Officials at the Oberoi group confirmed that the deal was struck recently, adding that it entailed a lease for a period of 80 years. Work on the hotel will commence shortly, they told The Financial Express.

The group has decided to go ahead with the project even though the performance of the company has not been very encouraging. According to Oberoi group officials, negative economic growth has had a direct bearing on the hospitality industry. Sources said that business travel had declined and stagnation in the tourism sector had adversely affected the company's performance. By 2003, the Oberoi group is planning at least 10 five-star luxury hotels, of which three hotels with a room capacity of around 250 will be constructed in Mauritius, Egypt and Indonesia. Apart from this, the group also has plans for similar hotels in Dubai and Morocco.

The remaining seven luxury hotels will be built in India. These include palace-like hotels on the lines of Raj Vilas at destinations like Agra and Udaipur. Other hotels are being planned at Mashobra and Jaisalmer in Rajasthan and Madhya Pradesh. The hotel chain is also planning one business hotel at Chennai -- The Oberoi Chennai. The group at present owns 28 hotels, of which 17 are spread across tourist and leisure destinations in India and 11 abroad - in Australia, Indonesia, Sri Lanka, the Middle East and Egypt.

In view of the economic slow down, the group is planning to have `Trident', which means the luxury levels will not be the same as Oberoi but branded the same way and positioned differently. The pricing for Trident is also different - the room rates are 40 per cent lower that the room rates of a five-star luxury hotel. India has five Trident hotels at present, located in Jaipur, Udaipur, Agra, Cochin and Chennai. The company is planning three more Trident hotels - two at Delhi and one in Pune in the near future.

Last year, the company shut down 65 guests rooms at The Trident, Chennai for renovation throughout the year which resulted in lower revenues.