WOW - Hotel Leela Ventures

Leela along with Kempinski a key move..

Hotel Leela Venture is the flagship of Leela groups. Leela is the well known chain of 5 Star hotels in India, catering to both business and leisure travelers. Hotel Leela Venture had a collaboration with Penta Hotels, UK, which was subsequently transferred to Kempinski Hotels, a European chain of 5-star deluxe hotels, owned by Lufthansa, the German airliner. The company has a marketing alliance with Kempinski for properties in India.

HLVL operates four hotels under the Brand Name of 'Leela' across India. The company has 1015 rooms in four major cities Mumbai, Bangalore, Goa and Kovallam (Kerala). All the properties are owned and operated by the Company. The Mumbai and Bangalore properties has a management tie up with Kempinski hotels. The company has entered into a marketing alliance with GHM (Aman Group) for its Goa property. The beach resort in Kovalam, Kerala was acquired in 2005.

Well placed in the Business and Leisure space and large expansion plans as well !

Leela's properties are concentrated in Mumbai, Bangalore, Kerala and Goa. The Brand name Leela is associated with them. The Leela Kempinski at Mumbai is centrally located near the International Airport with 413 luxurious rooms. Bangalore property, with lavish 376 rooms, is highly rated and contributes significantly to revenues. For the leisure travellers, Goa, one of the most visited tourist spots has 152 rooms. The Company acquired the Kerala property in 2005 which is a beach resort with 194 deluxe rooms with a panoramic view of the Kovalam shoreline.

HLVL enjoys highest room rates compared to its peers. Leela's hotel in Bangalore contributes 50% to the top line, followed by Mumbai and Goa. Bangalore has the highest occupancy rates and ARR ( Average Room Rent) compared to its other properties. Mumbai. and Goa continue to have a strong growth outlook in terms of ARR and occupancy. Bangalore ARRs have jumped significantly and are at record levels. Limited room inventory, high dependence on the Bangalore market and no presence in growth areas like Hyderabad, Cheenai, and Delhi are the negatives.

HLVL has an aggressive expansion drive for presence in key business and tourist destinations in India. The company has a capex plan of Rs 800 cr. The company has acquired land at Chennai to build 380 Rooms, Hyderabad with 300 rooms, Pune 260 Rooms, Udaipur 81 Rooms. The company also intens to set up an IT Park at Chennai (400,000 Sq Ft. ) and finally its in discussion for a management contract a hotel in Gurgaon Delhi with 419 rooms under a management Contract. The companies total rooms will expand by 1550 Rooms by the Year 2009-10. The Funds for this capex is raised through Internal Cash flows and from the stock issued at Rs 62.20 per share in September 2005.

Its in the investment phase for now !
India has emerged as the 2nd most rapidly growing tourism place in the world.. According to recent estimates of the WTTC, Indian tourism will grow at 8.8% (CAGR) over the next 9 years (from 06-15). Tourist arrivals are expected to touch new highs on the back of low cost airlines, growing infrastructure thrust by the government and India's emergence as an outsourcing hub. Addition to the room inventories over the next 2-3 years is not expected to be commensurate with this growth. It is likely that the demand will outpace supply in the short to medium term, and ARR's and OR's will see further growth during this period thereby driving industry profitability.

Leela's focus on luxury business hotels and its concentration on key metros like Bangalore and Mumbai has led the growth in ARRs and occupancies rate for the four consecutive year till FY06. However supply is expected to increase in Bangalore. This brings in a risk of slower ARR growth in FY07 and peaking in FY 08. Occupancies are expected to stagnate by 2009. Growth will come in from Leelas entry in Hyderabad , Chennai and Delhi (Gurgaon) ARR for the company for the year FY06 is at Rs 9778 and Occupancy rate seen at 78-81%.

The company is trading at a P/E of 22 for FY07E and 17 X for FY08 earnings. The big investments will happen in the next couple of years. Keep watch on this for now. Its not time yet to check in