

Bharat Hotels was delisted from the bourses in 2003 after its promoters raised their stake in the company to over 95 per cent through open offers.

The group is open to a dilution of 10 per cent in the company, which can be increased to 15 per cent, based on the valuations. It aims to have 18 hotels operational in two-to-three years, which would provide it with better valuations.

Image: Lalit Suri