Lemon Tree aims 3K rooms by 2025 under upscale brand Aurika

Hospitality firm Lemon Tree, which is foraying into the upscale segment with Aurika, plans to have about 3,000 rooms under this new brand by 2025. "Aurika is our upscale brand. I expect we should get 2,000-3,000 rooms by 2025," Lemon Tree Hotels Chairman and Managing director Patanjali Keswani told PTI.

The New Delhi-based hospitality chain which focuses on the mid-segment market will launch its first Aurika branded hotel will be launched in Udaipur. There is an upcoming 670-room hotel at Mumbai International Airport which will also be launched later under the Aurika banner. Overall, the company is looking to have around 12,000 rooms in its inventory by 2022 as part of its capacity addition plans.

It launched its new property in Mumbai, a 303-room Lemon Tree Premier hotel at an investment cost of Rs 325 crore, it's first in the city. Post-launch, the company operated 5,800 rooms in 57 hotels across 34 cities under its three brands -- Lemon Tree Premier, Lemon Tree Hotels and Red Fox Hotels. With this now we are very well positioned in the 10 key markets of India. Broadly our strategy is in these 10 cities specifically the metros and other cities we want 25-30 per cent of the inventory branded by Lemon Tree by 2022-2025.

Keswani said the peak debt for the company could go to Rs 1,300-1,400 crore from Rs 1,000 crore at present for funding its investment plans, which would be written off through internal accruals in the next five years. The company in March had entered into a non-binding term sheet with Berggruen Hotels (Keys Hotels) and its Mauritius incorporated holding company Berggruen Investments to acquire 100 per cent shareholding for an undisclosed sum.

Keswani said they will announce whether they would be acquiring the chain or not by next week. Asked if it would look at more inorganic growth opportunities, he said, "Yes, providing they make economic sense and providing we don't have to deploy capital and we find partners who are happy to deploy capital." Of the 5,800 rooms, around 4,000 are company owned and Keswani said they want to go asset light.

"We want to focus on going more and more asset light. We don't want assets on our balance sheet. So we are going to find partners who will buy these assets from us, unlock capital and just focus on brand management and development," he said. Explaining the benefits of an asset-light model, he said that the typical fees are 14 per cent of profit, which means for every seven hotels managed, it is like owning one with no risk and no capital.

With the bankruptcy code, he expects many of the distressed hotels will come into the market and the company will look at buying them. He noted that the now-defunct Jet Airways, elections and slow down in consumption has affected the hospitality sector.