Hotel Leela expects spike in Q3 numbers

Vivek Nair, Vice Chairman and Managing Director of Hotel Leela Ventures said that the occupancy in Bangalore and Delhi had gone up to 70-75%. He further added that the room rates had risen but were still lower than the 2008-peak. “We expect a spike in numbers in the third quarter.”

Here is a verbatim transcript of an exclusive interview with Vivek Nair on CNBC-TV18. Also watch the accompanying video.
Q: Have average room rates inched up with the past few months?
A: Yes it has for the last month and this month. Going forward bookings across India show a marked increase. The more encouraging trend is increase in occupancy levels in cities like Bangalore and Delhi; they are averaging around 70-75% for this month and next month which is a marked increase over what has been recorded in the last six months. The average daily rates are inching upwards but they are nowhere close to what it was the year before or in 2007-08. Since it had gone down by about 35% and it will take some time before it recovers but it is certainly a marked increase and we hope that in the quarter ending December and March you will see revenues go up compared to year before.

Q: How big a help would the recent moves make for you, the one from Reserve bank taking Hotels out of the commercial Real estate classification, also the nod to go up and raise External commercial borrowing (ECBs) for hotel companies. Do you think it will be a big help for you?
A: Yes in fact we have been working on that for the last three-four years. All long we were classified as real estate and with this de-linking we will be able to avail of loans without the extra provisioning norms which were levied for real estate and we expect that in the reset which will take place of most of the loans we will be able to have lower rates of interest. There is one more aspect of this which has still not been agreed to, as they are still working on, which is definition of infrastructure lending which is again mentioned in the same circular which was issued for delinking. We still are not featured on that list along with airports and educational institutions and hospitals, though there is no reason why hotels should not be in that list. If we are included in that list then  we would have access to infrastructure funds  and also for projects which are very capital intensive in our industry we would be able to get loans at longer repayment schedules. So we are still pursuing to have that inclusion and the Minister of Tourism also has been very supportive in that cause by recommending it to the Ministry of Finance and the Reserve Bank of India.

Q: They are some comments from ITC that they are open to integrating with competing companies like yours – is that an option open for or to Hotel Leela?
A: No not at all, they have been buying our stocks in open market and they are 3% plus. And we own and operate our own hotels with strong international brand names Kempinski, so there is absolutely no reason why there should be any such linkage; it’s of no use to us at all.

Q: Do you feel threatened at all as a management or a promoter group that a large company with interest in the hotel business is acquiring stake in the open market in your company?
A: Frankly our promoters have 53% right now and we absolutely feel no threat at all and the rest is also disbursed with general public having about 30% and rest with institutional banks etc.

Q: How much do they hold in total because we have heard that there has been some more buying in the open market?

A: The last figure I heard was around 3.5-4% and they perceive value in the stock according to sources and then they feel that because of the fact that our projects will be commissioned soon - our Chanakyapuri project will be commissioned before the games and the one in Delhi. Chennai will also be ready in 2011. We have lots of land which will be developed soon thereafter in Agra, Hyderabad and Pune. We will be a very formidable hotel chain in the luxury sector; all our hotels are in luxury sector. Our aim is to have in each destination, the best performing hotel in terms of average daily rate in occupancy. So they feel that the present price is hugely undervalued and it’s only one of the investment companies who are investing in that stock and they feel that ---will increase in due course of time and they will be able to take advantage of that.