[News Analysis: Lead to Cash] - Marriott bullish on Indian hospitality sector - Friday, Sep 26, 2008

As a part of News Analysis: Lead to Cash....
News Update:-

• Marriott International Inc, a leading global hospitality brand that manages and franchises hotels, foresees a strong, long-term outlook for the Indian hospitality sector.
• Marriott, which manages six hotels in India at present, is looking at a steady growth in the number in the next four years. “By the end of 2009, when we complete a decade of operations in India, we will have 16 hotels. The number will grow to 25 by 2011 with a room strength of 8,000-10,000”.
• The company, which registered a turnover of $150 million last year, hopes to finish the current year at $165-170 million. “By 2012, when all the 25 hotels become operational, we are targeting to achieve $500 million”.

Who will be the beneficiary of above news?

Viceroy Hotels - Marriott has given Viceroy Hotel its brand in a franchise agreement and provided the necessary support and systems.

[CMP = Rs 38, Mcap = Rs162Cr (Small Cap can only create wealth)....expected return 4x-5x in next 3 years] RJ & ICICI bought it at Rs80 per share, massive expansion plan in pipeline.

• Viceroy’s 305 Room five star hotels situated in the banks Hyderabad famous Hussain Sagar Lake. The property is managed on contract basis by world’s largest hotel chain Marriot International.
• Viceroy is on big expansion Path; its new hotels in Chennai (550Room), Bangalore (250Room), and Hyderabad (160) will be ready for occupancy in next 16-20 Months.
• Viceroy Board approved merger of its group companies with itself, which are operating in restaurant biz with 10 outlets in Hyderabad’s prime locations and a 55Room budget hotel. Combined Turnover of the restaurant chain stands at 40Cr in FY06. Post merger Viceroy’s Equity capital will go to 43Cr.

Viceroy Hotels Ltd (VHL) has set itself a target of logging a turnover of Rs 1,000 crore by 2010, up from just Rs 130 crore in FY07

• In addition to the four new properties currently under development, which will make this possible, VHL also plans an extension of its current line of business to set up a chain of resorts and spas across the country in the next few years.
• Properties in Goa and Mysore, spread over 20 and 2 acres, respectively have already been identified. Kerala, Ooty and Puri are also on the radar for the resort foray.
• The Hyderabad-based group recently carried out a major restructuring exercise, merging nine different entities into VHL to give it the size and focus needed for a shot at the big league. The group will present the first consolidated results this quarter.
• Currently, VHL has just one 5-star property — the Hyderabad Marriott, with four others under development.
• It will have a total room inventory upwards of 1,300 across segments in the hospitality business by 2009-10, said Reddy. The group is investing upwards of Rs 1,500 crore on new hotels in Chennai, Bangalore, Visakhapatnam and Hyderabad, all under the Marriott brand name, which will be completed by 2010.
• Nearly 70% of the group’s turnover will be from the hotels business, while the rest will be from the F&B chain that the company is expanding across the country.
• VHL has its presence in the F&B business through four outlets each of ‘The Minerva Coffee Shop’ and ‘Blue Fox Restaurant and Bar’, the Bread Talk chain of boutique breads, a franchise of the Singapore-based company with the same name, besides a food court and a restaurant in Hyderabad.
• VHL will push up the total number of Bread Talk outlets from the current four, three of which are in Mumbai, to 50 over the next three years at a total investment of Rs 50 crore. It is also kicking off the Minerva brand from Mumbai, Reddy said, adding, the Minerva-Blue Fox brand will have 15 outlets by 2010.
• As rule of thumb the cost of adding a room in the hotel industry is typically 1000 times the daily rack rate. So if Viceroy is adding 960 rooms with an average rate of say Rs. 7000, we are looking at an investment of 672 crores.The company has already diluted equity and issued shares/warrants to ICICI Ventures and Rakesh Jhunjhunwala (around Rs. 80 a share). Add to that additional debt of 500 crores to fund the massive room expansion.

[Are you looking for wealth creator stock from HBJ Capital? If yes, then subscribe to "10in3" research report (paid service) which includes every month a very exhaustive research on small cap stocks with potential to create 10 times or more returns in 3 years]

-HBJ Capital Team