Indian government finds solution for loss-making hotels

Back in January, we noted that India’s tourism ministry was planning to make eight of the 16 hotels run by the state-run India Tourism Development Corporation private. By May, the number of properties headed to market had grown to 14—more than 85 percent of ITDC’s portfolio. These hotels, described as “perennially loss-making,” would be offloaded to private developers. 

Just last week, India’s government was moving ahead on disinvesting the Corporation. But with some of the worst-performing units sold, ITDC’s fortunes may have turned a corner, and the government is reconsidering its options.

Now, four of these properties are being transferred to state governments rather than private buyers. The Hotel Lalitha Mahal Palace in Mysore will be transferred to the Karnataka government; the Hotel Jaipur Ashok will go to Rajasthan; the Hotel Lake View Ashok in Bhopal will be transferred to Madhya Pradesh; and the Hotel Brahmaputra Ashok in Guwahati will go to Assam government, according to Tourism Minister Mahesh Sharma. 

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Beyond these hotels, the Ministry has invited applications from transaction advisers to help transfer the government’s holding in three other properties (the Hotel Pondicherry Ashok, the Hotel Patliputra Ashok in Patna and Hotel Donyi Polo in Itanagar) to their respective state governments. “With a view to transfer the property, the authority has decided to appoint transaction advisors to determine the feasibility and prepare the financial model for the project. If found viable, the property may be transferred to the state,” said the tenders. To take part in the plan, applicants would have to submit a technical as well as a financial bid.

The latter three hotels are JVs set up with State governments. ITDC holds 51-percent equity in Hotel Donyi Polo and Hotel Pondicherry Ashok, for example, and the state governments own the remainder. For Hotel Patliputra Ashok, which reportedly turned a profit over the last fiscal year, the Bihar government had allotted land under a 99-year lease to the Tourism Ministry.

The government has also decided to lease or sell Hotel Kalinga Ashok in Bhubaneswar. 

More than 10 years ago, from 2002 to 2003, the government sold stakes of between 89.97 percent and 100 percent in 10 ITDC hotels—including Hotel Airport Ashok in Kolkata and Hotel Indraprastha in New Delhi—to private players, raising Rs 273 crore.

Officials said the proceeds from the sales will be partly returned back into ITDC. Sharma did not say how much money the government could expect to get from these transfers.

 

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