Olive, the co-living and hospitality wing of the Embassy Group, plans to add 400 co-living beds in Bengaluru and Mumbai within the next six months. The company is currently making a foray into the co-living sector in Mumbai.
"The majority of beds will be in Bengaluru and we are also looking at adding about 2,500 beds in Bengaluru and Mumbai as the overall pipeline within the next year. The return on investment is about Rs 30-50 per sq ft in Bengaluru," Kahraman Yigit, Co-Founder and CEO of Olive told Moneycontrol.
Currently, the company has 508 beds operational across six locations in Bengaluru. For the upcoming launches, the company is mostly looking at prime areas like Indiranagar, Koramangala and HSR Layout, with some in growing suburbs of the city.
Yigit adds that the rentals for co-living have jumped by 30-40 percent in the last two years. Currently, 1BHK in Koramangala costs Rs 45,000 in rent per month, up from Rs 32,000 two years ago.
Currently, Olive has four verticals, one for co-living called Olive Life, the hotel segment called Olive Hotel, express hotels called Olive Zipp and the short stay premium villa project called Olive Villa.
"In total, we want to touch 5,500 keys within the next year and 30,000 keys over the next five years," Yigit adds.
The company is also looking at launching two integrated stay projects in Bengaluru that will include both the co-living and hotel segments --- about 1,400 keys within the next 2-3 years.
Hotels beating office rents
Olive Hotel has about 800 keys, of which 450 are operational and 350 are in the pipeline. Overall, the company plans to add about 2,930 keys within the next year. The upcoming launches will take place in over 30 locations in Bengaluru and 4-5 locations in Goa.
Yigit adds that the tariffs for hotels in Bengaluru have also doubled in the last two years. “It has gone up to Rs 2,150 from Rs 1,150 just after Covid,” he says.
Interestingly, the areas close to the tech parks do not see much demand; the prime areas and central business district are more in demand, he says.
The financials
Speaking about capital expenditure, Yigit says the Brownfield refurbishment cost incurred is about Rs 2-4 lakhs per key and greenfield investment between Rs 16-18 lakhs per key. And across the entire portfolio, the Annual Recurring Revenue (ARR) of the company has increased to Rs 2154 in June 2023, up from Rs 1560 in June last year.
Yigit says that in the hotel segment, the company is almost beating the return from office rents. “In short-stay options which are selling at Rs 3,000 a night, we are seeing net income of Rs 100 per sq ft. Several office buildings are being converted into hotels in Bengaluru. One of our first buildings is going live in the next two months in ITPL Kundallahalli,”. The company did not share further details about the project.
However, due to the unavailability of vacant land in the city centre, the company is also planning to launch several express hotels in Bengaluru with affordable short-stay options. “We will be adding about 500 keys to our portfolio and each express hotel is priced at about Rs 1,400-2,000 per night depending on the locations,” he says.
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