Last year's economic maelstrom put the hotel business through a period of unprecedented challenges. We had to decide whether to execute our projects simultaneously or stagger them. In July 2008, we decided to put on hold our new projects in Hyderabad and Pune and concentrate on the New Delhi and Chennai hotels which were in advanced stages of completion.
As I reflect on the past 16 months, an invaluable lesson I learnt is that resources for new projects should be raised when the market is conducive for fund raising, that is, when they are available, not when they are needed.
In the past year, business hotels were the worst affected, especially those relying on international travellers. Nevertheless, we delivered a positive profit after tax. This was possible in part due to the increased share of our resort properties—Goa and Kovalam (Kerala)—in the 2008-09 revenue mix, which included two business hotels (Bangalore and Mumbai).
The other thing we did was, on sensing the trend of a weakening rupee, we quickly switched from dollar loans to rupee loans. We also replaced the existing high-cost, short-term loans from banks with low-cost longer tenure loans, achieving in the process deferment of repayment outflows and reducing interest cost.
The sharp fall in share prices presented an opportunity for foreign currency convertible bond issuers like us—we took advantage of the buyback window that the Reserve Bank had opened to mop up 25 per cent of Eurobonds and 33 per cent of the US dollar bonds at attractive discount. This buyback not only gave us a huge non-taxable profit but increased our financial leverage by reducing the debt.
Businesses, in general, reacted by cutting marketing spends. We did just the opposite. The result: we had 85-90 per cent occupancy in our hotels.
— Vivek Nair, 58, is the Vice Chairman and MD, Hotel Leelaventure