The realtor-hotelier

Not many have achieved this globally. But he wants to do in hotel industry what he has done in real estate. By siddhartha nahata

Over the last few centuries, the global corporate theatre has witnessed businessmen donning almost every other hat – a steel maker becomes an IT giant, a liquor baron turns into an aviation maestro, oil tycoons transform into retail magnates, real estate players are successful as telecom majors, and the list goes on. Whenever such businessman entered a new sector, which was different from their core one, they took the existing competition by storm and became a dictating force in that arena. Surprisingly, what the world hasn’t witnessed is experienced real estate players emerging as successful hoteliers.

It’s ironical since there is a logical fit between real estate and hotels; after all, the bulk of the initial cost of a hotel is in the form of land purchase. It is also ironical since almost every real estate tycoon has entered the hotel business. But almost everyone has managed to merely become run-of-the-mill hoteliers. So, while the Forbes list of richest persons in the world has been flooded with real estate tycoons, the elite list of top players in hotel industry in 2007 doesn’t have a single real estate major. It really revealed how ordinary has been the performance of real estate players, who have tried to become hoteliers.

What global realtors have failed to do, K.P. Singh, the world’s richest realtor with a net worth of $35 billion, has decided to do. And if he is able to make the transition, the jinx that has been floated that realtors can’t be hoteliers, will be broken. Singh envisions his DLF Hotels “to be India’s premium hospitality real estate development company.” The idea is to develop, acquire, finance and actively manage hotel properties. But it is not going to be cakewalk.

The spokesperson of ITC Welcome Group Hotel explains, “Both of them are totally different businesses. The common factor might be the layout of the property, but after that in the hotel business you enter into services, which is different from real estate. You need to have specialisation in logistics, manpower, and maintaining standards.” This is amplified by Nisheeth Srivastva, Director, Federation of Hotel & Restaurant Associations of India (FHRAI), who claims, “There are many differences between the hotel and real estate industry. The dynamics of the hotel industry are way too different, but at the same time a real estate player also has an advantage of having his own experience of property layout.”

Well, Singh has decided to walk on this untreaded path. The plans are gigantic and they can make DLF the number one hotelier in the country, ahead of Indian Hotel Company (IHC). IHC has a room inventory of 9,000 rooms and plans to double it in the next two years. But DLF has chalked out a mega plan of 25,000 rooms spread across different segments (luxury, business, leisure & recreational). Actually, DLF has made headway in implementing the plan. The construction of 6,000 rooms is under process across major cities and tourist destinations.

Singh’s confidence can be measured by the fact that he plans to list the hotel division (along with the separate listings of other divisions). DLF’s company spokesperson says that “work towards the listing of the hotel division is on track and has made significant advancements.” The plan looks perfect. To make his journey an easier one, Singh has struck deals with the world renowned hotel majors like Four Seasons and Hilton. The sharp-minded Singh was quick enough to gauge the importance of inorganic growth to make it big in the hotels business. Recently, DLF acquired the global leading luxury hospitality chain Aman Resorts for $400 million giving it a presence in the international hospitality realm. Such deals will help DLF to master its skills in crucial areas such as manpower, logistics, and supply chain.

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Source : IIPM Editorial, 2008

An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative

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