AV Birla Groups “MORE” may tie up with Accor for hotels
on May 27th, 2008 at 11:25 amAV BIRLA Group’s retail venture More is holding talks with French hospitality giant Accor for setting up neighbourhood hotels alongside stores for tapping better yields on its high-cost real estate base.
Sources said AV Birla Retail and Accor are discussing a hospitality partnership under the latter’s Formule-1 brand, which operates in the economy segment.
It is believed that Accor and More have identified about 180 locations across the country where a budget hotel could tag along with the retail store over a period of time. The discussions have veered around the possibility of developing hotels with 50-100 keys.
AV Birla Retail, which has entered the second year of operations, is setting up supermarkets and hypermarkets with store size up to 10,000 sq ft and 75,000 sq ft respectively.
Incidentally, AV Birla is not the first domestic conglomerate that is seeking out an hospitality angle to its still evolving retail story. Reliance, which recently floated a separate JV with the US-based Vornado Realty Trust, appears to be looking at the possibility of tieups with hotel chains to take advantage of the excess floor space index (FSI) available in its proposed store rollout.
The expensive real estate along with the ramping down of the store size at several locations may have acted as a trigger for many retail chains to explore partnerships with the hotel industry, sectoral experts opined. In fact, Reliance is expected to park its retail real estate assets in the new JV with Vornado, in the process stripping a high cost base off the retail arm.
Meanwhile, there is no clarity on the deal structure that may emerge between AV Birla Retail and Accor, with one source suggesting that Accor may go beyond management contract route if the arrangement falls into place.
When contacted, an Accor official said: “We have had initial talks to understand each others needs, with no significant progress after that.” AV Birla spokesperson declined to comment.
It may be mentioned that there is no exclusivity to the current discussions between AV Birla Retail and Accor. In fact, Accor already has an agreement in place with Emaar-MGF to build Formula-1 hotels in India while AV Birla could be talking to other potential suitors for a hospitality partnership.
Sources said Tata Group’s budget hotel chain Ginger has also held exploratory talks with some of the retail chains, even though this could not be independently confirmed.
