Looking to get an early start, hoteliers take to partial launch

What do The Leela Palace Kempinski in Chanakyapuri
(New Delhi), Shangri-La Mumbai and The Grand Hyatt Goa have
in common?

All three are in advanced stages of construction, expected to open sometime in the second half of this fiscal, and none will have full capacity at the time of launch.

Hoteliers these days are not shying away from adopting the ‘partial launch’ strategy as against the earlier practice of opening the property with all guestrooms and facilities in place.

PR Srinivas, industry lead —tourism, hospitality and leisure, Deloitte Touche Tohmatsu India, said developers want to see projects get operational at the earliest.

“Partial launch not only helps bring the project online and cash in on the business opportunity, but also beefs up the profit & loss statement for that fiscal. Another advantage is the developer gets to use the lean period (non-business season) to complete the balance inventory at their own pace as there is no pressure to fill rooms then,” said Srinivas.

A clear indication of an emerging trend, particular to the Indian hospitality market, partial launch certainly seems to be the answer, though some hotels may have other reasons to do so.

For instance, for Hotel Leelaventure, the Chanakyapuri hotel is an ambitious showcase, particularly in the advent of the Commonwealth Games to be held in New Delhi from October 3-14.

“We are confident of welcoming guests by the end of July this year,” Vivek Nair, vice chairman and managing director, Hotel Leelaventure had said in an earlier interaction.

Though the Nairs intend to launch the hotel before the games, industry sources told DNA that it will not be possible unless it’s a partial launch.

“Opening well in time for the games is a prestige issue for them. Besides, there is a huge guestroom inventory piling up in and around Delhi, which will significantly widen the supply-demand gap post the sports event. Thus, sustaining the business at respectable prices (average room rates) will be tough thereafter. In such a situation, the promoters have no option but to launch with partial inventory. This approach will bring in much needed cash flow, for a short period though,” said an industry source familiar with the plan.

Featuring 483 guestrooms and 23 serviced apartments when fully operational, Shangri-La Mumbai will launch with 230 guestrooms open, sometime in September 2010.

The hotel’s realty partner Phoenix Mills Ltd (PML) wants to achieve efficiency in cost of operations by opening in time for business season. “Operating with a higher inventory base will mean incurring operational expenditure on all the guestrooms as against the occupancy levels, which will be on the lower side during the initial few months of launch. Adopting this approach will help be a little more efficient in terms of cost of operations,” Shishir Shrivastava, executive director, PML said recently.

Market sources told DNA that the reason to have a partial launch of Grand Hyatt, Goa is more or less the same for its realty partners DB Hospitality. Julian Groom, COO & executive director, DB Hospitality was not available for a comment. Grand Hyatt Goa’s general manager, Stefan Radstorm did not revert to an email questionnaire. Industry sources, however, confirmed that the hotel will have a partial launch if at all it launches within this fiscal.
Sector analysts back the concept. “It makes sense to get as much inventory online and book the revenues when there is demand in the market,” said a hotel sector analyst.