Lemon Tree Hotels zooms 5% after it signs agreement to open hotel in Goa

Lemon Tree Hotels gained 5.13 per cent to Rs 61.50 on the BSE on Thursday after the company signed a License Agreement for a 44-room hotel at Baga, Goa. This will be the company's fifth hotel in the coastal state.

"The hotel is located at Baga, one of the most popular destinations of north Goa and will feature 44 well-appointed rooms and suites, complemented by a multi-cuisine restaurant... The hotel, owned by Aqua Resorts And Spa Pvt. Ltd, is expected to be flagged and relaunched in April 2020," the company said in a filing. 

At 9:44 am, the stock of one of India’s largest hotel chains in the mid-priced hotel sector was trading 3.68 pe cent higher at Rs 60.55 apiece. In comparison, the benchmark S&P BSE Sensex was down 0.22 per cent at 41,465.68 levels.

Earlier, the hospitality firm had said that it is looking to open three more properties under its upscale Aurika Hotels and Resorts brand across the country by the end of 2021.

"We plan to open three more hotels under the Aurika Hotels and Resorts brand by end of 2021 across the country," Lemon Tree Hotels Chairman and MD Patanjali G Keswani had told news agency PTI. The company plans to re-brand its existing Lemon Tree Premier in Corbett to Aurika, Corbett, as that hotel provides a truly upscale experience, he added.

For the July-September quarter, the firm reported a standalone net profit of Rs 6.19 crore, up from Rs 3.11 crore logged in the April-June quarter of FY20. The revenue came in at Rs 66.85 crore for the quarter under review.

Lemon Tree Hotels will divest 49% stake in 2 years, says Patanjali Keswani

Lemon Tree Hotels, which has been in a capital deployment phase to expand operations and create assets, will start scouting for buyers to divest minority stake after fiscal 2021-22, Patanjali Keswani, chairman and managing director, Lemon Tree, has said. The move will be a change in tack for the New Delhi-based company that has been investing in assets.

“We have been in a capital deployment cycle. We had to deploy $800 million (Rs 5,524 crore). Most of it is done. After investing the reminder $120 million over the next two years, am going to find partners who can buy 49 per cent, we will have 51 per cent,” said Keswani. The move, he said, will help unlock over a billion dollar of capital for the company over the next two to three years. “Why carry in your balance sheet a high level of risk that is linked to the assets? Just get rid of it,” he said.

To be sure, most of the hotels in India, including the Indian ones that traditionally owned assets, have embarked upon an asset light model for a faster growth and quicker returns. Lemon Tree is likely to announce a deal with Keys Hotels in the next two weeks, he said. The mid-market hospitality chain had signed a non-binding term sheet with the Los Angeles-based Berggruen Holdings, which owns two, three, and four star hotels under Keys Prima, Keys Select, and Keys Select. Keys Hotels owns and manages 21 hotels with 1,911 rooms in 19 cities in India.

If the deal goes through, it will be the first acquisition of a hotel chain by Keswnani-led hospitality firm that currently has a portfolio of 56 hotels (5,525 rooms) with another 31 hotels (3,275 rooms) in the pipeline likely to be added by calendar year 2021.

chart The Warburg Pincus-backed company, which raised Rs 1,038 crore in March 2018, had then said it had plans to add 3,000 hotel rooms over the next three years. The company has been expanding its footprint at a brisk pace over the past 12 months.

On Wednesday, Lemon Tree announced the opening of Lemon Tree Premier, its upper mid-scale brand. Comprising of deluxe, premier and executive rooms and suites, the 303-room hotel will be operational later this week. It’s one of the23 such hotels the company plans to have by 2021. It currently has 12 hotels under the Lemon Tree Premier brand. Lemon Tree expects its upscale brand Aurika, coming up near the Mumbai International Airport, to be up and running over the next two years. The 670-room luxury hotel will be one of the largest five star hotels in India, said Keswani.

The overall consumption slowdown in the domestic market has hit the hospitality sector, said Keswani. Though the occupancy rates have been high, average room rate has been under pressure and has been coming down month-on-month for the last three to four months. He expects the government to announce measures to kick-start the economy and revive consumption.

Lemon Tree’s shares closed at Rs 64.90, up 0.70 per cent on Thursday. The benchmark Sensex closed at 39,586.41 points, down 0.01 per cent.