BackEmbassy, Blackstone to build business hotels in office parks
Blackstone-backed Embassy will build two hotels in Manyata Embassy Business Park and is close to signing up for two hotels under the Hilton brand
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Bengaluru: Property developer Embassy Group is planning to build business hotels at its existing and upcoming office parks spread across Bengaluru, along with investor partner Blackstone Group Lp.
Blackstone-backed Embassy will build two hotels in Manyata Embassy Business Park, which currently has around 12 million sq. ft of existing office space, and is close to signing up for two hotels, in two different price segments, under the Hilton brand. The developer will also add two more towers of premium office space and food and beverage-led retail for a total 1.2 million sq ft, at an investment of about ₹ 1,000-1,100 crore
At Embassy Tech Village, another large, upcoming office park, which will house e-commerce firm Flipkart as one of its key tenants, two more business hotels will be built though Embassy has not zeroed in on the brand yet. This will also require another ₹ 600 crore of investment.
“There is a lot of captive demand for these hotels from within the office parks, and they in turn will also enhance the value of these parks," said Jitu Virwani, chairman, Embassy Group.
In August, 2014, Embassy Group opened a 247-room Hilton hotel in its office park Embassy Golf Links in Bengaluru with an investment of about ₹ 350 crore.
Embassy and Blackstone also bought over an under-construction mixed-use project, which will have a Four Seasons hotel and branded residences in last year. They re-launched the project as Embassy One this year, in August.
“Apart from the Four Seasons project, which is a unique and standalone project, we intend to focus on business hotels because there is a ready captive market in all our parks," said Sartaj Singh, president-hospitality, Embassy Group.
“We are in the business of building office space and to get into the hotel space is a natural fit. Our office parks are typically quite large, so the business model will be to build a five-star and a three or four-star hotel in each park with conferencing facilities of a reasonable size," Singh said.
Embassy is clear that it doesn’t want to build standalone hotels of 500-600 rooms each, but instead will build two hotels in each park that will have a combined 450-500 rooms.
Separately, Blackstone is also scouting to buy out hotels at reasonable valuations across the country, said a person who didn’t wish to be named.
“Blackstone has so far focused on buying office assets, but it is interested in acquiring hotels as well as retail space or shopping malls and is looking at them in an opportunistic manner," he said.
Blackstone declined to comment.
Replicating the plans for Manyata and Embassy Tech Village, Embassy will also build two more hotels in its recently acquired 100-acre land parcel in Whitefield, its fourth in the city.
In November, Embassy entered into an agreement with Cornerstone Group, a Bengaluru-based firm with a large land bank, to develop Embassy Cornerstone Business Park near the Whitefield area, with a development potential of 12 million sq. ft of office space.
Real estate developers in the past have ventured into the hospitality sector, with ambitious plans to build a portfolio of hotels across cities. Most of them withdrew their plans, some during the 2008 real estate slowdown, and some later as the Indian hospitality industry faced many challenges.
“Many developers who got into hospitality realized it’s a different business model altogether where it’s far more capital-intensive and where the return on investment is of longer tenure,’ said Mandeep Lamba, managing director, hotels and hospitality, at property consultant JLL India.
Lamba said those developers who are going forward with the intent to build hotels, are those who are more mature and those who are likely to use the mixed-development project route, instead of building pure play hotels.
“Embassy’s plans seem to be a brilliant model because not only will they get ready demand from their office parks, but they will also cater to different segments of people within the same company by offering hotels in different price segments," Lamba said.
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