Blackstone evaluating potential hotel buys in ₹300-400 cr range

April 8, 2024

Blackstone Inc is looking at investing in the hospitality sector in India and according to sources, is already evaluating two hotels in southern India as potential buys in the range of ₹300-400 crore.

These are standalone hotels with decent occupancy levels, according to sources.

Last week, Blackstone’s President and Chief Operating Officer Jonathan Gray had said that he loved hotels and would like to invest in them in India, but the India team had informed him that they were pricey as the valuations had run up. He added that fundamentals in the segment were good for private equity investments.

Even with the pricey valuations, sources told businessline that the asset manager was actively pursuing opportunities and an acquisition was likely this year.

The world’s largest alternatives asset manager with over $1 trillion assets under management (AUM) globally is already a large player in commercial real estate in India, while it has substantial mall assets and is in the process of building up a sizeable portfolio of warehouses and data centres. It manages assets worth $50 billion in India including its private equity investments and is looking to scale up the same.

The next frontier would seem to be hotels, which is partly a real estate play and partly services. Blackstone is late to the party, but the private equity giant is dipping its toes into the water with privately-owned standalone hotels rather than a chain, though it is looking at that option as well.

Blackstone declined to comment on the information.

Hotel industry acquisitions

Recent acquisitions in the hotel industry would give an idea of the valuations.

Last month, Chalet Hotels acquired 158-keys Courtyard by Marriott Aravali Resort for ₹315 crore. About a year back, it had acquired an 80-room resort, Dukes Retreat in Khandala, for ₹133 crore.

Anirudh Agro Farms acquired Viceroy Hotels, which has two hotels in Hyderabad operated by Courtyard by Marriott, with 400 rooms for ₹150 crore. This was acquired under a bankruptcy process. In June 2022, Max Estates had bought Accord Hotels and Resorts for around ₹324 crore.

Hotel demand

Hotels demand

The hospitality sector, which was battered in the Covid pandemic, has seen a surge over the last two years with resumption in business and leisure travel and a sharp increase in conferences and events.

In the last fiscal, average room rates have gone up about a fourth, according to Elara Securities data and over 48 per cent from the beginning of 2022. Occupancy levels have improved 200 bps to 73 per cent, while average revenue per room has increased over 43 per cent during the fiscal. Hotel stocks have seen price rise in the range of 78 to 148 per cent over the last 12 months.

The sector saw a fourfold jump in investments into the sector at over $400 million in 2023 according to JLL India. Three hotel companies have also made their debut in the stock markets.

Despite a record number of hotel signings last year, there is a huge demand-supply gap that is keeping room rates high.

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