FROM EAST TO WEST

NEPALI HOTEL GROUP, CG HOSPITALITY HAS GROWN ITS PLANS TO CONQUER THE WORLD

IN 1934, NEPAL WAS CRIPPLED BY A CATASTROPHIC EARTHQUAKE. FROM THE RUBBLE, COMMERCE AND SOCIAL INFRASTRUCTURE EMERGED, INCLUDING A ROW OF SHOPS ALONG WHAT IS NOW KNOWN AS NEW ROAD.

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Bhuramull Chuadhary was one of the shop keepers who made a living importing textiles from India and was privileged to be able to sell them inside the palace, to the courtiers and the King’s people. Fast forward two generations, and Binod Chaudhary, Bhuramull’s grandson, is the Chairman of CG Corp Global, a multinational conglomerate with 112 companies and 76 brands around the world. Nepal’s first and so far, only, billionaire, he is ranked 1,349th by Forbes on their rich list.

The story of Binod Chaudhary’s CG Group is one of entrepreneurial endeavour, ambition and success. A legacy that Binod’s son, Rahul Chaudhary, Managing Director of CG Corp Global, aims to continue in his leadership of CG Hospitality, the fast-growing hotel and travel arm of the business. His vision? To build a billion-dollar hotel business from Nepal with a spread from east to west and a hotel in every country he wants to visit over his lifetime. In 2001, his father made his first investment in hospitality in the Sri Lankan Taj Samudra, along with two Taj properties in the Maldives. At the time, during the war, “even Sri Lankans and Maldivians were not willing to invest in these assets,” Chaudhary says. His father’s bold move was the start of a long partnership with Taj and with Sri Lanka. Chaudhary himself joined the family business full time in 2006. In the thirteen years since the portfolio of properties has grown by 4,300% and expanded into 15 countries. This impressive growth was driven by geographical diversification and investments in management companies. By mid-2019, CG Hospitality has a global portfolio of 132 hotels and are opening close to 15 hotels a year.

Over the two decades, CG Hospitality and its owners have built relationships with several of Sri Lanka’s hospitality groups. They now own equity in 16 Sri Lankan hotels through partnerships with CHC, Ekho, Jetwing and the joint venture with Indian Hotels Company Limited (IHCL) at their earliest property, the Taj Samudra. Many international hospitality groups are steering clear of asset ownership, focussing only on the management. However, CG Hospitality is investing and also managing some hotels. “We consider ourselves a one-stop-shop,” says Chaudhary. Around 70% of its portfolio is managed assets. While the amount of investment varies widely, the company does not take minority positions. Chaudhary expects an ROI of at least 10% every year and an IRR of 15-20%. Geographical diversity is already a hallmark of the group. Investments in Vietnam—a country experiencing remarkable growth rates in tourist arrivals—are under consideration, as well as potential purchases of hotels in Kenya. Looking to the future, Chaudhary sees significant opportunities in the hospitality sector across the Indian Subcontinent, South East Asia, the Middle East and East Africa, particularly in the distressed asset and mid-market space.

Investments in important cities are the first of three prongs of Chaudhary’s growth strategy to reach 200 hotels by 2023. The second is investments in asset-light companies or asset-light assets, which could be given to one of their existing companies to operate and the third is to grow the business through the fund route. CG Hospitality has already launched a fund in India focussed on the mid-market space to cater to the growing demand from India’s middle class and is embarking on a Europe fund.

THE NEW SRI LANKAN LANDSCAPE

Of course, the tourism landscape in Sri Lanka has been dramatically shaken in the last six months. Sri Lanka was “heading in the right direction, with all the fundamentals in place,” stressed Chaudhary, but the terror attack in April ’19 has turned the industry on its head. In the immediate aftermath, travel advisories and the state of emergency crushed international arrival numbers but the damaging impact on how Sri Lanka is perceived as an investment destination has the potential to linger long after the tourists return. The attacks broke the balance between comfort and security, a fundamental underpinning the hospitality industry. The impact of this in other destinations, like Mumbai is still felt years later, Chaudhary suggests. “In any recovery, when there’s a wound, it leaves a scar. Recovery is not going to happen overnight. It’s a gradual process, and a lot of thinking needs to be done in terms of the strategy going forward.” While Sri Lanka may be an investor’s market now, with 16 hotels to take care of, Chaudhary’s focus is on ensuring their success and survival, rather than snapping up new opportunities. “But let’s see – never say never. If there’s a good opportunity in the market, we’d love to look at it, but look at it with a pinch of salt.”