Emaar-Accor to invest $300 m in 100 budget hotels

New Delhi, Nov 27 | Updated: Nov 28 2006, 09:12am hrs
Real estate major Emaar-MGF on Monday announced that it will set up a chain of 100 budget hotels in all major cities in India in collaboration with Accor, the global leader in budget hotels. The budget hotel chain may however, come in direct competition with Indian Railways which is also rolling out 100 hotels, which are expected to have room rents cheaper than Rs 1000 ($21) per day.

Emaar-MGF will invest $300 million in setting up these hotels over the next 10 years. These hotels will comprise of over 10,000 rooms and will be let out at an average room rent of $20-$40 per day.

In the initial phase, about 50 hotels with an investment of $150 million will be constructed across all metros and B class cities. The venture called Budget Hotels India Pvt Ltd will have equal investments ($75 million each) from both Emaar-MGF and Accor. The amount will be raised via equity and internal accruals. Each hotel room will cost about $30,000 to be built with an investment of over Rs 10 lakh per room.

Emaar MGF will announce similar strategic tie-ups in 2007 to float hotel chains in luxury and business segments. We have over Rs 5,000 crore worth of land bank in India. Emaar MGF may also tap the capital markets with an IPO by offloading about 5-10% of its equity next year, said Emaar MGFs managing director Shravan Gupta.

Emaar-MGF, is a 50:50 joint venture between Middle Easts largest publicly listed real estate company Emaar and Delhi-based MGF Ltd. The JV has already invested about $1 billion across 30 cities in India to diversify into residential, commercial and retail real estate development.

The budget hotels will be floated under the Formule 1 brand which comprises over 650 hotels with 57,000 rooms in 12 countries. Formule 1 hotels which offer all basic comforts located globally in city centres, key suburbs, major roadways or near airports and transport hubs. The hotels each feature upwards of 80 rooms with an average room rent of $20-$40, the worldover.

According to estimates, about 1,00,000 rooms are needed in the country, which will require an investment of $17.4 billion. Currently, about 92,000 rooms exist in India. The upcoming Commonwealth Games and rapidly growing economy have created a shortage, peaking room rents to an average of $350 in India.