Delays may mar Hotel Leela’s expansion

The ambitious plans of Hotel Leelaventure Ltd seem to going awry. The company, which had last year announced a Rs 2,500-crore expansion plan, is facing delays in several projects.

Its Chennai hotel (The Leela Palace Kempinski), which was to be launched in December 2009, has got delayed by at least 12 months. There is also uncertainty over the development / construction at Pune, Agra and Hyderabad as land continues to remain idle.

To make matter’s worse, the Chanakyapuri project in New Delhi, on which is company has been pinning hopes on, may not be fully ready before the Commonwealth Games to be held in New Delhi in October 2010.

Industry sources told DNA Money that funds on the company’s books are being diverted to the Chanakyapuri development. “All other developments have been put on hold and priority is to get the Delhi hotel up and running before the Commonwealth Games. The company wants to take advantage of the tax holiday granted to hotels in the National Capital Region in the 2007-08 Budget,” said the source.

But looking at the construction work, hospitality industry sources in Delhi said, while work is happening on full-swing, the hotel may not be completely ready before the Commonwealth Games. “They may open it partially just to pronounce it operational and complete the balance work during the course of the year,” said another source.

Hotel Leelaventure officials were not available for comment. The company promoters had in July 2007 acquired the 3-acre Chanakyapuri plot for Rs 611 crore and earmarked an overall investment of Rs 1,100 crore for a 311-keys hotel on the site.

There were rumours earlier this year that Hotel Leelaventure management had put the Chanakyapuri plot on the block. “The exercise didn’t bear fruit owing to valuation issues. Eventually, the management was left with no other choice but to develop the property on its own,” the source pointed.

Analysts say the company failed to factor in the global economic recession and its impact on the hotel business, and on Hotel Leelaventure in particular. “The luxury segment has taken a significant hit in revenues in the last two quarters. There has been a significant drop in international business and leisure arrivals into India,” said an analyst requesting anonymity.