Aerocity hotels waiting to take off as red tape proves a hurdle

About Rs 12,000 crore (Rs 120 billion) are stuck in India’s first hotel district, Delhi’s Aerocity, because of red tape. 

Originally planned for the 2010 Commonwealth Games, hotels in the Aerocity, including those that have been built, await security clearances. 

The Lemon Tree and Red Fox hotels have not got the go-ahead for bulletproof glass on runway facing windows. Around 150 Lemon Tree rooms are sealed because of this. The JW Marriott next door has managed to get its windows approved by the Defence Research and Development Organisation (DRDO) recently. 

The DRDO has refused to conduct a similar test for Lemon Tree. “We have written to them citing the Cabinet order which requires them to test and advice on the glass required,” said a senior civil aviation ministry official who did not wish to be named. It has been over a year since the Cabinet Committee on Investment gave its security clearance to hotels in Aerocity. 

“The matter is stuck with the home and the civil aviation ministries. If one hotel is given a certain specification, we can’t be given a different one for bulletproof glass,” said Patu Keswani, chairman and managing director, Lemon Tree Hotels. 

A hotelier who did not wish to be named alleged corruption by the police was holding up approvals. 

The Aerocity will add 5,100 rooms to the 11,000 branded hotel rooms in the National Capital Region. Many of the existing hotel rooms are empty for significant stretches of time and the extra supply is expected to add to the glut. RadissonBluPlaza, Leela, Oberoi and Trident have hotels in the vicinity of Delhi’s IndiraGandhiInternationalAirport.

The pressure (of oversupply) is in the short term. Since occupancy is growing, average rates will increase in the long term,” said Achin Khanna, managing director of HVS India, a hospitality consultant. 

The Accor group’s Ibis hotel is next in line to open in the Aerocity, and two of its other brands, Novotel and Pullman, are likely to open in early 2015. The group expects a few final clearances for the Ibis hotel will come through by the end of the year. 

“New security compliances have taken some time to incorporate, like installing a specific kind of baggage scanners and security cameras,” said J B Singh, president and chief executive officer, InterGlobe Enterprises. 

The Lemon Tree and Red Fox hotels in the Aerocity have 55-65 occupancy and JW Marriott is clocking 35-37 per cent. Removing the toll on the Gurgaon-Delhi stretch of National Highway 8 has also improved business. “Considering these hotels have not completed one year of operation, they are doing well,” Khanna added. 

Construction is on for the remaining Aerocity properties, including Hyatt Andaz, Aloft and Holiday Inn. These hotels expected to open by 2015.