Asian Hotels (E) to develop a Hyatt Regency in Bhubaneshwar

Below is a verbatim transcript of the interview. Also watch the video.

Q: Can you start of by walking us through what exactly is entailed in Asian Hotels (East) both in terms of your Kolkata property, the cash and I believe there is a subsidiary as well?

A: Asian Hotels (East) is part of the demerged entity of Asian Hotels, which split into three entities. We have the Hyatt Regency Kolkata as part of the operating asset and we have a subsidiary GJS Hotels Limited (GJS), which has heavy investment into the Hyatt Regency Chennai. Hyatt Regency Chennai will open sometime end of this year and revenues of Hyatt Regency Chennai will also start coming in into the company.

We have a land in Bhubaneswar, which also came as part of the company. It was a seven acre site in the heart of the city and the prospects in Bhubaneswar are very good and we are looking at developing a Hyatt Regency there. Talks are on with Hyatt as well in terms of doing a Regency.

So in terms of the existing developments—these are what they are. As far as the cash flow in the company goes which we have sitting, at this point in time we are looking at hotel opportunities across the country. The hotel industry in India is going to do well over the next 10-20 years as there is a huge demand-supply gap and the barrier to entry is also very high because of the investment levels each hotel requires and opportunity in terms of land as well.

We are looking at various opportunities and we think the investment, which will be made in the various properties that we are looking at now, will be very profitable for the company in the future as well.

Q: What exact percentage does Asian Hotels (East) own in the Chennai property and how big is the Chennai property in terms of rooms?

A: That Chennai property is a 335 room property. It is on Mount Road. It is in the heart of the city. You cannot get a better location in Chennai. It is very imposing nice structure. It is a full-fledged luxury hotel. Currently, Asian Hotels through its subsidiary owns preference capital in Hyatt Regency Chennai which will be converted into equity shares and it will become a subsidiary of Asian Hotels.

Q: What percentage equity?

A: It will be approximately 65-70%.

Q: How do you intend to use this 300 crore of cash that you have right now? Is it going to be used primarily for bringing up the Bhubaneswar hotel?

A: Yes, partly in Bhubaneswar hotel and partly the opportunities we are looking at across the country. There are lots of opportunities in this sector currently, which opportunities were very hard to come by a few years ago when the real estate market was booming. But now we are seeing opportunities coming up in the hotel industry and profitable ones.

We will take a look at them. In fact, we are looking at them currently and the cash will be utilized for growth of the company in the hotel business.

Q: How are things progressing for the Kolkata property though—your occupancy levels seem pretty low at just 65%?

A: Kolkata, over the last two years or traditionally over the last ten years, has been a very stable and a robust market. It has grown steadily and in the last one year, in fact, the growth and occupancy has been about 10-12% and we have seen an increase of 25% in revenues and in the operating income we are looking at about 42% as net operating income increase in Kolkata over the last one year or rather over the last five months since the company has been in existence.

There is a growth in the market there. After the lull of 2008 across the country in the hotel business, there has been a growth. This year also we are seeing another 10% growth in Kolkata. It is going to be steady and it is going to be good. I think Kolkata is going to do well. It is one of the major metros and the supply/demand gap is there and I think hotels are going to do well.

Q: So on the basis of the up and running performance of this property and your various holdings, what do you think you may report in terms of sales this year?

A: This year as far as Kolkata operating income goes, it will be at least 15-20% higher than last year. That is what we expect. I cannot put an exact number on it because we also have Chennai property coming in and hopefully by the year end that will be operational as well but there will be a growth.

I can assure you that there will be at least 10% growth in operating income in the hotel.