Some hotel owners and foreign investors are believed to be furiously reworking proposed transactions and projects as the double whammy of prohibition in key states and the Supreme Court ban on liquor sales near highways threatens to hurt investments in the country’s hospitality sector.
The SC ban and the call for prohibition in Madhya Pradesh -besides reports of similar moves in Chhattisgarh -have not only forced existing players to review upcoming projects, but also impacted proposed investments and M&A transactions.
Carlson Rezidor, which owns brands such as Radisson, Radisson Blu and Country Inn and Suites in India, said 30-35% of its upcoming projects are near highways and will be affected. Even existing projects will be impacted, said Raj Rana, South Asia CEO of Carlson Rezidor. Rana said about 40% of the hotels that became operational in the past 12 months have been hit by the SC order, s and this includes S 30% of Carlson’s e 84 operational properties. “To J ensure easy acs cess, especially s from airports, hoa tels are built near highways. If the decision is not reviewed, the construction of hotels and the way they are built will need to be re-looked,“ he said. Samhi Hotels, a hotel investment firm part-owned by Goldman Sachs and the owner of properties such as Hyatt Regency in Pune, Sheraton in Hyderabad and Fairfield by Marriott in Bengaluru, termed the ban discouraging. Ashish Jakhanwala, CEO of Samhi, said some early stage projects may be stalled. “The ban is discouraging and we are disappointed, but we won’t change our investment outlook because the government appreciates the need for a solution.“ Goldman Sachs had last year invested Rs 441 crore in Samhi Hotels for a minority stake.
Investment banking executives say at least two funding deals -valued at about $40 million -in hotel chainspubs have been put on hold in the past week. “Investors want some clarity around future expansion plans and valuations may be impacted due to that,“ said a person aware of the developments.
An investor who approached hospitality consulting firm HVS for building a hotel on the outskirts of Kolkata is now believed to be reconsidering his decision.
“There will certainly be a recalibration of deals in the hospitality and F&B (food and beverage) sectors due to some of the recent changes. It might also take away some of the gains that GST (goods and services tax) was likely to bring to the hospitality sector,“ said Sanjeev Krishan, private equity leader, PwC.
Email questionnaires sent to Marriott and the Oberoi Group went unanswered. Kurt Straub, VP-operations for Hyatt Hotels & Resorts, as well as Indian Hotels Company declined to comment.
Global chain Hilton has 18 ho Global chain Hilton has 18 tels in the pipeline and three of the properties to be launched this year do not fall within the 500-metre zone. “This year we are okay . Our immediate focus is on our two hotels in Chennai and Thiruvananthapuram that have been impacted by the ban. But there are hotels to be launched by different chains that fall within that zone and they are concerned. The expectation is that some sanity will prevail and the matter will get resolved. Hotel staff is well trained to take care of guests being served liquor. So we are hoping the ruling, if revised, will not apply to star category hotels,“ the company spokesperson added.
“The proportion of upcoming projects around highways is not minuscule by any means. It is affecting developers and their decision-making. It will lead to losses for developers and hotel operators,“ said Achin Khanna, managing director of consulting and valuation practice at hospitality consulting firm HVS.
Patu Keswani, chairman, Lemon Tree Hotels, said the company’s upcoming hotels in Mumbai, Pune, Kolkata, Shimla, Siliguri, Thiruvananthapuram and Udaipur will not be impacted by the ban and will open on schedule.
Meanwhile, industry body Federation of Hotel & Restaurant Associations of India said it is approaching eminent lawyers such as Harish Salve and will prepare a legal strategy in a week. FHRAI had earlier sought an opinion from retired justice AP Shah.
FHRAI estimates as many as one lakh establishments have shut shop since the liquor ban came into force.