Prestige Estates Projects Ltd plans to significantly expand its hospitality portfolio over the next 3-4 years with a total investment of INR 1,700 crore. The company currently manages 1,849 rooms across various hospitality assets in India. The expanded portfolio is expected to generate annual revenue of INR 1,800 crore, double the current revenue of INR 900 crore. Prestige is exploring new markets like Srinagar, Ayodhya, Goa, Mumbai and expanding in existing markets. Prestige is also evaluating monetizing its existing hospitality portfolio through REITs and IPO. With the hospitality sector witnessing strong growth and demand returning to pre-pandemic levels, Prestige Estates' planned expansion of its portfolio seems timely.
Prestige Estate Projects plans to significantly expand its hospitality portfolio over the next 3-4 years, with a total investment of INR 1,700 crore. The company currently manages 1,849 rooms across various hospitality assets in India.
The expanded portfolio is expected to generate annual revenue of INR 1,800 crore for Prestige, which is double the current revenue of INR 900 crore. Separately, the company is exploring new markets like Srinagar, Ayodhya, Goa, Mumbai and expanding in existing markets.
Zaid Sadiq, Executive Director of Hospitality at Prestige Group says that their hospitality assets have an average occupancy rate of 70% generating consistent cash flows. The branded segment is also seen to show great potential and they are proactively pursuing growth opportunities in this segment.
Prestige is evaluating monetizing its existing hospitality portfolio which could unlock substantial value. As per analysts, this could reduce INR 900 crore of gross debt and alleviate cash flow stress for the planned investment of INR 1,700 crore in hospitality expansion.
After all the assets have been established and are fully operational, there are several potential avenues to explore for monetizing them. One option is to consider creating a real estate investment trust (REIT), which would allow investors to pool their resources and invest in the assets collectively. Another possibility is to pursue an initial public offering (IPO).
Separately, Prestige has partnered with Marriott International for new brands in India for a deal worth INR 4,250 crore. They will invest INR 1,000 crore to develop 801 rooms across Goa and Karnataka. The hotel properties include 177 keys Marriott Executive Apartments in UB City in Bengaluru, 130 keys Moxy Bengaluru ORR in Outer Ring Road, Bengaluru, 152 keys Bengaluru Marriott Hotel South in Kanakapura Road, Bengaluru, and 160 keys JW Marriott Sakleshpur Plantation Resort in Sakleshpur in Karnataka.
In Goa, it will develop 62-keys Tribute Portfolio Dabolim Hotel in Dabolim and 120-keys Autograph Collection in Chopdem. The Autograph Collection in Goa will be the first autograph collection in South Asia.
As of April 3, the hospitality business accounted for 10% of Prestige's total revenue of INR 5,713.1 crore from April to December 2023, with the inventory of 1,500 keys expected to double over the next three to four years.
Recently, Prestige Estates Projects Ltd had secured INR 2,001 crore or USD 240 million funding from Abu Dhabi Investment Authority (ADIA) and Kotak AIF. The capital infusion is earmarked for the development of housing projects across four major cities - Delhi-NCR, Mumbai, Goa, and Bengaluru - as part of Prestige's expansion strategy. The housing projects have a combined Gross Development Value (GDV) exceeding INR 18,000 crores
According to JLL, in 2023, a record number of hotel signings totalling to 25,176 keys and openings of 12,647 keys were witnessed with around 54% of the signing concentrated in tier-2 cities.
Going ahead, investment momentum in the hospitality sector is expected to increase throughout 2024 with the pan-India premium hotel occupancy estimated to reach decade highs of 70-72% during 2024-2025 financial year, according to credit rating agency ICRA.
With the hospitality sector witnessing strong growth and demand returning to pre-pandemic levels, Prestige Estates' planned expansion of its portfolio seems timely. The company's focus on both expanding into new geographies and developing more branded properties will help optimize returns from these assets.
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