Golden Tulip Enters India; Says Land Prices Unrealistic, May Soften

Golden Tulip Hospitality Group operates more than 630 properties, mostly in the three and four-star categories, in 49 countries.

The 45-year-old European company is making its entry into India with its Golden Tulip, Royal Tulip, and Tulip Inn brands at an estimated cost of $250 million (Rs1,075 crore).

Their first hotels in India will open in three months in Jaipur, Ludhiana and Hyderabad. Vimal Singh, managing director of Golden Tulip’s South Asia venture, spoke to Mint. Edited excerpts:

Can you tell me about what your current plans in India are?

We’re going to primarily devote (our efforts) to four and five-star hotels and three-star properties. Four- to five-stars will be in the major metros and some of the stronger tier two cities.

The three-stars will roll out all across the country in about 60-odd locations that we have targeted. And we will be developing extended stay as well, in the three-star as well as the four-star bracket. And we will also be developing resorts in those brackets.

And do you have a land bank already? How do you handle that?

We’re creating a land bank. We’re buying sites, negotiating for sites, so…we make deals with developers who are building properties to either buy the property from them or to joint venture with them. Or we go and look for our own land to buy and do our own development.

You’re trying to set up about 100 hotels?

No, I think our internal target is about 50 hotels over the next three to five years.

Where are you getting the funding for this?

Our internal private resources are, you know, overseas mostly through an entity in Mauritius.

And then we raise local debt….from local banks.

What are the interest rates running now?

Right now for our private transactions, they’re probably at about 10.5%…

I expect them to go up so we’re looking at alternative sources…for debt funding.

What kind of alternatives are you looking for?

Well, there are, you know, mezzanine debt structure, there is some offshore borrowing that we could do. We’re talking to some institutions here for a principal entity for our borrowing so that we can leverage all our hotels (together)…rather than separately.

What do you think of the land prices right now in the markets that you’re looking at?

High. I think in most places unrealistic. We look for properties which, you know, probably don’t fall into those categories. It’s been tough to find…land. I think price of land needs to temper down. At these prices, the only property you can do is luxury. And even then it becomes tough.

But will the real-estate market allow you to do what you’re planning on?

Well I think that’s happening now. We see that there’s a downward trend in prices now….

There’s a pressure on pricing now, because a lot of (hoteliers) are balking, not buying properties.

You hear about crazy numbers, but there are very few deals getting done in those places right now.