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  • December 2011

    Hotels & Tourism Conference

  • Section Particulars

    Section I Tourism & Hospitality Industry Overview

    Table of Contents

    Section I Tourism & Hospitality Industry Overview

    Section II Investment Rationale & Change in Business Model

    Section III Government Initiatives & Investments in the Industry

    Section IV Financial Norms from a Debt and Equity Perspective

    Section V Emerging Financing Opportunities in Hospitality

    Section VI Case Studies

  • Section I: Tourism & Hospitality Industry Overview

  • 65%26%

    8% 1%

    Deprived Aspirers Middle class Rich

    13% 2%

    Indias travel & tourism industry is booming

    Inbound Outbound Domestic travel/visits

    4.4 5.1 5.3 5.2 5.6

    million million

    Foreign tourist arrivals have led to Increase in the aspirer/middle class Inter-state travel by foreigners and

    The Indian Travel & Tourism Industry

    Size: `3,680.4bn 4.5% of GDP 7.5% of total employment

    11.8 13.3 14.4 14.4

    17.9

    million

    65%26% 51%

    34%

    4Source: Ministry of Tourism, State/UT Tourism Departments, WTTC, CARE research

    2006 2007 2008 2009 2010

    390.3 443.6 507.3 549.6

    648.9

    2006 2007 2008 2009 2010

    8.3 9.8 10.9 11.1

    12.1

    2006 2007 2008 2009 2010

    ` billion million

    significant forex earnings has led to an increase in travel abroad

    2006 20102006 2007 2008 2009 2010

    462.3 526.4 563.0

    668.8 740.2

    2006 2007 2008 2009 2010

    Indians are also gaining momentum

  • and the hotel industry is scaling up, given huge demand

    Hotel industry size and growth (` billion) Aggregate Average Room Rates (ARR) and Occupancy Rates (OR)

    64.8

    132.0

    186.7

    106.7 124.0

    2004 2006 2008 2010 2012

    55%

    60%

    65%

    70%

    2006 2007 2008 2009 2010

    0

    1,000

    2,000

    3,000

    4,000

    5,000

    6,000

    ARR (`) Occupancy rate (%)

    5Source: CRISIL research, Broker reports, FHRAI

    2010 hotel market by category (rooms) 2010 hotel market by segment (rooms)

    2004 2006 2008 2010 2012 2006 2007 2008 2009 2010

    Mid-market

    29%

    Premium

    24%Budget

    6%

    Heritage

    2%

    Others

    39%

    Business

    75%

    Leisure

    25%

  • Section II: Investment Rationale & Change in Business Model

  • Players are investing in the business segment

    Business destination rooms Most popular business destinations (by 2010-15 room additions)

    24,796 27,714 30,868

    34,854 37,117 38,906

    2010 2011 2012 2013 2014 2015

    Destination Room additions

    Delhi 20,021

    Bengaluru 9,819

    Mumbai 7,477

    Chennai 5,995

    Hyderabad 5,302

    Pune 5,196

    Kolkata 3,481

    Ahmedabad 2,339

    7

    Leisure destination rooms Most popular leisure destinations (by 2010-15 room additions)

    Destination Room additions

    Jaipur 2,664

    Goa 1,736

    Agra 510

    Source: CRISIL research, HVS research

    8,421 8,938 9,395 9,918 10,066

    10,459

    2010 2011 2012 2013 2014 2015

  • and making investments based on RevPAR

    CityRooms Average Room Rate (`) Occupancy Rate (%) RevPAR (`)

    2010 2015 Change 2010 2015 Change 2010 2015 Change 2010 2015 Change

    Agra 1,439 1,949 35% 6,127 6,543 7% 61% 68% 7% 3,737 4,449 19%

    Jaipur 2,472 5,136 108% 6,043 6,605 9% 54% 58% 4% 3,263 3,831 17%

    Goa 3,288 5,024 53% 7,014 7,383 5% 64% 69% 5% 4,489 5,094 13%

    Mumbai 9,877 17,354 76% 8,972 9,541 6% 61% 65% 4% 5,473 6,202 13%

    City wise hospitality operating metrics

    8

    Bengaluru 5,597 15,416 175% 8,892 9,210 4% 61% 65% 4% 5,424 5,987 10%

    Delhi 11,018 31,039 182% 9,340 9,904 6% 65% 67% 2% 6,071 6,636 9%

    Kolkata 1,520 5,001 229% 6,310 6,670 6% 63% 64% 1% 3,975 4,269 7%

    Chennai 3,806 9,801 158% 6,479 6,689 3% 58% 58% ---- 3,758 3,880 3%

    Pune 2,672 7,868 194% 6,025 5,860 3% 47% 49% 2% 2,832 2,871 1%

    Hyderabad 3,782 9,084 140% 6,184 6,257 1% 56% 54% 2% 3,463 3,379 2%

    Ahmedabad 1,521 3,860 154% 5,324 5,600 5% 55% 49% 6% 2,928 2,744 6%

    Source: CRISIL research, HVS research

  • with a focus on management contracts

    Ownership model

    Franchise model Management contract Management contract

    Business

    model focus

    1991-20011991-20012002-20102002-2010 2010 onwards2010 onwards

    Tier I cities

    Tourist destinations Tier II cities

    Multi tourism optionsGeography

    9

    Tourist destinations

    Tier III cities Multi tourism optionsGeography

    Luxury category

    Unclassified category

    Mid-level category

    Individual profit centres

    Budget category

    Mixed land usageFocus area

    Top-line growth

    Customer acquisition

    Customer segmentation

    Diversification of base

    Customer retention

    Value added service offerings

    Customer

    strategy

    Conventional funding

    Tie-ups with international brands

    Tie-ups with construction, real

    estate companies & PE players

    Acquisition/expansion under sub-

    brands

    Refurbishments

    Investments

    Source: Technopak, Broker reports

  • to mitigate issues such as long gestation & heavy funding

    Lack of infra status to hospitality has

    adversely impacted govt subsidies

    10

    Banks generally do not look at lending beyond 7-9

    years

    Players look at repayment of loans

    beyond 11-15 years due to long

    gestation

    Source: Technopak, Broker reports

  • Section III: Government Initiatives & Investments in the Industry

  • The Government has initiated several promotional activities

    Visa on arrival &

    medical visa

    Hospitality Development

    & Promotion Board

    Foreign Direct Investments (FDI)

    Tax incentives &

    subsidies

    Introduction of Medical

    Visa (M-Visa) to

    encourage Indian medical

    In some cases more than

    65 clearances are

    required to set up a hotel

    100% FDI is permitted in

    hotels & tourism including

    restaurants, resorts, and

    Under Section 35 of the

    Income Tax Act, a co is

    permitted to claim

    12

    encourage Indian medical

    tourism

    Introduction of visa-on-

    arrival for persons from

    Japan, Finland, Singapore,

    Luxembourg & New

    Zealand. Plans to

    introduce visa-on-arrival

    for 16 more countries

    required to set up a hotel

    in India

    The Union Cabinet of

    India has approved

    creation of Hospitality

    Development and

    Promotion Board (HDPB)

    for single window

    processing of clearances

    and approvals

    restaurants, resorts, and

    other tourist complexes

    providing accommodation

    and/or catering and food

    facilities to tourists, travel

    agencies, tour operating

    agencies and tourist

    transport operating

    agencies, etc

    permitted to claim

    deduction for investments

    in new hotels to set off

    against profits from other

    existing hotels

    5 year income tax holiday

    granted to 2-4 star hotels

    in specified districts

    having UNESCO declared

    World Heritage Sites

    Source: Technopak, Broker reports

  • And the hotel space has seen interest from various quarters

    Date Target Investor Deal size Stake

    Sep 2011 Logix Riviera ITC N/A 26.0%

    Apr 2011 Inovoa Hotels & Resorts Asian Hotels (W) N/A 50.5%

    Feb 2011 Marvel Resorts Delta Hospitality US$12.0mn 83.5%

    Sep 2010 Amartara Hospitality Royal Orchid Hotels N/A N/A

    Oct 2009 Nedstar Hotels Mac Charles India N/A 100.0%

    Date Target Investor Deal size Stake

    Foreign and Indian hotel companies

    Recent transactions in the hospitality space

    13Source: ISI EMIS, VCC Edge, Technopak, Broker reports

    Mar 2011 Roots Corp Omega TC Holdings US$47.9mn N/A

    Sep 2010 Global Resort & Spa VC Hunt India US$7.0mn 27.0%

    Jul 2010 Accor & InterGlobe Fund Pacifica Partners N/A 36.0%

    Jul 2010 Aria Hotels & Consultancy IL&FS & Milestone US$17.8mn 30.0%

    Jul 2010 Panchshil Realty Xander Advisors India US$110.0mn N/A

    Apr 2010 Viceroy Bangalore Hotels JPMorgan India US$16.7mn 49.0%

    Date Target Investor Deal size Stake

    Aug 2011 Leela Resorts Kovalam RP Group US$100.0mn 100.0%

    Dec 2010 Grosvenor House Hotel Sahara Group US$739.2mn N/A

    Aug 2010 East India Hotels (EIH) Reliance Industries US$217.1mn 14.8%

    Jun 2010 Hotel Leela Venture ITC N/A 10.0%

    Private Equity players (including players

    with investee hotel companies)

    Corporates looking to diversify into

    hospitality

  • Section IV: Financial Norms from a Debt and Equity Perspective

  • Hospitality companies A debt perspective

    FYE March 2011Margins Returns TOL

    TNW

    TTL

    TNWFACR DSCR Current ratio

    EBITDA PAT RoCE RoE

    Indian Hotels 17.5% (1.8%) 7.1% (1.8%) 2.1x 1.6x 1.1x 0.7x 0.7x

    EIH 24.6% (0.4%) 8.8% (0.2%) 0.7x 0.5x 2.3x 0.3x 3.0x

    Hotel Leela Venture 31.8% 7.0% 3.0% 1.8% 2.0x 1.9x 1.5x 0.5x 2.0x

    Taj GVK Hotels 37.5% 16.6% 21.1% 13.5% 0.7x 0.5x 3.0x 0.7x 0.9x

    Oriental Hotels 27.6% 10.3% 12.6% 7.8% 0.9x 0.7x 1.6x 1.8x 2.6x

    Asian Hotels (N) 37.6% 10.1% 6.4% 4.0% 2.1x 1.8x 1.6x 1.9x 0.6x

    EIH Associated Hotels 30.7% 5