Hotel Leela - Good Prospects Ahead

Hotel Leela Venture - Buy And Wait For Two Years

Hotel Leelaventure Ltd has posted a net profit of Rs 100.81 crore for the year ended March 31, 2006, thus growing at close to 119 per cent. The company is also planning to invest close to Rs 1,200 crore in expansion and to spread its footprint across the country. It plans to raise close to Rs 220 crore out of this through private equity, about Rs 320 crore through foreign currency convertible bonds and the rest through long-term loans. “We plan to spread our wings across the country. Our Chennai, Hyderabad, Pune and Delhi projects will ensure the same,” said chairman C.P. Krishnan Nair.

Total revenue stood at Rs 343.69 crore, a growth of 27 per cent compared with Rs 271.33 crore in fiscal 2005. The company expects its profit to touch Rs 200 crore next year. “The industry has grown at 20-25 per cent this year. We expect to double that growth,” said Vivek Nair, vice-chairman and MD, Leela Group. Leela is also looking at ventures in Jaipur and Calcutta, Nair added.

Meanwhile, Board of directors of Hotel Leela Venture Ltd has approved the purchase of additional land in Bangalore to expand its facilities. This will enable ‘Hotel Leela Palace’ to add another 30 rooms to the new wing and the expansion is expected to be completed by October 2006, the company said in a release. According to C P Krishnan Nair, chairman, Leela Palaces and Resorts, the Bangalore property is set to add another 144 rooms and an international restaurant to the existing hotel.

The construction of an additional wing to house the new rooms commenced in May 2005 and will be operational by October 2006. The investment planned is to the tune of Rs 40 crore. The expansion is in response to the market demand, if the buoyant traffic inflow of the business traveller is any indicator. Our expansion is well in place to cater to the demands of tomorrow, he added.

Presently, the Leela Palace has six floors of 256 rooms and suites. Commenting on the expansion programme, the company’s president, Peter Leitgeb, said, “With the strategic investment in expansion, we will enhance the hotel’s appeal and position not only in Bangalore but in the country as well. Our effort is to increase the scope and scale of the ‘Essence of India’ through a larger and luxurious Leela Palace, Bangalore.”

Hotel Leela Venture is also eyeing the lucrative business of managing hotel properties abroad. The group has now set its eyes on West Asia, London and Singapore. Peter Leitgeb, group president, however, made clear that the group is not interested in equity participation. “We will only look at management contracts,” he told DNA Money. In the West Asia region, the group is concentrating on Abu Dhabi, Dubai and Bahrain, which are key source markets for the Leela Goa and the more recently acquired Leela Kovalam Beach in Thiruvananthapuram.

In fact, Leela is pulling out all stops to make the brand a recognised one in West Asia. Kempinski of Germany, which is managing the Emirates Palace hotel in Abu Dhabi, is already a well-established name there. All future Leela properties in India will also have the Kempinski affiliation, making it easier for West Asian customers to connect to the brand. The company is already in talks with two property developers in Dubai, Leitgeb said, adding, “It will be a superior deluxe hotel in Dubai under the Leela brand name.” The group is scouting for partners in London, where it is setting up a marketing office. It will also enter into a management contract in Singapore “provided we get the right partner,” said Leitgeb.