Many hotels may soon find other uses for properties

New Delhi: Raj Sehgal, owner of the three-star Wet ‘n’ Wild Hotels & Resorts in Gurgaon, India’s first water resort that he claims helped shape the short weekend trip culture in the National Capital Region, now wants to shut shop after the Covid-19 outbreak-induced slowdown hit business hard.“We want to close the hotel and use it for some other business now. We don’t see survival in hospitality,” said Sehgal, who wants to change his land-use agreement. “We have 13 acres of land and the resort is spread over 5.5 acres. No one wants to invest in hotels, so we are hoping the government allows us to do some other business in the hotel premises like serviced apartments.”Hotel owners across India, facing bleak prospects or weighed down by debt, are considering shutting down their hotels and getting the land-use arrangements changed so that they can switch to other businesses like residential services, office spaces or even retail.Consulting and advisory firms said talks are ongoing with owners and interested parties looking at converting their assets. The list of stressed assets not meeting debt obligations will swell as some big hotels across key cities face the prospect of going belly up following the Covid-19 outbreak and the ensuing lockdown.“Some of the marquee assets in Delhi and Mumbai are in trouble. A five-star hotel in one of the best locations in Delhi, a fantastic product, may have to shut due to debt exposure,” said Nandivardhan Jain, CEO of hospitality advisory firm Noesis Capital Advisors. “Because of Covid-19, things are pretty terrible for them. If the banks do not consider restructuring their debt, the owners have no other option but to exit or dilute stake.” 76313352Assets that are overleveraged or even moderately leveraged will face a tough time, he said.“So, some owners can foresee there is going to be a mismatch in the gross operating profit levels and what needs to be paid to banks. The government has given a moratorium of six months, but post that they have left everything to the banks,” Jain added.Mandeep Lamba, president South Asia at HVS Anarock, said with the hospitality sector among the most severely impacted, owners of several operating and under-development projects will explore alternative uses of their assets or redevelopments.In Shimla, Sanjay Madan, managing director of East Bourne Resort, plans to shut his four-star hotel.“Ours is one of the prime hotels in the state with 75 rooms, banqueting space for 1,000 people and a heated pool and spa. We are getting out of hospitality and are doing this because of no support from the Indian government or the government of Himachal Pradesh. We are running to banks for our staff and other costs and banks are asking how we will return the money. We have to diversify,” said Madan.Madan said standard operating procedures are needed but his overhead costs are very high and are likely to double.“Hotels are open in the state but no tourists are allowed,” he said, adding that he is considering converting the asset into studio apartments and the banquet hall into a retail store.Jaideep Dang, MD, hotels and hospitality group at Jones Lang LaSalle in India, said co-living space, student housing and senior living companies are enquiring about half-built hotels or recently opened hotels that could be converted.“We have discovered a couple of such opportunities in Bengaluru and they are evaluating them,” he said.Vibhas Prasad, director, Leisure Hotels Group, which has hotels across locations like Corbett National Park, Haridwar, Nanital, Rishikesh, Kasauli, Naukuchiatal, and Kausani said he is hoping for a recovery by October and the next few months are critical. Hotelier Raj Chopra, who has two upcoming Marriott hotels in Goa, said the industry has suffered a lot. "Of the 600 people working for us, 500 disappeared. We have to wait for labour to come back. Financially, it has been a big setback and we have received no assistance."

from Economic Times https://ift.tt/2XRRCIb