Check out mall hotels

The malls are dead, long live the malls. As oversupply throws Gurgaon's mall business out of gear, investors who dabbled in the retail revolution dream are grappling to turn the business around by setting up hospitals, dispensaries and "anything to regain the lost footfall".

But smart real estate developers planning to build future malls are looking at a new option to hedge risks: to run or lease out parts of the mall area to hotel companies.

Sample this. At least three players are vying to build "mall hotels"in New Delhi's Saket where the government sanctioned 51 acres of land for commercial development a year ago.

Real estate developer Select Infrastructure Ltd's Select City Walk, the Rs 350-crore (Rs 3.50 billion) mixed-use property modelled after New York's Time Square, will house an upmarket shopping mall, a multiplex, a business centre -- and a 100-room hotel in Saket.

A few metres away, DLF Retail Developers Ltd plans to develop two malls -- South Court will have a 60-room hotel and The Courtyard, will come up with a 100-room hotel.

"We are looking at a mix of opportunities and de-risking the business to include both retail and hotel business," says Arjun Sharma, co-promoter of Select City Walk and former owner of travel company Sita Travels.

Sniffing a business opportunity, even hotel companies are hardselling their brands to mall developers. Sarovar Park Plaza, for instance, is exploring options in east Delhi and in Chandigarh.

Choice Hospitality, which has brands such as Comfort Inn and Quality Inn, is eyeing several projects. "Hotels are spicing up the pot and adding to the saleability of retail and commercial space,"adds Ajit Bakaya, executive director, Sarovar Park Plaza.

With growth in domestic tourism, Omaxe Construction Ltd also foresees business traffic at its mall hotel . It is building one of the largest malls (1.4 million sq ft) in Greater Noida called Omaxe Connaught Place where its hotel is expected to cash in on the huge shortfall of hotel rooms.

"The mall will be a destination itself but we expect to get business from the corporate houses in the region ," said Kunal Banerji, Omaxe' vice-president.

Punit Beriwala of Vipul Infrastructure Group, which developed the Global Business Park in Gurgaon, says a developer seeks to optimise the land value by building a multi-storeyed structure.

"Since retail doesn't work above the second floor, a mix of service and business centre is the obvious choice," he says.

The group is currently working on a blueprint to build a 600,000 sq ft retail and service complex on the Delhi-Gurgaon highway, which will accommodate a 200-room hotel.

While hotel companies add to the revenue of mall developers, the hotels themselves enjoy a cost benefit. Top floor mall rentals are cheaper by 15 to 45 per cent.

"This helps to price the product correctly in the long term," says Patu Keswani, CEO of Krizm Hotel.

Carlson's Sanjeev Pawha says that being part of a commercial complex helps cut costs by about 25 per cent. "Common usage of elevators, heat, power and lighting is beneficial besides there's access to restaurants, retail stores and entertainment," he says.

The Carlson Hotel Group will have a presence in Bangalore's upcoming shopping complex -- Sigma Grand Malls & Towers. It plans to develop a 122-room hotel.

Uttam Dave, CEO of Inter Globe Hotels Ltd, says the arrangement benefits both the hotelier and the developer. "A hotelier doesn't need to seek approvals and the place is built for him while a mall developer finds an anchor to sell his retail space and can extract better floor space index."

That the business model has worked in Thailand and Dubai may be music to the ears of mall owners and hoteliers.