Hotel Talk

Railways’ budget hotel concept on track

BOT terms being reworked for easier revenue sharing regime

EH Staff - Mumbai

The much-talked about budget hotel concept of the Railways may finally take off with the ministry reworking terms of build, operate, transfer (BOT) arrangement that could result in easier revenue share regime for hoteliers.

The terms being reworked include provision of a "letter of comfort" from the Railways for the land on which the hotel would be built and a likely increase in the period for which companies would be allowed to operate the hotel. There would be a revenue sharing arrangement between Railways, Indian Railways Catering and Tourism Corporation (IRCTC) and the hotel operator, which would be decided through a bidding process. IRCTC is a public sector unit under the Ministry of Railways.

Letter of comfort: One of the reasons why the project wasn't taking off was while IRCTC was the executing body, the land was being provided by the Indian Railways and the interested parties wanted a guarantee from the land provider to ensure that the terms of land use do not change mid-way.

"Several interested parties wanted a ‘letter of comfort' from the Railways on the land on which the hotel would be built", said an official in the know, adding that the Indian Railways is considering providing the letter of comfort. Similarly, the term for operation was fixed at 30 years and the companies wanted the term to be increased to 45 years. The Railways is considering increasing the term as well.

Tariff fixing: The operator would be free to fix tariffs though some accommodation should be reserved for economy segments. An earlier proposal made it mandatory for operators to provide 50 per cent of rooms for below Rs 1,000 per day. This condition, which companies found stringent, may be relaxed to some extent.

Sites identified: Meanwhile, the Railways has identified 34 sites to set up budget hotels. The bids for these sites would be invited and there would be a two-tier tender. Players with prior experience in hospitality would be chosen, after technical qualifications. Financial bids would then be invited from these players. "Players are likely to be asked for a combination of fixed license fee and a revenue share", said sources. For the food plazas and proposed food courts, it has recently increased the period for which companies can operate. The period has been increased to 12 years (three years after satisfactory performance for nine years) from the earlier level of five years.

Similarly, it proposes to let companies set up their automatic dispensing kiosks, milk bars and milk product vending machies for three years. The Railways has been in talks with state dairy federations for the proposal. The Railways had earlier announced a proposal to set up 100 budget hotels through IRCTC. At present, it has four hotels that include Rail Yatri Nivas at Delhi and Howrah; and heritage hotels at Puri and Ranchi. The reworked terms are likely to be ready in two to four months. - Several interested parties wanted a ‘letter of comfort' from the Railways on the land on which the hotel would be built.