World Franchise Associates - Building Franchise Business Worldwide

« BACK TO NEWS

Balwa Group (India) Plans Expansion for Hotel Biz in India and the US

02 Oct 2017 - Balwa Group, with businesses spread across hotels, real estate, engineering and food processing sectors, is set to invest over Rs 800 crore to further expand the hospitality business in India and overseas. The over-a-century-old family-owned business group (set up in 1906) is adding two hotels in Mumbai and another two hotels in the Houston area, in the US state of Texas. Once the expansion is completed, the new additions will take the total number of hotels in its portfolio to 10 four in Mumbai and six in Houston.

In a chat with DNA Money, Umar Balwa, director global operations, Balwa Group, said that hotels form a major part of the group's business. "We have two operational hotels and another one coming up near the international airport in Mumbai. It's a 200-room hotel and we have tied-up with Marriott for their Fairfield brand. This hotel will be operational in another three years from now," said Balwa adding that another hotel project in north Mumbai is underway.

The new hotels in Mumbai will call for an investment of Rs 300 crore each total Rs 600 crore including land cost. The two hotels in Houston are likely to call for a capital expenditure of anything between Rs 200 crore and Rs 300 crore. Funding the expansion in India and the US will be done through a mix of internal accruals and debt.

The group has so far invested close to Rs 800 crore in the hotels business that has two operational hotels in Mumbai and four hotels in the US. The Mumbai hotels are operated under Sarovar Hotels & Resorts (now acquired by Louvre Group) brands viz Grand Sarovar Premiere (a 100-room five-star hotel in Goregaon) and Residency Sarovar Portico (a 75-room hotel in Malad). The hotels in Houston are operated under Choice Hotels and Howard Johnson brands.

On whether he will be looking to acquire his younger cousin and one of the promoters of DB Realty Shahid Balwa's boutique hotel (Hilton Mumbai International Airport Hotel, Sahar), he said, "I would love to have it. But that hotel is very close to Shahid's heart. That's where he started with and I don't think he will ever sell it."

The under-construction Fairfield by Marriott hotel (located half a kilometer from JW Marriott, Sahar) in Mumbai will be under a franchise agreement with Marriott International. The operations of this hotel will be managed by Balwa Group's asset-owning company. The second hotel project, with 200 rooms, is being planned in the Borivali area, a suburb in north Mumbai. While decision on the brand under which this hotel will be operated is yet to be finalised, the asset owners may partner Marriott International for their Fairfield brand for this hotel as well.

As for overseas expansion, Balwa said, "We should be breaking ground early next year. Catering to the mid-market segment both properties are in the Houston area. The costs involved in setting up a hotel there is much lesser compared to Mumbai. A 60-room hotel, which is a typical size in the US, will not cost you more than $12 million. We are currently operating 250 rooms between the four hotels, and the two new projects will add another 250 rooms to our portfolio in Houston," he said.

Drawing parallels between the two markets, Balwa said that putting up a hotel in Canada and in the US is much easier as one can have a project up and running in less than 14 months. "The first hotel we built in the US was in 2006. It was a 70-room property. We broke ground in March and were ready to operate by December same year," he said.

On the prevalent stress with hotel-asset owners in the Indian hospitality market, Balwa said that people who haven't taken huge debt on their books are very comfortable and doing well. "This is a very capital-intensive business and if you look at the return on investment (RoI) it's not as exciting as one can get in some of the other businesses as breaking even takes longer. The only thing that appreciates over a period is the value of your property, if the hotel is not really making any money.

"You need to be a hotelier to understand and run this business successfully. It just doesn't work if you have loads of money and are setting up hotels for its glamour. We have seen so many such examples in the past few years wherein people got into this business and eventually had to sell-off to be able to focus on their core operations," he said.

On the realty front, the group has stayed away from residential developments and has been focusing on commercial and IT spaces. It currently operates a million square foot of commercial and IT space in Goregaon. The group also has plans to add more commercial space at the same location in the future.


DNA Daily News and Analysis

« BACK TO NEWS

FranSpeak

Subscribe to FranSpeak and receive free, monthly news and features about international franchising.

f

International Franchise News.International Franchise News.

© World Franchise Associates Ltd 2016. All rights reserved. info@worldfranchiseassociates.com
UK Company No. 6203737. 26 York Street, London, W1U 6PZ. +44 (0) 8446 698 980

Disclaimer: World Franchise Associates Ltd. is a privately owned limited liability company specializing in international franchise development and advisory services.
World Franchise Associates is not an NGO or franchise association and is not affiliated in any way with the World Franchise Council.
World Franchise Associates is a member of the International Franchise Association. Member of the IFA International Committee and
Member of the Advisory Council for the Global Restaurant Leadership Conference.