Hospitality start-up Peppermint Hotels is in talks with a slew of investors for expansion capital as more private equity funds chase deals in a sector that is rising on the back of a booming economy. The trendy hotel chain set up by Arjun Baljee , whose family earlier launched the Royal Orchid Group , expects to add seven new properties by September this year.
“There will be at least two big-ticket PE investments of approximately $100 million each in the hospitality segment,” said a person who works with PE funds in the hotel industry segment.
India’s hospitality industry, which took a big hit due to the recession and the Mumbai attacks of 2008, is now back on the growth track. In 2010, revenue per available room or RevPAR went up by 6.2% according to the 2010 Hotel Industry Performance Report published by STR Global, a hotel industry data and research provider. Such growth is triggering greater interest from private equity players.
“PE interest in hospitality is improving this year. We have got a number of enquiries”, says Kaushik Vardharajan, managing director of HVS, a hotel industry consulting, valuation and research firm.
“The market has matured and PE funds have money sitting on the sidelines, so there will be more investments,” he added. Industry watchers say most investments will happen in the budget to mid-market segments and for non-metro locations, where real estate is available at a relatively lower price. “In Delhi and Mumbai, the PE interest is more a function of value of physical assets. But, in tier-II cities, the interest is due to increased occupancy levels as business travellers visit and stay in these cities,” says Vikram Uttamsingh, KPMG’s Head of Private Equity.
