InterGlobe, AccorHotels JV earmarks another Rs 900 crore for Ibis hotels

InterGlobe Hotels and AccorHotels, which have so far invested Rs 1,600 crore in their joint venture (JV) for Indian hospitality market, have now earmarked another Rs 900 crore towards expanding their Ibis branded hotels portfolio in the country.

The 14-year old, 60:40 JV currently has 18 hotels under its mid-market brands Ibis and Ibis Styles, with a total of 3,300 guestrooms. The plan is to add another six hotels, taking the total number of guestrooms to over 4,400 by 2020.

J B Singh, president and chief executive officer, InterGlobe Hotels Pvt Ltd (IGH), told DNA Money, “We opened in Coimbatore a few weeks ago. Just last week we launched our second Ibis hotel in Pune (Hinjewadi). Ibis Kolkata will get operational in another six months. Construction of our fifth property in Bengaluru has started in October 2017 and another site will start very soon. Work on the 250-room Vikhroli hotel (on the LBS Marg in Mumbai) will start in a fortnight and the Thane (Ghodbunder road) site will follow suit soon. We are in the process of acquiring our second site in Goa and negotiations are on for acquiring third land parcel in Pune.”

These hotels under various stages of development will come up within the next 36 months. Each project will require capital expenditure between Rs 80 crore and Rs 100 crore (including land cost) or more in case of larger hotels with guestroom inventory exceeding 150. Funding this expansion will be through a combination (50:50) of equity (from InterGlobe and AccorHotels) and debt from bank(s).

While AccorHotels has an asset-light strategy mandated for the Indian market, the global hospitality major will stay invested in this JV with InterGlobe Enterprises and continue funding future Ibis developments. Its third brand, Ibis Budget, is not present in the Indian market yet, but AccorHotels will introduce the same in the coming years when an opportunity presents.

Interestingly, InterGlobe Hotels is among the very select few hospitality joint venture companies that have been successfully pursuing greenfield hotel developments in India. Hotel companies typically take the faster route of picking up a brownfield project, re-branding a standalone hotel and or converting an existing branded property into one of their own.

Jean-Michel Cassé, chief operating officer - India and South Asia, AccorHotels, said, developing an Ibis hotel requires following a lot of specifications and norms.

“The Ibis prototype is very unfriendly for brownfield or conversion. If you want to optimise the building cost, control the space and still have a trendy, modern hotel with right space allocated to the guests then greenfield is the way. Till about a few years ago, building greenfield hotels was very challenging and unfriendly.

Now we are fully in control of the timing of building and getting a hotel operational. In fact, we built the Ibis Hinjewadi in 24 months, which is a record even for us. I think it’s a matter of understanding what it takes to do things in the right manner, and after that, once you don’t have any financial barrier and it’s just a matter of building, something we know very well now, then we can do it quickly.”

The company typically picks up an acre or less, which is a standard requirement for an Ibis hotel with an inventory of anything between 100 and 150 guestrooms. Having said that, there are a few hotels like Ibis New Delhi Aerocity that’s bigger with 445 guestrooms.

Similarly, the recently launched Ibis Styles in Goa is built on a larger land parcel featuring various leisure facilities and an inventory of 197 guestrooms, which is also larger in size compared to an Ibis hotel room.

The overall experience of developing greenfield hotels in the last over a decade, according to Singh, has helped the company shrink the timeline and costs associated with getting the property operational. “It now takes us just a year (from the time of acquiring the land parcel) to get all the permissions in place. So within 36 months, we can easily get the hotel ready to receive guests.

That apart, we have also brought down the cost per key by almost 30%. Earlier the per key cost was Rs 40 lakh, which was brought down to Rs 30-32 lakh. However, there has been an addition of 8% due to the implementation of goods and services tax (GST), but the cost is still lower by 20%-odd. Also, we are not averse to brownfield expansion provided the prototype fits in.”

The correspondent's travel to Ibis Hinjewadi Pune was hosted by the hotel company.