His investment firm Berggruen Holdings is likely to make additional investments in Berggruen Hotels that runs the 'Keys' brand of hotels in India
New York-based billionaire Nicolas Berggruen is betting on revival in Indian hospitality industry.
His investment firm Berggruen Holdings is likely to make additional investments in Berggruen Hotels that runs the 'Keys' brand of hotels in India.
While the quantum of investment is not known yet, the operator of the 21-hotel strong chain said, it was good enough to take their business on a growth path over the next few years.
Anshu Sarin, chief executive officer, Berggruen Hotels, told DNA Money that the fund-raising has been spread out over different quarters in the current fiscal.
"We raised a small portion in the first quarter. However, the decision was deferred as the reason behind getting fresh investments was to be able to fund growth. A chunk of that (fund) is now going to come in the current quarter as we have created a kitty required to fund the growth," Sarin said.
Berggruen Holdings had committed equity to the tune of $75 million at the time of launching the hospitality company in September 2006. Until 2013, approximately $62 million in equity and an additional Rs 182 crore through debt funding have been pumped into the business.
So is the fresh round of funding in the $15-20 million range?
"It's less than that," said Sarin.
The new funding will be used to provide the senior management suitable amount of ammunition in case they have to invest into last-mile funding for hotels to be brought into the Keys network.
"The funding ensures that a kitty is available to us for concluding any type of financial structuring required to be done using a combination of internal and external resources apart from cash flow that's getting generated from the operating business," said Sarin,
Brand building, technology and business development are the three areas where money will be spent in the near future, she said.
Over the last 12 to 14 months, the company has been building its management bandwidth hiring experts from global chains like Accor Hotels and Wyndham in addition to a few others from outside the hospitality industry. It has also taken control of the call centre (now housed adjacent to its hotel at Pimpri, Pune) that was earlier outsourced to Tata Consultancy Services to enhance efficiencies in the area of distribution and customer service.
The new leadership has been working on putting things in order to not only make the business viable but also fine-tune it for the next growth level. While the initial focus was to develop and operate mid-market hotels, serviced apartments and upscale resorts, the company is now purely on the asset light model. Though it continues to own seven hotels, 50% of the land parcels acquired (in the initial years) have been sold off.
The company has also introduced a new brand architecture to operate hotels on management and franchise basis under the Keys Prima, Keys Hotels and Keys Lite brands.
As far as the network of hotels is concerned, while on one side new hotels were being added to the portfolio some went off the network as seen in the numbers – down to 21 hotels across 17 locations at present from 26 hotels in 2013. "The hotels went off the network for different reasons including expectation mismatch between owner and operator. The plan now is to add at least 20 hotels over the next 12 to 24 months. At least 2-3 will be under Keys Prima, 6-7 hotels under Keys Hotels and another 4-5 will be Keys Lite," Sarin said.
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