30 minute interview

‘I would consider allying with a mall for a Hometel’

Anil Madhok Managing Director, Sarovar Hotels

Anil Madhok has just set out acquiring hotels on the back of a historic VC funding, and with a reputation of setting up hotels in locations where other hoteliers have been loathe to enter, he tells Bhisham Mansukhani about his company's expansions in 2006.

Is it unusual for venture capitalists to invest in the hospitality industry?

Venture capitalists are always looking for an opportunity and while their mandate is to look at specific industry verticals, hospitality, for its dream run these past few years, is also on that list. However, I think the reason why VCs haven't invested much in hotels in India is probably because hoteliers themselves are reluctant on account of the fact that VC investments are time bound. From that point of view, an IPO is certainly more attractive.

Why did you opt for VC funding?

The reason to opt for VC funding was to own our own hotels. Usually hoteliers own assets before consolidating and then go on to manage properties owned by others. We never did that to begin with but now, I think, given the present opportunity in the market, the time was ripe for us to invest. With the expertise and experience we have already gathered, it will serve us well. Profits will be higher and the asset value of the hotel will also increase over the years.

Will you then consider an IPO at some point of time?

Sooner or later, we will consider an IPO although our relationship with VCs has worked out well so far.

Are you considering setting up hotels on mall premises?

Yes. Land cost in India is exorbitant and that has created problems for us insomuch as skewing the project cost and viability. Now, malls represent a ready premise with footfalls and accessibility. That said, I would consider allying with a mall to launch our budget brand Hometel since the property would concentrate purely on the rooms and nothing else. I would, however, not open a five-star hotel within a mall.

Will you be outsourcing F&B and housekeeping for Hometel?

Unfortunately housekeeping and F&B in hotels cannot be outsourced because there always is a difference in the consistency of quality that a hotelier himself can provide, as opposed to the service provider he outsources to. In India, quality operators still are not available and the concept of take-away is not as widespread here as it is in Europe and America, therefore some food and beverage needs to be maintained. When we do take Hometel abroad, we could consider, focusing only on the rooms.

What about the selection of the location?

More travel means more business for us so the domestic aviation boom is linked to our growth. Locations would be considered on that parameter, among others. While a larger number of Hometels will be in satellite cities, we will consider them in metros as well. Hotels near the airport in Kolhapur and the Kandla port are likely. Malad is a likely location in Mumbai, given that is a BPO nerve centre. India has an unorganised budget hotel segment and that is where we see our biggest opportunity and in that sense, all cities, are on our radar for expanding the Hometel brand.

Will you be looking at overseas projects in the future?

Yes we will and from that point of view, brands like Portico, Premium and Hometel will be the most likely choice to be taken to that level.

Which other form of lodging are you considering in the future?

Service apartments in the premium luxury segment is something which we will consider, going forward.