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Hero's hospitality foray begins with Marriott deal

Source : BUSINESS_STANDARD
Last Updated: Wed, May 16, 2012 19:40 hrs

The Hero Group, the country's largest two-wheeler maker, signed an agreement last week with Marriott International, the America-based global operator of a broad portfolio of hotels and lodging facilities, to manage the former's first hotel in India. This came after months of exploratory talks with many international chains.

The partnership with Marriott is to bring its boutique hotel brand, Edition, into the country, Pankaj Munjal, managing director, Hero Motors, told Business Standard. Edition is only present in Istanbul, Turkey, at this point, and Marriott wants to take the brand to London, New York and Bangkok, besides India, over the next two years.

On Hero's long-term plan in the hospitality business, Munjal said, "We will surely expand with Marriott, but we have to taste success first." Eyeing the potential the sector holds in India, Munjal has synergy plans for the retail, restaurant and hotel businesses of the group. The group operates its retail and restaurant business under the brands Oma and Auma, respectively.

Analysts said the Hero Group, with an estimated total land bank of 128 acres (including manufacturing facilities) across the country, is likely to go big on hotels. Munjal is already hinting at a second and third hotel, through unlocking of value in service apartments that he's planning as the next project, to house expatriates.

At the time of announcing Hero's foray into hotels last September, the company had said it was investing Rs 650 crore in the business to start with; the figure has gone up to Rs 750 crore. Also, the launch date has been deferred, from late 2012 to early 2014.

Hero's first hotel, planned over four acres in Gurgaon, will bear the signature style of Ian Schrager, the American hotel industry icon of 'Studio 54' fame. Schrager, along with Steve Rubell, had co-founded Studio 54, a spectacular nightclub discotheque on West 54th Street in New York City. Schrager is in a partnership with Marriott International.

Apart from the Schrager flavour, the Hero hotel is likely to see the involvement of another international partner, SCDA Architects, a Singapore-based space planning company. Munjal is set for a "kick-off meeting" with all the international partners in New York at the end of this week.

While Munjal maintained it was too early to talk about future hotel projects, he said there were plans to set up 28 service apartments near the first proposed hotel. The apartments, also to be managed by Marriott, would house expatriates coming down from various parts of the world to work on the hotel project for about six months or so. "These apartments would unlock around Rs 300 crore once we sell these," said Munjal. That money can be used as seed capital for the group's second or third hotel, he added.

Of the 23 brands that Marriott International has, five are present in India - Renaissance, Marriott, JW Marriott, Courtyard and Marriott Executive Apartment. The company has planned to launch its luxury brand, Ritz Carlton, in Bangalore by 2014. In India, the chain manages 15 hotels with a capacity of a little over 4,000 rooms. It is expected to add another five hotels this year in India. Globally, the chain has annual gross revenue of $6 billion. In India, it crossed $10 million (Rs 54 crore at on Wednesday's exchange ) two years ago.

In India, Marriott has tie-ups with several developers for management contracts. Some of these include Rahejas, Panchsheel and Viceroy. Currently, there are 71,531 branded hotel rooms in the country. An additional supply of 41,000 rooms is expected to be added across various categories by 2015-16. According to a study by hospitality consultancy HVS, an additional supply of 180,000 rooms is required to meet the demand by 2021.




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