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ITC to invest Rs 120 cr in Fortune hotels; mulls re-branding 26 May 2011

The Financial Express

In a bid to further strengthen its business brand Fortune, hospitality and FMCG major ITC is planning to invest in new properties under the brand, as well as undertake a re-branding of the brand. For now, the company has identified two properties in Bangalore and Coimbatore, for investments. An investment of around Rs 120 crore is expected to go into the building of these two hotels, excluding the land price.

Till now, all the Fortune brand run hotels are under management contract and this would be the first time ITC would be investing to own and run hotels under this brand.

Confirming the move, Suresh Kumar, chief executive officer, Fortune Hotels, said, "ITC is looking at investing in the brand, and Bangalore and Coimbatore properties will be owned and run by the company." He added that the total room inventory of the two properties would stand at around 250. Asked about the land in these locations, Kumar, said, "These are being built on ITC's already existing land bank." The two properties are expected to be ready in another two years.

For the quarter ended March 31, ITC's hotel business posted net revenues of Rs 300.33 crore as against Rs 256.21 crore a year ago, a growth of 17%. On a consolidated basis, the company reported net revenues of Rs 1,066.35 crore for the year ended March 31 as compared to Rs 912.17 crore a year ago. On the re-branding plans for Fortune, Kumar did not divulge details. He hinted that the plan is under consideration and said, "We will talk about it at the right time."

By 2015, ITC hopes to have 63 hotels under the Fortune brand. This year, the company will be adding around 400 rooms to its kitty with five new locations. "We expect all the 31 new properties under various stages of development to be completed in the next three to four years," said Kumar. Some of the locations looked at by the company for Fortune brand include Manesar, Mussoorie, Mysore and Rajkot.

Says a hospitality consultant, "ITC has a long play in the hotel segment. Its association with Starwood for luxury hotels will in due course die its own natural death. Starwood is building Sheraton brand hotels on their own, which was earlier with ITC. The two will look at independent routes to grow. Hence, this investment in Fortune brand and plans of re-branding is part of company's preparation for the future." Aditya Mathur, an analyst with Citigroup Global Markets, said, "Heritage and Fortune brands contribute very little to the company's revenues from the hotel portfolio, compared to its luxury brand. ITC has expressed interest in expanding its mid-market offering (Fortune), but one would have to see the company's plans going ahead."

Current ITC hotel inventory is 3,100 rooms in the luxury segment, 2,400 under the Fortune brand (managed properties) and around 1,000 rooms in the heritage segment (through JVs). ITC’s 600-room Chennai property will be operational mid 2011-12, and the 500-room Kolkata property is under construction, and will be operational in two and a half years.

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