Interstate Hotels Breaks into India with New JV

Interstate Hotels & Resorts has teamed up with JHM Hotels in a joint venture that will focus on the operation of hotels in India, as well as the investment in lodging properties across the country through participation in a $200 million fund. Establishment of JHM Interstate Hotels India paves the way for Interstate’s entrée into the Indian lodging market. Operating out of New Delhi, the 50-50 joint venture will engage in a multi-pronged platform to accomplish its goals. The partnership’s main focus will be on obtaining management agreements on existing and planned properties. Already, the team has orchestrated a strategic relationship with Artesia, Calif.-based JNB Hotels & Resorts Private Ltd., which has lined up a string of hotel management opportunities for JHM Interstate in India. Beyond the primary management objective, the partners will also pursue investments in lodging facilities via a U.K.-based real estate fund, Duet India Hotels Ltd. Interstate and JHM will contribute $12.5 million each to acquire an interest in the fund, which has already raised about $175 million. Total equity contributions are expected to reach more than $200 million, for a total investment capacity of as much as $800 million in projects over the next five years. The joint venture’s $25 million also buys it a piece of Duet India Hotels Ltd.’s asset manager, Duet India Hotels Asset Management Ltd. India’s appetite for hotels is on the rise, spurred by a steadily growing economy, foreign investment, and the promise of improved infrastructure, according to real estate services firm Jones Lang LaSalle Hotels’ India Digest. Mumbai is a particularly hot market. In 2007, hotel rates in Mumbai–where the successful manufacturing and IT sectors have triggered a spike in business travel–increased by 45.3 percent, as per Deloitte’s HotelBenchmark Survey. The average room rate there reached $277 last year, and the city experienced the highest absolute RevPAR in Asia Pacific for the year. Since demand, as noted in the JLL report, is exceeding supply in India and a bevy U.S. hotel companies are stepping up to the plate in a hurry to increase the pool of options, from mid-market to luxury accommodations. As part of a dynamic expansion plan in the country, Starwood Hotels & Resorts Worldwide Inc. opened its first Westin hotel in India, the 97-room Westin Sohna Resort near Delhi, last month. Additionally, at the close of 2007, the company announced it had partnered with a joint venture involving Citigroup Property Investors to develop aloft hotels across the country, the first two of which will be located in Bangalore and Chennai. Last November, Golden Tulip Hotels Inns & Resorts made its debut in India with Golden Tulip Jaipur, and five more of the hotels are on target to open in India this year. Interstate is a hotel real estate investor and the largest independent operator of full- and select-service hotels in the United States. The company’s ownership investments presently encompass 54 hotels and resorts, and its management portfolio includes 218 properties accounting for a total of 45,500 guestrooms in 36 states and the District of Columbia, as well as in Belgium, Canada, Ireland, Mexico and Russia. JHM, which also has offices in Mumbai and Surat, India, develops, acquires and operates hotels across the United States. Its portfolio of owned and operated properties includes 30 hotels accounting for over 5,000 rooms. The company’s development pipeline includes 1,500 additional rooms in hotels to carry such flags as Marriott, Hilton, Starwood and Hyatt.