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PE Backed Sarovar Hotels and Carlson Partnership Ends, Revenues To Dip

By Shrija Agrawal

  • 17 Jan 2009

The exclusive deal between PE backed Sarovar Hotels and US-based Carlson Hotels Worldwide has ended, reports Mint. Sarovar Hotels, a budget and mid-market hotel chain had an exclusive franchise agreement for the Park Inn and Park Plaza brands of the Minneapolis, US-based Carlson Hotels Worldwide. About one third of the Rs 600 crore revenue at Sarovar Hotels Pvt. Ltd used to generate from this exclusive agreement. Sarovar will continue to work with Carlson as their non- exclusive franchise partners.

Bessemer has invested (along with New Vernon Private Equity) Rs. 38 crore ($ 8.5 million) in Sarovar Hotels, to build out a chain of budget hotels in India, under the Hometel brand.

Ajay Bakaya, executive director of Sarovar Hotels told Mint that they expected an increase of 50% in revenues in the beginning of this year. The increase in revenue expectations have been revised to about 30% now.

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Bakaya also said "2009 is going to be a very bad year generally for the hospitality industry in terms of fee recovery and revenues of hotels. Our room rates currently vary from Rs 2,000 to Rs 12,000, and room rates this year would probably be 10% lower than last year."

Sarovar which currently has 35 hotels, is looking to expand to 50 hotels by 2011. Outside of India, their focus would be in either the Middle East or East Africa.

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Bakaya is however confident that over a period of time, 'Sarovar Branding' will become more predominant and their brands (Sarovar Premiere, Portico and Hometel) will fetch them more revenues. He added that they are not looking at raising another round of funding in the year to come and waiting for the valuations to be strong again.

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