Acquired 10 years ago, the Taj Boston remained a loss-making property for the third consecutive year last year forcing IHCL to explore liquidating options.
Loss-making Tata Group firm Indian Hotels Company (IHCL) has sold Taj Boston, one of its three US-based properties, for $125 million (Rs 839 crore) to AS Holding LLC.
The sale comes nearly a decade after IHCL bought the 90-year-old property after attempts to revive business at the iconic hotel remained fruitless. IHCL had bought the 273-rooms Ritz-Carlton-run luxury hotel from Millennium Partners for $170 million (Rs 765 crore) in November 2006 and subsequently renamed it, Taj Boston. With the US being the single largest source market for the company, the idea behind the buyout was to expand IHCL’s global footprint and lessen its dependence on India.
This hotel was the oldest continuously operating Ritz-Carlton property in the US having run for nearly eight decades straight. Overlooking the picturesque Boston Public Garden, the luxury hotel had hosted heads of state, famous writers and film stars, among others before IHCL signed on the dotted line to buy it.
CHANGING HANDS
The sale comes a decade after Indian Hotels Company bought the 273-rooms Ritz-Carlton-run luxury hotel from Millennium Partners for $170 million (Rs 765 crore) in Nov 2006
This hotel was the oldest operational Ritz-Carlton property in the US having run for nearly 8 decades
Its net loss before tax widened to $7.3 million in 2015-16, from $6.7 million in 2014-15
The total revenue in 2015-16 dipped 1.15 percent to $34.1 million, from $34.5 million in 2014-15
However, after the Lehman Brothers crisis, less than two years after the buyout, leisure as well as corporate travel took a hit in the US, severely crippling the earnings for the hospitality sector. IHCL’s US-based properties, which include Pierre in New York and Campton Place in San Francisco besides Boston, became a drag on its consolidated balance sheet.
The net loss before tax for the Boston-based property widened to $7.3 million in 2015-16 from $6.7 million in 2014-15. Taj Boston’s total revenue in 2015-16 dipped 1.15 percent to $34.1 million from $34.5 million in 2014-15. Taj Boston remained a loss-making property for the third consecutive year last year, forcing IHCL to explore liquidating options.
The 114-year-old Mumbai-based company has decided to use the proceeds from the sale to retire its outstanding debt, which stands at around Rs 5,000 crore. In May this year, the firm had announced its intention to sell the Boston property and was inviting buyers for the same.
“Pursuant to the sale by United Overseas Holdings (wholly-owned subsidiary) of its entire LLC Interests of IHMS (Boston), the owning company of the hotel, the hotel will continue to be operated and managed by IHMS (USA) LLC, an indirect wholly-owned subsidiary of the company,” a statement from IHCL said.
This will be the seventh exit overall (international and domestic) for IHCL, including the exit from the management of hotels, in the past two years. Less than two years ago, IHCL had sold the loss-making Blue Sydney in Australia for Rs 180 crore.
The Mumbai-based company, which has brands such as Taj, Vivanta by Taj, Gateway, and Ginger, recorded its fourth consecutive consolidated yearly loss for the year ended March 31, 2016. The firm posted a consolidated yearly loss of Rs 60.53 crore against a loss of Rs 378.10 crore posted in 2014-15.
Source: Business-Standard