M&C takes the JV route to bridge the 2-star and 5-star gap

M&C takes the JV route to bridge the 2-star and 5-star gap

 

MILLENNIUM & Copthorne Hotels, ‘the largest international hotel group in Singapore’, is also ranked ‘in the top 40 of the world’s 300 largest international hotel companies’.

 

And it has got to where it is mainly through acquisitions. In fact, Millennium & Copthorne (M&C) first caught global attention when it acquired a 50 per cent stake in the landmark Plaza Hotel in New York in 1995.

 

M&C, which is part of the Hong Leong Group, has snapped up hotels in key gateway cities in Europe, the United States, Middle East and Australasia.

 

But in India, where it moved into only in April this year, it has taken a different tack. M&C took the joint-venture (JV) route into the country, tying up with Rakindo Developers to develop hospitality projects in the country.

 

‘The joint-venture company, M&C Rakindo Hospitality, will develop two upscale, contemporary business hotels in Chennai and Bangalore,’ says Ng Chee Theam, vice-president of project development for M&C.

 

The JV partners are also looking into plans to develop more hotels in India, especially hotels that cater to the needs of business travellers. The two hotels in Chennai and Bangalore are under construction. When ready, they will be managed under a new urban brand ‘aimed at offering affordable contemporary business hotels to the market’.

 

‘The JV partnership will inject equity investments of up to US$100 million,’ Mr Ng says. ‘M&C Hotel owns 60 per cent of the JV and Rakindo Developers owns 40 per cent.’

 

While it’s tough to find one, a ‘suitable partner with a good network in the local business community and government, and who has demonstrated a track record in land acquisition’ helps in negotiating the restrictive rules of foreign land ownership in India.

 

The JV partner also comes in handy in dealing with other local challenges and difficulties, such as the lack of infrastructure, high cost of land, difficulty in negotiating deals and the slow pace of construction.

 

According to Mr Ng, M&C has moved into India to take advantage of the rapid growth of its economy.

 

‘With very high room rates throughout India, we believe that there is demand for a well-designed product catering to the business traveller who may be unwilling to pay five-star hotel rates,’ he says. ‘There is a strong basis for believing in the long-term attractiveness of the Indian hospitality market.’

 

M&C hopes to focus on markets with high investment potential and build new business hotels in major growth cities in the country over the next five years.

 

‘The new brand being developed by M&C meets the current need in the Indian market for a hotel that bridges the five-star and two-star segments,’ Mr Ng says. ‘It will cater to the demand for a superior product at an affordable price.’

 

Source: Business Times

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