Why India is selling 14 state-run hotels


India is gearing up to sell 14 out of 16 "perennially loss-making hotels" owned by state-run India Tourism Development Corporation to private developers. 

Union tourism and culture minister Mahesh Sharma said that the finance ministry is taking forward the disinvestment plan to totally offload government's stakes in all the ITDC-run hotels—except the Ashoka and Samrat hotels in New Delhi.

Privatizing the hotels is expected to improve the financial standing of the ITDC, a public-sector undertaking that currently runs 16 hotels in Delhi, Patna, Jammu, Ranchi, Bhubaneswar, Puri, Bhopal, Bharatpur, Jaipur, Guwahati, Mysore, Puducherry and Itanagar. The ITDC reported an 18-percent drop in standalone net profit at R18.07 crore for the fourth quarter of financial year 2015-16, compared year-over-year to R22.06 crore for the same quarter. The company’s total income from operations declined 7.5 percent to R133.13 crore from R143.98 crore.

"The process to privatize the 14 hotels has already been started, Sharma said, adding that "certain issues" with the states may cause delays. "We are trying to address them," he said. Sharma did not say how much money the government could expect to get from the hotel sales. 

This would not be the first time India's government has offloaded under-performing properties. In the five years between 1999 and 2004, 18 ITDC were sold, bringing the number of state-run properties from 34 to the current 16.

Financial Incentives

India's share in global tourism is around 0.68 percent, Sharma said. The country's government is pushing to raise this to 1 percent by 2020, and two percent by 2025. Sharma said the government is considering setting up a National Tourism University as part of a series of measures to boost the tourism sector.

"We want to make India a tourism-friendly country," Sharma said. "We are putting in all efforts to make tourist places clean and safe. Growth of tourism will spur overall economic growth." 

Opportunity for AccorHotels?

No word yet on how much the government expects to get for these 14 hotels, or who will buy them—but this may just be the opening AccorHotels needs. Earlier this month, the French-based company said that it wanted to have 80 hotels in India by 2020

This could be a challenge, as AccorHotels currently only runs 38 properties throughout the country. The pipeline is good, however, with as many as 10 properties in Hyderabad, Goa, Jaipur, Chennai, Kochi, Coimbatore and Nashik set to open this year alone. Five of these will be ibis-branded, and the rest under the Novotel or Formule1 brands.

“In India, the metros are big areas for us," Global Deputy CEO Vivek Badrinath said. "They are actually multiple markets in our view. Meanwhile, there are cities with significant economic activity to be present in where we open ibis or Mercure or small Novotel,” he added.

Sources: PTI, Hindu Business Line, Hindu Business Line