‘Circle rates make Delhi a logjam for hotel developers’ | The Financial Express

‘Circle rates make Delhi a logjam for hotel developers’

Reya Mehrotra speaks with JB Singh, president & CEO, InterGlobe Hotels, a joint venture between InterGlobe Enterprises and Accor that led to the dissemination of the Ibis brand across India, at the launch. Edited excerpts:

‘Circle rates make Delhi a logjam for hotel developers’
he eight-floor hotel has 154 rooms that mix style and functionality, with traditional art adding a local flavour. (Representational image)

The fourth Ibis hotel in Bengaluru opened its doors in Hebbal earlier this week. A product of Accor and InterGlobe Hotels, it is strategically located opposite Manyata Tech Park to ensure proximity to the tech hub. This marks the group’s 21st Ibis hotel in India that has been introduced with a new Instagrammable design for new-age travellers, built at a cost of Rs 110 crore. The eight-floor hotel has 154 rooms that mix style and functionality, with traditional art adding a local flavour. Reya Mehrotra speaks with JB Singh, president & CEO, InterGlobe Hotels, a joint venture between InterGlobe Enterprises and Accor that led to the dissemination of the Ibis brand across India, at the launch. Edited excerpts:

In Delhi and Gurugram, you have one Ibis hotel each, while in Bengaluru there are four. Is Bengaluru a bigger market for Ibis hotels?

One of our criteria is to get good AAA locations. Gurugram is growing very, very fast but no good AAA locations have come our way. Delhi has got issues on property tax and how the circle rate is computed. We were actually going to build a hotel there and had sealed a deal. But the way the circle rates are calculated, the deposit of duty to the government comes to almost 50% of the cost. That still hasn’t been rationalised entirely. This is why you see very, very few transactions happening in general (there) and that place is a logjam. But Delhi will need far more capacity. By 2030, it is going to become the world’s largest metropolises. But if these separate conditions prevail, then it just becomes untenable financially.

Also read| Accor to have over 100 hotels in India by CY27

On that note, would you suggest any policy changes from the government for the hospitality sector?

Height restriction is one. In some cities like Hyderabad, there is no height restriction. But when you have height restrictions, the cost of real estate becomes very expensive. The second thing, of course, is parking norms. As per the current laws, which are local municipal laws that vary state by state, the amount of parking that we have to put in buildings makes the whole venture very expensive. In Delhi, we were once bidding for a venture but the parking costs came out so much that we just let the whole thing go. Then, when the GST regime started, we as developers could not get the input credit on what we spent in the building, except for maybe 10% around movable sort of expenses. These are things that we need to look at. During Covid, the cost of development had also gone up and that is also impacting the industry.

Also read| Holiday Inn and Holiday Inn Express to drive India growth: IHG

India has a strong presence of Ibis hotels, but Ibis Styles and Ibis Budget are missing from the Indian market, apart from a few exceptions (Ibis Styles in Goa). Why is this so? Are you looking to introduce Ibis Budget and Styles here?

We have an Ibis Styles in Goa and a second one is coming up there. We’ll open it sometime next year. Ibis Styles is a product that we are using mostly for leisure destinations. For Ibis Budget, we believe the market may not be ready. But Ibis, which is right in the middle, is actually the sweet spot. It’s allowed us to build the brand, and this is an area that we’ll continue to build on. The growth revenues for you are already on par with pre-pandemic levels. What are your expectations for this year and what kind of recovery have you seen so far? January-February this year started on a very depressed note, with the possibility of a third wave. But, thankfully, the recovery started happening March onward. If we compare ourselves with the pre-pandemic numbers for the same months, we are already 25-30% up on the red bar basis.

During the pandemic, we saw health and well-being take priority. What efforts have you introduced in your hotels for the same? Even before the pandemic, buildings like ours were very highly compliant with health and hygiene standards. We tightened the processes and responded to what the government wanted us to do. But we were sort of ready for it.

Last year you announced expansion of Ibis properties majorly in Mumbai, Bengaluru and Goa. What is the status now and what are the plans for the future?

It is an ongoing process. We have the single-largest investment in the space in the country with Rs 6,000 crore, broadly speaking. In two months’ time, we will open a 180-plus roomer in Thane. Next year, we plan a 150-roomer in Goa, and a year after that, we will be opening another 150 rooms in Bengaluru. We have a pipeline of development that’s going on. And we will always be open for good locations in key cities like Mumbai, Bengaluru, Pune and Hyderabad and not majorly in tier-2 cities. The focus is not just because they are metros, but because they are cities that have the right balance of demand and supply. It works well for your balance sheet and satisfies your bankers and shareholders.

With many workplaces functioning on hybrid mode, do you plan to penetrate tier-2 and 3 markets? Tier-2 markets will bring up a fair amount of demand, there is no doubt about that. We normally monitor almost 20-30 cities continuously to see how they are balancing demand and supply. If there is a triple AAA location, you could even make an early entry into the city. With all the airports coming up, airport-based hotels coming up, we are definitely evaluating.

The government is giving a push to religious tourism. Are you looking at that market as well?

It is a very good market and needs attention with quality products. At the moment, we haven’t gone there though we have evaluated a couple of religious destinations. A lot of non-branded, local players dominate that market. So, there is that little gap there.

Has the cost per room gone up post the pandemic?
The cost of construction has gone up. But one can only estimate that it will be a while before free trade opens up and the movement of goods eases. Inflation is also high. The cost for the end consumer has no doubt gone up.

Get live Share Market updates and latest India News and business news on Financial Express. Download Financial Express App for latest business news.