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ITC Hotels subsidiary on an expansion spree - Views on News from Equitymaster
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  • Feb 25, 2000

    ITC Hotels subsidiary on an expansion spree

    Fortune Park Hotels (FPH), a wholly owned subsidiary of ITC Hotels has plans of managing 22 hotels across India over the next two years. Currently they operate under the "Fortune Park" brand which primarily operates hotels in the three and four star segment.

    ITC Hotels, a subsidiary of the tobacco giant ITC Ltd owns and operates hotels under the "Welcomgroup" brand. It has 9 hotels (1,076 rooms) on ownership and license basis and manages 6 others (1,123 rooms).

    FPH plan to further expand into the two star hotel segment. This would be done through a brand called "Fortune Inn", and these hotels would be opened in small industrial towns and religious places like Tirupati, Ayodhya, Mathura, Shirdi and Vaishnodevi. Under the "Fortune Park" brand they plan to open seven new properties by the end of this year in Darjeeling, Calcutta, Siliguri, Sikkim, Vapi, Goa and Chennai. At present there are three hotels under the "Fortune" brand in Trichy, Trivandrum and Ahmedabad.

    The Budget hotel segment has become an area of interest for Indian hotel companies since the five star segment has been exhausted in the major cities. The future growth in the hotel industry lies in the three and four star segment in the smaller cities and towns in India. This trend of expanding into the budget hotel segment by ITC Hotels, is also seen by other hotel companies. The Taj group is expanding its "Taj Residency" brand, Oberois are expanding their "Trident" brand, Radisson is opening budget hotels under the brand of "Country Inn" etc.

    The total no. of hotels in India as of 1998 is 1,209 and total rooms available is 66,522. Over the last two years total room supply has gone up by 3.5% on an average. The segments which have contributed to this growth are the four star segment which has increased by 8% over the last two years, heritage segment which has gone up by 9% and the three star segment which has gone up by 6%.

    The growth in last couple of years has been highest in the three and four segment as the “budget” category of rooms is in high demand due to lower room rents. Also five star hotels in the metro cities are very expensive to build. In normally costs Rs5-6m per room to build a five star hotel, Rs 4m for a four star hotel and Rs 2-3m for three star hotel. This cost however excludes the land cost which is higher for the metro cities where five stars are usually located.

    Besides the above hotels ITC Ltd and ITC Hotels together plan to own and operate two five star hotels in Mumbai, one in Calcutta and expand the existing Maurya Sheraton hotel in Delhi.



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