Berggruen Hotels plans to invest $100 million

Berggruen Hotels, the hospitality company focused on the budget and mid-market hotel segments, plans to add 19 hotels at an investment of $100 million in the next two-and-a-half years.

The company opened its first greenfield hotel project under the Keys Hotels brand at Thiruvananthapuram and plans to start four more hotels during the current fiscal.
Out of the 19 projects, 15 would be owned by the company while four would be management contracts, with a total inventory of about 1,980 rooms, Sanjay Sethi, MD & CEO, Berggruen Hotels, said. About $45 million investment would be equity and rest would be debt.

Berggruen will soon review the decision to put 10 new projects, or an inventory of
1,000 rooms, on hold, he said, adding that the company in talks for acquiring two distressed properties.

Sethi, who sees the hospitality sector reviving from November, said with the corporate sector looking to pare costs, Berggruen stood to benefit the most as its hotels were focused on budget and mid-segment travellers.

“Large corporate houses are looking for value-for-money and the mid-market hotels segment is less sensitive to the downturn,” Sethi, who expects about 70% of revenues from the corporate sector, said.

The company has put is plans to expand in overseas markets such as South Asia, Middle East and North Africa on hold.

Its overseas strategy is to be asset light and focus on strategic tie-ups with local players.
Berggruen, which is backed by New York-based fund Berggruen Holdings, is aiming to have about 100 hotels, including managed ones, under its umbrella by 2020, he said.

It sees its Thiruvananthapuram property becoming cash positive on pre-financed basis in the first year itself. On distressed asset opportunity in the sector, Sethi said one in three announced projects is in the market.

Of the inventory of 85,000 rooms announced by various players two years back, only 30,000-35,000 rooms are expected to come in the market in the next 3-4 years, he said. “Only professional hotel companies are staying put. A lot of people realised it is not a cakewalk. Real estate players have exited the hotel industry.”

(The writer was in Thiruvananthapuram at the invitation of Berggruen Hotels)