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Covid-19 delivers body blow to new hotel projects

Hospitality projects have been delayed, deferred or put on hold across the board. In 2020, just 4,537 keys entered the branded hotel space, far lower than the pre-pandemic projection of 15,000 keys.

November 22, 2021 / 02:33 PM IST
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Several new hotel projects are either running behind schedule or have been put on hold after the Covid-19 pandemic wreaked havoc on the financials of hoteliers and developers.

Premier projects of EIH (Oberoi Hotels), Lemon Tree, Chalet Hotels and many others have absorbed a delay of 2-3 years or have been shelved, according to the disclosures made by these companies.

Lemon Tree’s flagship property in Mumbai, the massive 669-key hotel near the airport, which is to be branded Aurika, will be ready to welcome guests only in 2023. This property, which will be the single largest for Lemon Tree, was earlier scheduled to open in 2021. The company is investing Rs 930-950 crore on the project.

Patanjali Keswani, Chairman and Managing Director, Lemon Tree Hotels, said, “The delay is due to the Covid-19 pandemic and the resulting uncertainties. As a matter of fact, many projects across multiple sectors have been delayed due to this.”

Pandemic fallout


EIH, the listed entity of Oberoi Hotels and Resorts, was forced to go slow on three hotel projects in India — in Madhya Pradesh, Bengaluru and Goa — and one in Thailand due to the pandemic.

The Rajgarh Palace project in the Chhatarpur district near Khajuraho, Madhya Pradesh, for instance, has faced yet another delay. After taking the nearly 160-year-old palace on lease in 2013, EIH said it would complete restoration work of the palace only by the end of 2024.

“EIH commenced work on the Palace in late 2019. In March 2020, construction work had to be stopped due to Covid-19, and resumed in July, 2021,” said an EIH spokesperson.

In Bengaluru, EIH has not been able to access land records from various departments of the State government due to the shortage of personnel in government departments on account of Covid-19.

“We had planned to manage two hotels in Thailand. Our agreement with the owner of the sites was to only manage the two hotels and not make any equity investments. Unfortunately, no progress has been made to date due to the Covid-19 pandemic,” the EIH spokesperson added.

The K Raheja Group-promoted Chalet Hotels could shelve its plan of having a 150-room luxury property in Powai under W Hotels, a premium brand owned by Marriott International. This new property, originally slated to come up in 2022-23, was to complement the Renaissance Mumbai Convention Centre, Powai.

“The upcoming Powai hotel is now a question mark. We have to take a call on this. Given that we have 773 rooms today in Powai, do we want to add another 150 rooms in the environment that we have just seen? It is something we need to re-evaluate. If we decide not to go ahead with that project then it opens up a massive land parcel to us for alternate asset classes,” Milind Wadekar, CFO, Chalet Hotels, said in an earnings call.

Fewer keys on the chain

According to experts, the branded hotel space saw less than one-third of the total number of keys delivered in 2020.

Mandeep S. Lamba, President (South Asia), HVS ANAROCK, said, “Hotel supply growth was limited in 2020, as several projects were delayed, deferred or put on hold. In 2020, just 4,537 keys entered the branded space, far less than the expected supply of roughly 15,000 keys for the year before the pandemic.”

This year has been slightly better than 2020 after a surge in demand. “In 2021, the situation has improved. By the end of September 2021, over 4,400 keys had been opened, and we expect this number to reach nearly 6,000 by the end of December 2021. But despite stronger growth in 2021, the aggregate supply of 2020 and 2021 still falls short of pre-pandemic projections,” Lamba added.

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Swaraj Baggonkar
first published: Nov 22, 2021 02:33 pm
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