Reliance Industries has announced a Memorandum of Understanding with The Oberoi Hotels and Resorts (Oberoi Group) to jointly manage three properties across India and the UK.
These will be an upcoming Anant Vilas Hotel in Mumbai’s Bandra Kurla Complex, the Stoke Park in the UK, and another planned, unnamed hotel project in Gujarat.
This is the first time Reliance is stepping into management of hotels. But the company had made investment in the sector long back, keeping it idle.
In 2022, Reliance bought nearly 73% stake in Mandarin Oriental Hotel in New York for nearly $100 million. This coincided with the buying Stoke Park, Britain’s iconic country club and luxury golf resort, for GBP 57 million.
The place is famous as a popular location for movie shooting; two James Bond movies ‘Goldfinger‘ and ‘Tomorrow Never Dies’ — were filmed being the two.
Between 2010-23, Reliance Industrial Investments and Holdings Ltd (RIIHL), a wholly-owned subsidiary of Reliance Industries, has been making investments in hotels, starting with the Oberoi Group in 2010. A year later, Mukesh Ambani’s wife, Nita Ambani and close confidante Manoj Modi joined the EIH board.
With the support of Reliance, other corporate companies could stay off the grounds of EIH. At the time, speaking to ET NOW, Nita Ambani had said that RIL was a long-term investor but was not seeking to run the company as its interest was financial. It’s a financial investment… It’s a long-term investment.”
Mr Ambani’s purchase of hotels in London and New York and building new ones in BKC Mumbai and in Gujarat support strong ideas towards building a small niche in the hotel industry.
A move that built on itself
Oberoi Hotels was built under the rein of Rai Bahadur Mohan Singh Oberoi, the father of PRS Oberoi with borrowed funds and starting from scratch with the position of clerk at a hotel, keeping a tab of coal purchases.
The group was built from ground up with others like PRS ‘Biki’ Oberoi, his second son. Biki trained for the industry and was really not interested in the business till the age of 50. But he brought a vast knowledge of global hospitality industry to turn the chain into one of India’s most prestigious brands.
Oberoi chain is acknowledged for its luxury hotels including Vanyavilas, Udaivillas, Amarvilas, and Rajvilasare frequently ranked among the world’s best properties.
Interest in hotel business may be at the right time
“The hotel industry is facing the challenges of being under-invested and demand has consistently exceeded supply in recent times,” EIH executive chairman Arjun Singh Oberoi said last month.
But as the industry revives out of the pandemic, many hotel companies with the likes of Tata’s Indian Hotels and ITC’s hotel business are seeing good demand in 2023.
India will also see a spike in demand of hotel bookings from lined-up events in various parts of the country: G20 in September, ICC Cricket Men’s World Cup 2023 in October and Miss World Pageant in December.
Hoteliers are also seeing good demand in the summer season and are keen to roll out inventory. In the company’s annual report, the EIH chairman pointed out that room supply had increased by 3.5% while demand grew by 5.4%.
According to him, of the 170 hotels that opened in 2022, the average inventory was of 65 rooms. He also pointed out that 93 of these hotels had 50 rooms or less, and just two hotels with 300 rooms and more.
Global hotel inventory rose by 18% over past 10 years while the inventory for branded hotels in domestic market grew from 84,313 rooms in FY12 to 1,07,695 in FY15 at a CAGR of 8.5%.
Such figures indicate an underinvestment in hotel industry. And a good way for Reliance Industries to diversify and ensure a good outlook for both itself and EIH Hotels.