EIH-Oberoi Hotels announces surprise exit from UAE market | Mint

New Delhi: EIH Ltd is exiting the key hospitality market of United Arab Emirates (UAE), in a surprise decision by the homegrown luxury hotels chain operating the Oberoi chain of luxury hotels and resorts. 

On Wednesday, managing director and CEO Vikramjit Singh Oberoi announced the decision before 400 employees at the Oberoi-run Al Zorah in UAE’s Ajman, following the abrupt conclusion of its partnership with the local state government that owns the property. Oberoi did not mention any reason for the decision at the emergency meeting.

The 89-room property, mostly suites and villas, is 30 minutes from Dubai, catering to high-end travellers with prices starting at about AED 1,000-8,000 or ₹22,000 – ₹1.8 lakh a night.

According to two people who spoke to Mint—one of them an employee with direct knowledge of the matter—the announcement was a complete surprise. “Business had been outperforming budget expectations in recent months. We were informed that the management would be handed over to another international operator within a few months. The owners of the property reassured us that one of the key terms agreed with the new operator was that all employees would be retained. But we are feeling insecure,” the employee said.

In response to Mint’s query, a company spokesperson said, “EIH Holdings Ltd, a subsidiary of EIH Ltd and the operator of The Oberoi Al Zorah, along with Al Zorah Development Private Co. Ltd., the owner of the Hotel, jointly informed employees yesterday that both parties have mutually and amicably agreed to terminate the management contract for The Oberoi Al Zorah, effective 28 February 2025. Al Zorah Development Private Co. Ltd has assured employees that they will be retained by the company moving forward. The Oberoi Group remains committed to exploring opportunities in the region.”

Mint also reached out to Al Zorah representatives but did not receive any response.

EIH signed the Ajman lease in 2017, when its late chairperson P.R.S. Oberoi said the property had been made by Al Zorah Development Co., a joint venture between the Government of Ajman and Solidere International. It also has an attached golf course. 

That year, EIH had a total of 32 hotels worldwide, besides two cruises in the Nile. The number remains largely the same now, with EIH operating 31 hotels and two cruises. But with the potential loss of this property in the next few months, and with the impending loss of its managed property in Shimla, Wildflower Hall, things could get difficult for the hotel company which has set big targets for 2030.

EIH had announced a strong pipeline of hotels earlier this year. In March, Vikramjit Oberoi said the company would add 50 new hotels across various locations. Across the world and in India, its hotels operate under two main brands: Oberoi (luxury) and Trident (five-star). Two years ago, the company also exited its partnership in Dubai City Center. That hotel has now become Anantara Downtown Dubai Hotel in the business bay, near Burj Khalifa.

“It seems some of the issues that have happened to them are unconnected. But these are issues nonetheless. In the UAE, both their managed hotels are now effectively gone. In Shimla, they have received an eviction notice from the Supreme Court. In Hyderabad, the owners of the Trident Hotel property it manages — Golden Jubilee Hotels — are also booked by the CBI for financial irregularities since 2021. It is also no longer running its Motor Vessel Vrinda, which it operated in Kerala till two years ago,” said the second of the two persons cited earlier, both of whom spoke on the condition of anonymity. 

In February this year, EIH lost the right to operate the Wildflower Hall in Shimla to the Himachal Pradesh government, after the Supreme Court asked it to vacate the property.

On the international front

In the past two quarters, the company had given mixed feedback about its international hotel portfolio. Kallol Kundu, the group’s chief financial officer and chief risk officer said in the Q1FY25 call: “For the international hotels, it’s a mixed bag with UAE doing better than in the past. Egypt is slightly off because of the effects of the war. Morocco is more or less at the same levels, but rates are slightly down from last year. And that again has some impact from the Middle East war. Indonesia is doing much better. The Q1 revenue per available room, if we were to take the entire market, including international, is almost similar to last year. Obviously, in the month of May, the occupancies were down.”

Also read: Indian hotels saw a tepid Q1. Will the next quarter bring cheer?

In an earlier investor call in the March quarter of FY24, Kundu had said that the UAE market had “softened a little in terms of the average room rate, but with an increase in occupancies.” Internationally, the company operates in regions such as Southeast Asia, and Africa and has a hotel each in Marrakech, Egypt, Mauritius as well as one each in Bali and Lombok. It also has two cruise lines.

Mounting trouble from different sides

EIH’s growth plans could also be hampered by a legal battle involving Anastasia Oberoi, daughter of the late PRS Oberoi. Anastasia is contesting her exclusion from the Oberoi family’s inheritance, claiming a larger share of the estate, which includes stakes in EIH. The Delhi High Court has issued an interim order preventing the company and its holding firms from transferring their shares. Additionally, Anastasia has been granted protection over her possession of the family’s property, Villa Ashiana, in Delhi.

The dispute revolves around two conflicting wills: One from 2021 which Anastasia supports, and another from 1992 backed by her cousins Vikramjit and Arjun Oberoi. The court has found merit in Anastasia’s claims, but the outcome could lead to further complications. Industry insiders believe that if the case tips in her favour, a significant shift could occur within the company, possibly involving a buyout of Anastasia’s stakes.

But since then, the company has been trying to look for other avenues to expand. Earlier this week, EIH Ltd, the parent company of Oberoi and Trident hotels, had unveiled two major projects in Pune and London. In Pune, it said it has acquired a majority share in Muttha Towers II, where it plans to invest ₹972 crore to develop a Trident Hotel and commercial spaces for a 175-room hotel. The property will also have an adjoining office and retail spaces to be ready by FY30. In London, EIH announced the creation of a new subsidiary, EIH London Investments Ltd, to build a luxury Oberoi hotel, scheduled for completion by FY28.

Its future projects also include a mix of owned and managed properties, such as a palace near Khajuraho, the Rajgir Palace, in Madhya Pradesh, and a jungle resort in the same state and a resort in Goa.

For the year ended FY24, EIH’s revenue grew nearly a quarter to ₹2,511.2 crore. It profit more than doubled to ₹677.7 crore.

But Q1FY25 was not as strong. The group’s profit declined 9% year-on-year in April-June to ₹96.8 crore.