DSA GROUP - YEREVAN, SEVAN HOTELS
| New
directions in tourism demand new style hotels — adding modern hotel bed capacity
to key locations of Yerevan and Sevan will connect tourist traffic well with the growing number of regional bed and breakfast hotels. Filling the tourist beds requires seasoned operators with tieups with airlines and tour operators furnishing tourist traffic to utilize new and emerging locations. The DSA Group is strategically allied with hotel operators and proposes to market tourism in Armenia taking this integrated approach. Company: DSA Group (as project promoter) Amount: $ 8.10 million Tenor/Terms: 9 year loan (2 years moratorium + 7 year repayment) @ LIBOR + 125 basis points Documentation: The DSA Group is negotiating terms of partnership with major brands of hotel operators from India and USA Use of Funds: Land Buildings 4,339,040 Plant & machinery 1,689,510 Misc. fixed assets 880,000 Pre-Operating expenses 978,250 Technical know-how fees 216,950 Working capital margin Total 8,103,760 Legal Status: A limited liability company is proposed to be incorporated in Armenia Local Strategic Partners: Hotel Operators such as Holiday Inn (US) and Sarovar Park Plaza (India) Current Operations: DSA Group Promoters are one of the leading firms in India associated with the construction of hotels. They have to their credit 32 hotels of all leading chains like Holiday Inn, Oberoi s, Indian Hotels (The Taj Group), The Meridien, Ramada Renaissance, Sheraton and many more. Sales and Marketing Plan: • Offer the hotel to a chain operator taking advantage of their marketing organization; • Manage travel agent tie ups; • Implement loyalty programmes /membership schemes for corporate clients; • Promote Armenia as a potential holiday destination in India; • Manage airline tie ups. Business Plan: • To construct and successfully operate two international standard hotels, one each in Yerevan (Grand Hotel) and Lake Sevan area (Holiday Resort). • To create a benchmark for standards in the hospitality sector in Armenia. • To provide the correct mix of leisure, sport, entertainment and business in the same premises. • Redefine service standards currently provided in the hotel industry in Armenia. • To achieve recognition for Armenia in the international hotel industry through these hotels. Competition: None at present in the Sevan area. Investment, Capital Cost and Financing Structure Proposed: DSA plans to invest 10% of the total project cost of $8.1m. Along with the investment, DSA brings in international skills and expertise in the construction of hotels and also capitalizes on its relationships with international hotel operating chains. DSA plans to raise the balance 90% through financial/strategic investors. The project has an impressive return to offer to individual or consortium investors. The initial security for the investors would be the real estate, i.e., land and the building to be constructed. Regulatory considerations: The Law on Foreign Investments, effective since 1994, provides guarantees to foreign investors, as well as grand fathering for five years. Foreign investor companies are subject to the same tax regime as Armenian companies. Foreign investment in excess of Dram 500 million (approx. US$ 920,000) are exempt from profit tax in the first two years of operations, and a 50 percent profit tax reduction thereafter, up to the eight year of operation. Other Foreign Investment Incentives 100 percent ownership permitted. Long-term land lease freely permitted. No duties on import of statutory capital, raw materials and equipment. No export duty. Losses may be carried forward indefinitely. Free operation of foreign currency accounts. Foreign investors may freely repatriate their property, profits or other assets that result from their investment after payment of all due taxes. No restrictions on remittances. Investment guarantees including five-year protection clause and MIGA membership All forms of property and citizens rights to own and use property are protected under the Constitution. The April 1999 Law on Property registration regulates issues relating to registration of property rights. Under the Foreign Investment Law, in the event of a change in foreign investment legislation, foreign investments, in accordance with the investor s preference, may be subject to the laws existing at the time when the investments were made, for a period of up to five years. Foreign investments cannot be nationalized, confiscated or expropriated, except in extreme cases of a natural or state emergency, upon a decision by the courts and with full mandatory compensation. Other project details: Looking at the growing economy and future inflow of businesses into Armenia, the promoters feel that the capital city of Yerevan is in need of a state-of-the-art business hotel that would offer more choice and total flexibility to the business traveler. The proposedfacilities would also house a large banquet / conference hall for meetings, seminars, parties etc. The hotel would be designed in a manner that a particular wing of the building also caters to the tourists and their needs in Yerevan. The intention is to construct a world-class holiday resort by Lake Sevan. It would be advertised as a holiday destination in its own right offering all facilities and amenities that a beach resort in Mauritius or Bali or Nice would offer to its guests during summer. The resort would be designed by a leading Indian architect in a manner that a beach ambience is created around the lake that will help the Armenians overcome the psychology of being a land-locked country. The mountains of Tzakhadzor and Dilijan, close to Lake Sevan, are ideal for skiing and other winter sports but need to be promoted as such. The promoters, with assistance from the Government of Armenia, intend to develop the area and market it as a tourist destination throughout the year. Point of Contact: Mr. Vineet Singh Walia Partner DSA Group 16-A, Maya Mahal, 17th Road Khar Mumbai, 400 052 India Tel: 91-22-631-4082/6314 Fax: 91-22-631-4028/91-11-62 Email:vineet101@hotmail.com |