ET BureauNEW DELHI: Don’t be surprised if the owner of the hotel you check into the next time you are in the United States turns out to be an Indian entrepreneur who has little experience in the hospitality industry.
Non-resident Indians, especially those with the Gujarati surname Patel, have dominated the economy segment of the American hotel industry for decades. But now, Indians who have made their money in other businesses back home – in Kolkata to Coimbatore and New Delhi to Hyderabad – are increasingly taking over the keys from distressed owners in the US who are selling at rock-bottom prices to repay their growing debt.
This is especially the case in the warmer states, such as Florida and Nevada, where vacation homes are the first to be put up for sale in the market which remains stubbornly depressed three years after the economic crisis hit home.
Prices have dropped to as low as Rs 10 lakh per room in some locations close to the mega tourist attraction Disneyland in Florida’s Orlando, for example, says V Santhana Raman, chief executive of Ace Hotel Brokers India. In contrast, he says, properties in tourist destinations such as Kumarakom in Kerala back home command up to Rs 1 crore per room.
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Kolkata-based businessman Sushanto Dey, known for his mass-market leather shoes and accessories that sell under the Sreeleathers brand, has returned from the US just in time for the ongoing Durga Puja celebrations. He has shortlisted some properties in Florida and he is set to go back soon to seal the deal. “It’s a one-off investment for us,” says Dey, “If a businessman keeps his money in the bank he will get about 8%-9% returns. If he buys a hotel, he will make 10%-12%.”
Plus, of course, he will have the option of cashing in once the market bounces back. “Valuations in some regions in the US are as depressed as they were in the 1930s, which makes this one of the best times to buy hotel assets here,” says Alkesh Patel, vicechairman of the Asian American Hotel Owners Association.
Coimbatore-based S Raghavan, who owns Raghavan Auto Ancillary, has already bought a 187-room hotel on International Drive, Orlando, for $4 million. He says he had surplus cash and wanted to invest in a hotel in India. But, finding hotel valuations in Chennai and other cities in south India way beyond his means, he hired property investment advisors Ace Hotel Brokers, who turned his attention to the US.
To his astonishment, Raghavan found out that hotel assets even in the most sought-after Manhattan near Times Square were quoting lower than those in Chennai, Bangalore and Ahmedabad. Some five-star hotels in Chennai are quoted at Rs 3 crore per room, whereas prices in Manhattan start at Rs 2 crore.
“My teenaged son is interested in hotel management, and he can get an opportunity to pursue his dream,” says Raghavan, whose acquisition is up and running under the Quality Inn brand. He is confident that he has invested his surplus cash in an asset which will fetch him good returns.
Patel says some Indians, like investors from China and South Korea, are also taking advantage of the EB5 visa programme, which grants foreigners a temporary green card if they invest $1 million in a business that generates employment. The immediate access to the green card makes the route to permanent citizenship that much faster for those looking to settle down in the US. Patel adds that while people of Indian origin own nearly half of the hotels in the country, many of the new buyers based in India also have strong ties with the US through their relatives. For most Indian investors, the key driver is the bargain-basement prices.
“Ever since the recession hit the US market, there has been foreclosure of hotels, real estate owned by banks and auction of hotels,” says Raman, “It is a very attractive opportunity for Indian Investors because right now hotels in the US – which has the highest room inventory in the world – are among the cheapest in the world.”
Jaswant Lalwani, VP at the New York-based Corcoran Real Estate Group, says prices have crashed up to 70% in certain regions, which is attracting the attention of Indian businessmen who have no association with the hotel industry.
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US-based hotelier Rakesh Rathee, who buys and sells hotel assets, says prices have crashed between 50%-60% in parts of Florida and Nevada. “This is just the right time to buy a hotel in the US,” he says.
Indian buyers can surely afford to hold on to their new assets and wait for the tide to turn simply because they are making their money in the still fast-growing India and just parking their spare funds in the US.
Non-resident Indians, especially those with the Gujarati surname Patel, have dominated the economy segment of the American hotel industry for decades. But now, Indians who have made their money in other businesses back home – in Kolkata to Coimbatore and New Delhi to Hyderabad – are increasingly taking over the keys from distressed owners in the US who are selling at rock-bottom prices to repay their growing debt.
This is especially the case in the warmer states, such as Florida and Nevada, where vacation homes are the first to be put up for sale in the market which remains stubbornly depressed three years after the economic crisis hit home.
Prices have dropped to as low as Rs 10 lakh per room in some locations close to the mega tourist attraction Disneyland in Florida’s Orlando, for example, says V Santhana Raman, chief executive of Ace Hotel Brokers India. In contrast, he says, properties in tourist destinations such as Kumarakom in Kerala back home command up to Rs 1 crore per room.
(Join our ETNRI WhatsApp channel for all the latest updates)
Kolkata-based businessman Sushanto Dey, known for his mass-market leather shoes and accessories that sell under the Sreeleathers brand, has returned from the US just in time for the ongoing Durga Puja celebrations. He has shortlisted some properties in Florida and he is set to go back soon to seal the deal. “It’s a one-off investment for us,” says Dey, “If a businessman keeps his money in the bank he will get about 8%-9% returns. If he buys a hotel, he will make 10%-12%.”
Plus, of course, he will have the option of cashing in once the market bounces back. “Valuations in some regions in the US are as depressed as they were in the 1930s, which makes this one of the best times to buy hotel assets here,” says Alkesh Patel, vicechairman of the Asian American Hotel Owners Association.
Coimbatore-based S Raghavan, who owns Raghavan Auto Ancillary, has already bought a 187-room hotel on International Drive, Orlando, for $4 million. He says he had surplus cash and wanted to invest in a hotel in India. But, finding hotel valuations in Chennai and other cities in south India way beyond his means, he hired property investment advisors Ace Hotel Brokers, who turned his attention to the US.
To his astonishment, Raghavan found out that hotel assets even in the most sought-after Manhattan near Times Square were quoting lower than those in Chennai, Bangalore and Ahmedabad. Some five-star hotels in Chennai are quoted at Rs 3 crore per room, whereas prices in Manhattan start at Rs 2 crore.
“My teenaged son is interested in hotel management, and he can get an opportunity to pursue his dream,” says Raghavan, whose acquisition is up and running under the Quality Inn brand. He is confident that he has invested his surplus cash in an asset which will fetch him good returns.
Patel says some Indians, like investors from China and South Korea, are also taking advantage of the EB5 visa programme, which grants foreigners a temporary green card if they invest $1 million in a business that generates employment. The immediate access to the green card makes the route to permanent citizenship that much faster for those looking to settle down in the US. Patel adds that while people of Indian origin own nearly half of the hotels in the country, many of the new buyers based in India also have strong ties with the US through their relatives. For most Indian investors, the key driver is the bargain-basement prices.
“Ever since the recession hit the US market, there has been foreclosure of hotels, real estate owned by banks and auction of hotels,” says Raman, “It is a very attractive opportunity for Indian Investors because right now hotels in the US – which has the highest room inventory in the world – are among the cheapest in the world.”
Jaswant Lalwani, VP at the New York-based Corcoran Real Estate Group, says prices have crashed up to 70% in certain regions, which is attracting the attention of Indian businessmen who have no association with the hotel industry.
(Join our ETNRI WhatsApp channel for all the latest updates)
US-based hotelier Rakesh Rathee, who buys and sells hotel assets, says prices have crashed between 50%-60% in parts of Florida and Nevada. “This is just the right time to buy a hotel in the US,” he says.
Indian buyers can surely afford to hold on to their new assets and wait for the tide to turn simply because they are making their money in the still fast-growing India and just parking their spare funds in the US.
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