Reliance Plans Hotels in SEZs

Reliance Industries Ltd (RIL), India’s largest conglomerate, wants to enter the hospitality sector by building hotels and motels. The company plans to set up hotels at special economic zones (SEZs) in the Mumbai, Delhi, and Jamnagar areas. Reliance is also moving forward with plans to build rooms at hundreds of its petrol pumps across India.

The company intends to develop at least 1,500 rooms at its proposed SEZs near Delhi and Mumbai, assuming it can secure land and government permissions. For its 25,000 acre Delhi SEZ, Reliance has told the government it wants to set up hotels that will “(cater) to the needs of those visiting the city—either on business or for leisure”. It has earmarked 5% of the land (1,250 acres) in the proposed SEZ for hotels and leisure sites. Reliance is also seeking government permission to introduce businesses besides refining in its existing SEZ at Jamnagar in Gujarat. This would create the same need for hotels as at the two proposed SEZs.

Reliance has 1,400 petrol pumps, and expects a 286% increase to 5,400 pumps by 2010. About a third of its existing pumps already sell food and retail products. The company plans to build short-stay rooms at its rest stops located on long-distance routes, such as the one between Jaipur and Srinagar.

RIL has not yet decided what type of ownership structure it will adopt for the hospitality projects it is planning. The company expects plans to crystallize by November, but has already begun hiring hospitality industry professionals.

C.V. Prasad, who heads an association of travel agents, calls the SEZs “a big question mark” in the light of the government’s decision to freeze all approvals for such zones till a plan for rehabilitating farmers from whom the land is to be acquired is finalized. However, Prasad said if RIL were to build hotels, it would ameliorate the room shortage that has resulted in high hotel rates.

India’s hotel industry is short 150,000 rooms, according to the ministry of tourism. Driven by business growth and leisure tourism, high occupancy has led to sharply increasing room rates in major Indian cities. Hospitality consulting firm HVS International reported that the average room price in Mumbai increased almost 25% from April 2005 to March 2006.