News: easyJet firm will set up 8 Indian budget hotels

(DNA 30/04/2006) Mumbai - London-based easyGroup’s Stelios Haji-loannou, who was one of the first few to enter in the low-cost airline space globally with his easyJet, is steering clear of the aviation sector in India.

"It’s already very crowded," he says. The ‘serial entrepreneur’ — as Haji-loannou likes to call himself — prefers to bet on the Indian hospitality sector instead.

He has drawn up plans to bring his easyHotel brand to India through a master franchise agreement with Dubai’s Istithmar Hotels.

easyHotel will set up eight budget hotels across metros in the next four years. The project would be funded and managed by Isithmar, which will invest Rs 1,800 crore in the Middle East and India. Istithmar CEO Muneef Tarmoom said the alternative investment company would spend a quarter of this — or about Rs 450 crore — in Indian properties.

easyHotel would roll out no-frills properties with 12-square-metre rooms.

"These would be 80-120-room properties with no food and beverage service. An ideal site for them would in the centre of the city as that’s where the competitive advantage is maximised," said Haji-loannou.

Haji-loannou also wants to spark off competition in this segment; "Our tariff would be 15% lower than other international hotel brands. We want to undercut competition."

Having entered into the hospitality less than a year back, easyHotels currently runs two hotels under its brand - one owned by itself in London (August 2005) and the other franchised in Switzerland (September 2005).

Both have an occupancy rate of around 85%.

Outside Europe, India is the first Asian market that easyHotel is entering. Next it is also planning to foray into the Middle East market along with Istithmar.

"Since our agreement with Istithmar for India is non-exclusive in India, we will have the freedom to partner with other players for other projects that will plan here," said Haji-loannou.

Meanwhile, its investment partner, Istithmar PJSC, is all set to enter the real estate.

"We will be entering the Indian market in a few months with a real estate fund of $500 million," said Faiz Mayalakkara, associate director of Istithmar.

The proposed eight-year close-ended fund will invest in projects ranging from residential townships, commercial space, IT parks, shopping, leisure and entertainment across the country.

Mayalakkara said as in any emerging market the company would be long at returns ranging between 20% and 25%.

It is also planning to foray into luxury segment of Indian hospitality sector, and looking at bringing in the US-based five-star brand One & Only Resorts - a listed company on the New York stock Exchange (NYSE).

"We have a significant stake in the company and will be keenly considering setting up a five-star luxury property under the One & Only Resorts brand here," Mayalakkara told DNA Money.