Ramee Group on major expansion drive

Ramee Group of Hotels and Resorts will go public once the stock markets improve and the liquidity squeeze eases in the financial market. The group has embarked on major expansion drive in India and the Middle East and will add 10 more properties to its brand by the end of 2010. With the expansion of its portfolio, the group plans to recruit 500 staff in two years to operate upcoming projects.

Catering to the mid-segment, the Ramee Group aims to make the most of the crisis by targeting visitors looking for value-for-money deal.

In an exclusive interview with Emirates Business, Raj Shetty, Chairman and Managing Director of Ramee Group, reveals the mid-segment in hospitality sector is still enjoying a healthy occupancy rate of 70 per cent in Dubai even during the crisis. He believes the 30-per cent drop in room rates has taken the prices to a realistic level, which will help attract more tourists to the emirate. Below are the excerpts from the interview.


Do you intend expanding to other countries or sectors?

At the moment, our expansion is taking place in Dubai, Abu Dhabi, Bahrain and India. In Dubai, we are building a hotel in Business Bay and Jebel Ali Downtown, for which we have already acquired the land.

Currently we operate 35 hotels – some of which we own and some we manage – and another five to 10 hotels to be operational by the year-end. Since it's our core business, we will continue investing in this. Our key markets are India and the Middle East and aim to cater to these regions only. Hotels is my passion and we'll stick to this business. We don't plan to foray into any new sector.

Do you plan to raise funds for expansion?

Currently, we are funding our expansion mainly through bank finance. We normally raise around 60 to 70 per cent from financial institutions and the rest from own resources.

For projects in India, we get financing from Indian banks. For local projects here, we approach UAE lenders; same is the case for Bahraini projects. Though there is liquidity problem in the Gulf, it is not so in India. The situation will soon get better in Dubai, too. It's a short-term problem, so we'll not stop expansion despite some financing constraints. Though obtaining financing has become easier as the local banks have started looking positively at financing the projects, it has not yet reached that level when access to funds from financial institutions used to be very easy. We feel it will take another two to three months to access quick and cheap financing.

Do you intend to take Ramee Group to public?

Yes. We will go public once the financial crisis is over and stock markets stabilise. First we intend to launch an IPO in India followed by other stock exchange including Dubai.

What is the outlook for hospitality industry?

Well, the outlook is really bright – particularly for the mid-segment and there are tremendous opportunities to grow, because this is the time when people look for value-for-money deals. They will come to Dubai and stay in budget hotels, which means mid-segment will not get affected. In fact, this is the time we can give better services to visitors and make most of the crisis. However, we will venture into the high-end segment but it will not be luxury five-star; but four-star deluxe with five-star ratings.

Do you plan to increase staff strength?

Yes. We do intend to hire more people. At present we have more than 4,000 staff and hope to add another 500 employees by the end of 2010.

What is currently the occupancy rate in Dubai?

It is hovering around 70 to 80 per cent in the mid-segment. But hotel apartments suffered a bit more from the crisis and the occupancy rate has dropped more than 30 per cent. The occupancy rate in the mid-segment stays at satisfactory level because Dubai always remains in the limelight due to its geographical position and attracts more tourists. Moreover, as tourist sites are complete in Dubai and the visitor inflow increases, the hotel industry will certainly benefit and enjoy higher occupancy rate and stronger growth.

Have the room rates dropped?

Room rates have come down by nearly 30 per cent; but this drop has brought them to the realistic value, which is affordable to tourists. As a result of this drop, we expect more tourist inflow from next year onwards and occupancy rate will also go high. This year the number of tourists are low because people make plans in advance. And since the crisis began last year in Europe and the US, it has affected the tourist inflow. But as the economies improve, we will see a surge in foreign visitors inflow.

As you're expecting higher tourist inflow next year, does it mean room rates will increase again?

No. I don't think so. It's a matter of demand and supply. Since supply is already more, demand will match it. It was the other way round over the last few years when demand was outstripping supply. Since supply and demand are matching now, the prices will stay at the realistic and appropriate level.

Whom do Ramee hotels cater to?

We get tourists from Middle East, Russia and Asia countries including Iran, India, Bangladesh and China.

For example, as the holiday seasons begin in Iran, India or China, the tourist inflow improves. We get more Indian tourists during summer vacations when schools are closed and families come to Dubai for visits.


PROFILE: Raj Shetty Chairman and Managing Director, Ramee Group

Hailing from a simple Indian family, Raj Shetty had a very humble beginning.

He arrived in the UAE in 1975-76 and started his career as an entrepreneur. Shetty opened a restaurant in the UAE in his early 20s and then moved into hospitality industry. From there, he marched on and now owns one of the largest hotel chains in the region.

Under his leadership, the group has established a number of subsidiaries such as Ramee Investments Ltd, Prithvi Credit and Leasing Ltd, Ramee Recruitment Ltd (India), Ramee Technologies and Hospitality Ltd (India) and Rock Bottom Café.

Shetty is married with three sons and a daughter.

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