Financing Exercises For Hospitality Industry

BW Hotelier Indian Hospitality Awards & Summit 2017 was held at The Leela Ambience Hotel, Gurugram. The two-day event is up for March 23rd & 24th 2017 and the conclave theme for this time is 'Yes Bank Knowledge Session.'

The third session on day-1 was called 'The Challenge of Hotel Finance: is the Mixed Use Model the Way Forward?" The eminent panellists for the hour were Sonica Malhotra, Joint Managing Director, MDB Group; Mandeep Lamba, MD (India), Hotels & Hospitality Group, Jones Lang La Salle; Gaurav Sharma, Director Investments, SAMHI Hotels; Anurag Bhatnagar, Vice-President (Multi-Property Development -Luxury), Marriott International.

The session was moderated by Bikramjit Ray, Executive Editor, BW Hotelier and he took the discussion forward by asking Dhruv Khanna, Director, Corporate Finance, Yes Bank. Ray asked Khanna about Yes Bank's approach to funding or lending to the hospitality sector. On which Khanna said, "We are a very liberal but educationally supported decision making bank. And we continually look at innovative ways to fund through equity and debt planning. We recognise the fact that the hotel industry has a significant gestation period and hence we structure finance in long term of 13-15 years."

Thereafter Sonica Malhotra, a finance expert on the panel kicked off a discussion talking about how business in hospitality have started looking at balancing their sheets with retail strategies, holding commercial office or service spaces, investing in debt capacity and bringing on a good chain reaction with a mixed bag of assets. The business then is able to have a smoother cash flow.

Talking of financing and raising fund, Gaurav Sharma was able to present his model as one of the strong ones out there supported heavily by equity. He told that, "When our assets stabilise we approach banks for leverage of our assets or show them how we filled our gaps and covered our losses through a mixed bag. Some progress rather than a piece of plain land gives us the opportunity to negotiate on the table."

Mandeep Lamba too said, "Two prime pain-points for an hotelier were acquiring land and raising funds (by borrowing). It usually takes 3-5 years for hotel business to settle and show returns in 8 years, but co-incidentally if the business hits a cyclic depression somehow, you are in for a big trouble. It would be good if the hotel industry is classified into the infrastructure industry, so then certain exemptions can really help the hospitality sector. "

Anurag Bhatnagar went on to say that, "Yes, certainly land use is a bigger concern, returns would be bigger and better only then." I see Leela- Ambience a nice success story in the context of having a mixed bag of assets - corporate, entertainment, and hotel packed together."