From pilgrimage to portfolio: The Leela books new properties en route to IPO

The Leela is coming up in spiritual destinations like Ayodhya and in destinations with wildlife reserves

The homegrown luxury hotel brand The Leela that will be launching its initial public offering (IPO) next week is focused on ramping up its portfolio with eight new signings in six new locations.

The Leela is coming up in spiritual destinations like Ayodhya and in destinations with wildlife reserves. “We are coming up in Ranthambore, where a 350 year old fortress is getting repurposed. We will open a property with 30 keys in Bandhavgarh that has the highest density of tigers. Also, the spiritual segment is grossly under served so we are coming up in Ayodhya. In addition, we are coming up with properties in Mumbai, Sikkim, Srinagar, which will be a brownfield project and we are building a Leela palace in Agra close to Taj Mahal,” said Anuraag Bhatnagar, chief executive officer (CEO), Schloss Bangalore Ltd (The Leela Palaces, Hotels and Resorts).

The hotel chain currently has 3,550 keys that are operational across 13 operating hotels from a portfolio of 20 hotels. “We have 678 keys which are in the various stages of development. Out of the hotels operational today, we own five hotels and we manage the rest. So it is a judicial mix of ownership and asset management,” he added.

Ahead of the IPO, Bhatnagar shared why he is betting big on the luxury segment.

“The focus on luxury offering has allowed us to command a market premium, 40 percent more than the luxury industry when it comes to rates or RevPAR (Revenue Per Available Room). This allows us to have a higher margin. Luxury as many of you understand is already at a premium versus the rest of the industry,” Bhatnagar added.

There is willingness among our customers to pay a premium, said Ravi Shankar, head - asset management and chief financial officer (CFO).

“Our RevPAR growing at a CAGR (Compound Annual Growth Rate) of 11 percent stands at Rs 15,300 versus luxury industry at Rs 11,000 and hospitality at large of Rs 5,300.”

Bhatnagar also noted that the luxury segment allows them the opportunity to be a part of micro and macro level growth story in India. This (luxury) segment is also value accretive because this segment is significantly inelastic compared to other segments.”

The luxury supply coming in most of the markets today is subdued and is in low single digits while the demand is growing significantly, he noted.

The CEO said that today India is at an inflection point and is estimated to become a $7 trillion economy in the next few years. “We are excited about this opportunity and there are global trends that encourage us. When some of the large global economies had doubled their GDP (gross domestic product) from $3.6 trillion to $7 trillion, in that period the major players in those economies grew their hospitality size/inventory sometimes 4-6 times.”

On the launch of the IPO, Ankur Gupta, Managing Partner, Head of Real Estate for Asia Pacific & Middle East, Brookfield said that The Leela’s IPO is special for them.

“India as a destination for Brookfield, we have been treated very well as global investors and over the last 15 years that we have invested in India the business has expanded over Rs 2.5 lakh crore in assets under management. All of our businesses are very special but The Leela business is one way to celebrate and give back to the country. The Leela business which we acquired in 2019 slowly became a world class brand, growing from eight hotels in 2019 to 20 hotels at present.”

The hotel chain’s IPO will open on May 26 with the offer comprising a fresh issue of equity shares aggregating up to Rs 2,500 crore and an offer for sale of equity shares aggregating up to Rs 1,000 crore.