CHENNAI: The hospitality sector in Chennai is going through rough weather with many a hotel being put on the block for want of patronage. In less than a year, the city is all set to lose its third hotel to real estate promoters.
Breeze Hotel on Poonamallee High Road will be pulled down to make way for a residential apartment complex, if a deal between the owners of the property and BBCL, a city-based real estate promoter, comes through. The hotel, with six banquet halls, was a popular till a few years ago.
Sources privy to the deal said the builder had paid an advance and due diligence was on. The owners are in the process of relieving the employees. The 22.5 ground property is valued at close to 140 crore. BBCL will buy only a portion of the land. The rest will be developed on a joint-venture model, said a source. Running the hotel had become unviable for the owners as there was a loan liability of more than 50 crore on the property.
Chennai has been a challenging market for the hospitality sector for nearly two decades owing to low average room revenues. Mushrooming of hotels across all categories - mid-segment, luxury and business class - has resulted in oversaturation of room inventory, worsening the situation, said Amitabh Sanduja, CEO of Shaara Hospitalities, a division of publishing house S Chand and Company, which sold Atlantic Hotel in Egmore to city-based builder Ceebros for 165 crore last year. Shaara had spent about 10 crore on refurbishing the building before the sale.
"Owing to extreme revenue poaching among hotels, in spite of the average occupancy going up in Chennai, hotels continue to struggle. It takes 14 to 15 years for recovery of investments on hotels, whereas in other cities it takes 9 to 10 years," said Sanduja.
Atlantic has already been pulled down. Ceebros had also bought JW Marriott hotel, which was under construction in MRC Nagar for 480 crore last year. The builder is likely to launch residential projects in both locations shortly. Realtors are keenly watching Ceebros' launch price as the builder had jolted the market by slashing prices of three apartment projects in upmarket areas of South Chennai earlier this month. With close to a dozen builders buying properties worth 2,000 crore in the past one year in the central business districts of Chennai, there could be a glut of high-end residential projects in the near future.
There are at least half a dozen more hotels, including a leading five-star facility in south Chennai, that are up for grabs. Their prices range from 100 crore to 900 crore. Construction of a hotel on Radhakrishnan Salai has been stopped and its NRI promoters are looking for a buyer, said a leading realtor.