Over $200 million of assets were bought and sold last year, boosted by institutional equity on the buy side, according to a report by consulting firm HVS.
NEW DELHI: A growing number of institutional investors are investing in hotels, traditionally a stronghold of high net worth individuals (HNIs) and family offices in India. Industry experts estimate that about 30% of the new inventory in the country is owned by institutional firms.
Over $200 million of assets were bought and sold last year, boosted by institutional equity on the buy side, according to a report by consulting firm HVS. The firm branched into investment advisory in June.
“Across the length and breadth of the country, most of the new investments are being made by institutional investors and the scale is unprecedented. Through our new investment advisory arm, we are looking at exclusive sale mandates for assets that make financial sense and our primary target is institutional money,“ said Achin Khanna, managing director of the consulting and valuation practice at HVS. Khanna said institutional investors were expressing a greater interest in owning hotel assets due to an upswing in market conditions, a relaxation in FDI norms and an expansion of the midscale and upper mid-scale segment.
“It’s a far more mature market today compared to the upcycle of 20042007 and compared to 10 years ago, India is not largely a luxury and upscale market anymore. There is a larger bouquet of assets in the mid-scale and upper mid-scale segment of pure business hotels which are easier to buy and sell,“ he said.
Kaushik Vardharajan, VP, development at Hilton Worldwide, said the company will sign two new deals for its hotels with the Embassy group.
Its upcoming Conrad hotel in Benga luru is owned by the Prestige Group.
Others like Samhi and Interglobe have also been consistently building their portfolio in India, the latter through a tie-up with Accor.
Deven Shah, senior VP, debt capital markets, at Kotak Mahindra Bank, said about a few years back, hotels in India were being set up by HNIs and family offices as a mode for deploy ing their surplus funds and creating long-term assets for the family.
“In recent times, however, with a slowdown in business cycles in gene ral and a slack in real estate industry in specific, the investible surplus of these conventional sources has come down significantly . Instead, we are now seeing equity investment in ho now seeing equity investment in hotels being driven by institutional investors who are raising funds primarily from offshore investors,“ he added.
Lemon Tree Hotels, backed by Dutch pension fund APG and global private equity fund Warburg Pincus, is looking to add 10 hotels to its portfolio of 33 by the end of this year with plans to increase its footprint in the north-east, West Bengal and Orissa besides entering key tourist destinations, Vikramjit Singh, president and chief revenue officer at the company , had earlier told ET.