Prabhat Pani in Calcutta on Tuesday. A Telegraph picture

Calcutta, March 6: Roots Corporation, the wholly-owned subsidiary of Indian Hotels Company Ltd, will unveil its first budget hotel in Bengal at Durgapur tomorrow. The company is planning to set up more hotels in the state.

“We are looking at a few locations in Kharagpur, Haldia, Siliguri and at Salt Lake/Rajarhat region in Calcutta to set up our budget hotels,” said Roots CEO Prabhat Pani. “We are aiming for 25 hotels in India by March 2008.”

Tata group flagship Indian Hotels Company floated Roots in 2003 as a wholly owned subsidiary to develop and manage budget hotels under the brand name indiOne. The first hotel was in Bangalore in 2004 and subsequently the company changed the brand to Ginger Hotels. Roots now has six hotels of 100 rooms each.

Roots had planned for 30 hotels by March next year. However, it will have 25 hotels.

“Each state has its own rules and regulations for land acquisition. Besides, we need to have a variety of approvals from the local governments and authorities wherever we are setting up a hotel. Getting all these approvals takes time which is why we think we would be able to develop 25 hotels by the end of 2007-08 financial year,” Pani explained.

However, he added that the company was also considering options such as joint development and leasing of properties and taking over management. A steep rise in land prices has forced the company to explore other options, Pani said.

As part of this strategy, Roots will manage the Rail Yatri Niwas in New Delhi.

“We won the bid in January and within six to eight months Ginger Hotels will have a presence in the capital city through Rail Yatri Niwas,” Pani said. He said Roots Corporation was exploring more such opportunities.

“We are also in discussions with different parties, both in the private sector and public sector, for joint development of hotels,” he said.

Roots has earmarked Rs 300 crore for the 25 hotels to be set up by March next year. “Each of our hotels has 100 rooms and is spread over one acre plot. Excluding the land price, the cost of developing such a property is between Rs 10 crore and Rs 11 crore,” Pani said.

He said the company will not tap the market or offer shares to a private equity company. “Our parent has committed to meet the fund requirement till March 2008,” Pani added.

However, Pani is worried over the government terminating the capital subsidy scheme for budget hotels, under the 10th Five Year Plan, from next month.

“We hope the government will extend the subsidy scheme beyond 2006-07. We are waiting for a clarification from the ministry,” Pani said.

The country is expected to earn $24 billion from tourism by 2015 according to a World Bank estimate, but the gap between demand and supply of hotel rooms is over one lakh.