Inter Globe Hotels plans ~10-billion expansion
InterGlobe Hotels, a joint venture (JV) between IndiGo airlines’ owner InterGlobe Enterprises and French hospitality major Accor, plans to invest ~10 billion in expanding its portfolio of mid-market hotels in the country.
The Gurugram-headquartered company owns 16 hotels under the ibis brand.
The 14-year- old JV has invested around ~20 billion in setting up multiple hotels since inception. The 17th hotel is ready for a launch in Kolkata next month.
“We have another five hotels under various stages of development and these will get operational over the next three years. The committed investment in these projects is ~6 billion, while we continue to look for more sites,” J B Singh, president and chief executive officer at InterGlobe Hotels, told Business Standard. InterGlobe Enterprises has a 60 per cent stake in the JV.
Besides these hotels, InterGlobe Enterprises also has a few special purpose vehicles with Accor under which it owns seven hotels run as brands such as Novotel and Pullman. It also has a 49 per cent stake in the India operating firm of Accor.
“We have been growing at a CAGR of 31-33 per cent in capacity, higher than the industry average. We want to get up to a good number and execute projects efficiently. The market has a long way to go. Our revenues have been growing at 20-30 per cent annually,” said Singh. InterGlobe Hotels clocked revenue of about ~3 billion in FY18 and hopes to reach closer to ~4 billion in FY19. Currently, the company has 2,870 rooms in its portfolio and this is expected to cross a milestone of 4,000 rooms in about three years.
According to Singh, the company enjoys a gross operating margin of around 35 per cent and aims to cross 40 per cent as more recently opened hotels stabilise in operations. “That gives you a good cash flow…the problem is in getting to a portfolio of first 20 hotels….after that it is easier to add a few hotels without stretching… are getting closer to that spot.” As a brand, ibis competes with Holiday Inn Express and Lemon Tree, among others.
Singh said the company was looking at 18-19 new cities to find expansion avenues, besides building more hotels in its existing markets such as Mumbai and Goa.
“We believe we have created a good critical mass for ourselves. We also believe that the current big cities where we operate can take more hotels. If we get a good site in Mumbai, we will take it. The market is wide open for products like us,” he said, claiming to have every second ibis user as a repeat customer.
The company does not see a need to bring any investor on board or hit the capital market to fuel growth. “Our parent’s airline, IndiGo, is now a public company, but it went public after many years. We feel we are in good shape. We prefer to put at least 50 per cent of company’s fund in a new project,” he added.