SESSION REPORTS - Global Real Estate Institute

TopicTimeVenueAttended by:Hospitality Real Estate - new trends or old expectations?10h30 - 11h30EMERALD & JADE, Taj Mahal Palace1) Philip Logan2) Sohrab Dalal3) Pranav Bhakta4) Rishi KapoorThe group discussed prevailing trends in the Hospitality industry centred on maximizing returns via mixed usedevelopments, improving execution capabilities and extensive use of technology to enhance customer satisfaction.Mixed Use Development – The higher capital expenditure and longer gestation period makes the hospitality investmentsunattractive when compared to investing into other real estate asset classes. Further the hospitality assets are located atcentral locations where land prices are generally very high thus impacting the returns adversely. Hospitality assets take alonger time to stabilize and cash flow starts to flow in after project completion only which takes roughly 4-5 years.The lack of positive cash flow during the development phase exerts pressure on equity and debt investors as the successof the project is generally linked to hotel occupancy post project completion and stabilization. Such risks can bemitigated by adopting a mixed use development approach where the development has a for-sale component comprisingluxury condominiums, retail and offices. The cash flow generated from the for-sale component mitigates absorption andfinancial risk to a large extent thereby making the project more attractive to the investor. It increases the project leveragecapability and also generates intermittent returns for the equity holders.The condo-hotel market is gaining momentum as it provides intrinsic value to the buyers both from a rental yield orownership perspective. Globally there have been challenges with the condo-hotel model with respect to revenue sharingarrangements and the su]]_ss g[dirfy ^_j_h^s ih tb_ ij_r[tir’s g[h[a_g_ht _``c]c_h]y [h^ uhc`irg _xj_]t[tcihs `rigmultiple condo owners.Execution Capabilities – A hospitality project uses almost 70 trades and is a huge coordination effort. The groupbelieves that there is no contractor in India who is fully equipped to handle all the trades on a turn-key basis and deliverthe finished product. Such business gap in the industry is an attractive opportunity for entrepreneurs.Use of Technology – It is being observed that the use of technology is increasingly gaining prominence with hoteloperators. Investment into technologies like IP systems / Engineering management systems increases the capitalexpenditure but improves the customer interface while making the processes more efficient.Space management continues to be a challenge where larger emphasis is given at increasing area for functions (anincrease of more than 200% from 200 sqmt to over 600 sqmt). Further, more space is being allocated for back-up andfacilities thus reducing the effective room space.Page 15 / 23