selection of agency for development and operation of beach ... · performance of existing hotels in...

BIDDING DOCUMENT Issued on: 28.10.2016

for the

Selection of agency for development and operation of Beach Resort at Kakinada in

Andhra Pradesh under Operate and Maintenance Contract

Authority: Andhra Pradesh Tourism Development Corporation

Vol II: Terms of Reference (ToR) and Project Profile

Feasibility Report for Operations & Maintenance of APTDC Haritha Beach Resort, Kakinada

Contents of RFP

1 Terms of Reference (ToR) 3

2 Scope Data Sheets 10


1 Terms of Reference (ToR)

1.1 About the project The proposed property is at Kakinada in East Godavari district, Andhra Pradesh. The O&M service provider will have to market the property and provide all services to the guests as per the standards from a facility which is rated as 3 stars or above.

1.2 Rationale for the project Government of Andhra Pradesh (GoAP) vision is to be amongst the top 3 States in India by 2022, the top State in India by 2029, and be the most preferred global destination by 2050. The government is taking steps to provide an environment conducive to economic and social growth. These steps include formulation of investment friendly policies, creating world-class infrastructure, improving governance and taking necessary steps to attract investments into the State. Promotion of tourism infrastructure and services at potential destinations is one amongst the many initiatives taken up by the GoAP. In line with the objective to make Andhra Pradesh the premier destination for tourists in the country, Government of Andhra Pradesh has identified nine key theme areas to be developed. The theme areas are listed below: • Religious Tourism • Recreation Tourism • Beach Tourism • Buddhist Tourism • Spiritual & Wellness Tourism • Heritage Tourism • Medical Tourism • MICE Tourism • Eco Tourism

Tourist arrival Trend Andhra Pradesh has the distinction of being a leading tourism destination in India and is presently, the Third most visited State in terms of domestic tourists arrivals. Following table highlights the district wise tourist arrival in AP in FY 2015:

District 2015 Arrivals

Rank Domestic (Million) % Rank International %

Chittoor 1 38.37 31.6% 3 9,231 3.9% East Godavari 2 17.44 14.3% 9 507 0.2% Krishna 3 14.41 11.9% 6 4,626 1.9% Srikakulam 4 11.51 9.5% 8 582 0.2% Visakhapatnam 5 11.44 9.4% 2 69,483 29.2%


Source: Ministry of Tourism, 2016

There has been steady increase in both domestic and international tourist arrivals from 2011-12 to 2015-16.

Current Scenario and Potential for Hotel Rooms in AP

Performance of existing hotels in AP

• Statewide RevPAR performance of existing hotels was recorded at INR 2,010 in 2015-16 (15.4% growth over 2014-15)

• Following graph indicates growth of branded hotel rooms and increasing occupancy ratio of same over 3 years.

West Godavari 6 8.29 6.8% 11 96 0.0% Kurnool 7 5.22 4.3% 10 219 0.1% Guntur 8 4.75 3.9% 7 1,135 0.5% Kadapa Y.S.R 9 3.60 3.0% 13 0.0% Vizianagarm 10 3.04 2.5% 5 5,981 2.5% Nellore 11 2.12 1.7% 4 8,141 3.4% Prakasam 12 0.71 0.6% 12 6 0.0% Anantapur 13 0.69 0.6% 1 137,847 58.0% 121.59 237,854


Demand and Supply scenario of branded hotel rooms

• Presently there is high demand of branded hotel rooms in AP. • Supply of Branded Rooms is only 44% of total rooms

Following graph indicates the CAGR growth in Supply and demand of branded room from 2013-2016.

As seen from the excellent performance of existing branded hotels and high Supply demand gap for branded hotel rooms, AP presents a tremendous opportunity for development of Hotels/Resorts and MICE

1.3 Applicable incentives, subsidies and benefits The project shall be eligible for incentives, subsidies and benefits as per the Andhra Pradesh Tourism Policy 2015-20. These include:

6.40%

11.40%

Supply Demand

S. No Incentive category Incentives a) Complementary/Lin

kage Infrastructure a. Access Roads b. Water supply

point c. Power supply d. Sewerage

connection

Total Project Cost < Rs 50 crores

Total Project Cost from Rs 50-100 crores

Total Project Cost from Rs 100 - 200 crores

Up to a maximum of 5% of total project cost or Rs 2 crore, whichever is less

Up to a maximum of 7.5% of total project cost or Rs 5 crores, whichever is less

Up to a maximum of 15% of total project cost or Rs 10 crores, whichever is less


1.4 Kakinada, East Godavari District

Kakinada is the district headquarters of East Godavari district. It is the 4th most populous city of the state. Kakinada has been selected as one of the hundred Indian cities to be developed as a smart city under PM Narendra Modi's flagship Smart Cities Mission. Further, it was short listed in the 20 cities that are to be first developed under the same scheme. Uppada beach is primarily considered as Kakinada beach which is having one of longest coastlines in Indian beaches. Kakinada beach is meant for its mild blue waters and cold breeze all the day.

b) Land Conversion Charges

Waiver of Non-Agriculture Land Assessment (NALA) tax or Land Use Conversion charge, as applicable

c) Registration and Stamp duty

100% reimbursement on Registration and Stamp duty for all Tourism Infrastructure Projects

d) VAT/CST/SGST 5% for all new Tourism Infrastructure projects from date of commencement of operations. Necessary amendments to relevant clause(s) in the Andhra Pradesh Value Added Tax Act 2005 to be made.

e) Luxury Tax 100% exemption of Luxury Tax for all new Tourism Infrastructure projects for a period of 3 years from date of commercial operations

f) Entertainment Tax 100% exemption of Entertainment Tax for first 3 years from date of commercial operations

g) Energy Tariffs Tariff as per the rates provided in the “H.T. Category-III: Airports, Railway Station and Bus Stations” in the Andhra Pradesh Electricity Regulatory Commission (APERC) Tariffs


The city consists of two regions, connected by bridges. The southern part, Jagannathapuram, is separated from the rest of the city by the Buckingham Canal. The canal and its branches form Medaline Island, which abuts the city in the southwest. The northern area of Kakinada is the more modern part of the city, with its recent extension. An industrial belt, running north–south the length of the city, separates the eastern part from the coast. Kakinada is bordered on the southeast by Kakinada Bay and a marshy wetland, home to India's second largest mangrove forest and the Coringa Wildlife Sanctuary. A branch of the Godavari River, the Gouthami, flows into the Bay of Bengal at this point.

1.4.1 Economy of Kakinada Kakinada's economy is diverse, due to its seaport and port-based industry. The major industries present in Kakinada include; Fertilizer industry, IT, fabrication and auto parts, Rice and agro commodities processing, Steel, Edible oil refining, Fishing and Aqua culture.

Kakinada is known as the "Fertilizer City" of Andhra Pradesh. The city is home to two fertilizer producers: Nagarjuna Fertilizers (the largest urea manufacturer in coastal Andhra) and Godavari Fertilizers (owned by Murugappa Group). Also, the Murugappa Group-owned EID Parry (India) and Cargill International joint venture, Silk Road Sugars, has a port-based stand-alone sugar refinery in Kakinada with a capacity of 600,000 tonnes.

The city is also attracting many bio fuel manufacturing companies. Vakalapudi Industrial Park has attracted over $10 million in investment from biodiesel companies such as Reliance Industries, Natural Bioenergy and Universal Bio Fuel.

About 35 IT companies are operating in Kakinada. Godavari IT Association of East and West Godavari districts (GITA) is an association of IT companies in the twin Godavari districts and is based in the city. Some of the IT companies in the city are Cyient, a Hyderabad-based multinational software company, Avineon, a US-based technology company providing GIS and engineering services, Firstobject Technologies, a BPO firm and Krify, a UK-cum-India-based mobile app development company.

Hope Island, about 5 kms from the coast, makes Kakinada Port a natural harbour. It is home to two ports: an anchorage port and a deep-water port. Kakinada's deep-water port is the second-largest in the state (after Visakhapatnam port) and the first in the country built in a public-private partnership, in 1996. It is operated by Kakinada Seaports. A shipyard is under construction (a joint venture of Singapore-based Sembawang Shipyard and Kakinada Seaports) to provide support services to ships around Kakinada and the east coast of India.

Kakinada is also base for Oil and Natural Gas Corporation's Eastern Offshore Asset. Several oil companies use Kakinada for oil and gasoline shipments. Baker Hughes and Schlumberger are field-development companies working on offshore natural-gas fields near the city. The Krishna Godavari Basin is considered the largest natural-gas basin in India. Significant discoveries of oil and natural gas were made by Oil and Natural Gas Corporation (ONGC), Gujarat State Petroleum Corporation and Reliance, which has been extracting gas from its KG D6 block off the Kakinada coast.

Kakinada's principal exports include seafood (prawns, shrimp, fish) and related products, agricultural products (including rice and corn, oilmeals, processed food products, chemicals, iron ore, bauxite powder and biofuel.


1.4.2 Hotel Market in Kakinada Because of increasing commercial activity in the city there is large demand of hotel rooms. Most of the high level executives of Port based, IT, Oil and agro based industries visits from Tier I cities and even from abroad that too for larger stay duration, which increases demand of good quality hotel room in Kakinada. Current occupancy level of Hotels is 70-75%, and RevPAR is also growing There are around 15 hotels in Kakinada town but no resorts. Following are the four top business hotels of Kakinada:

S.no Name of Hotel Category No of rooms

Room tariff Other facilities at

hotel 1 Royal Orchid 3 star + 84 (15

suits) 3500-7000 +

taxes Conference Hall, Banquet, Restaurant, Bar, Swimming Pool, Gym, Business meeting hall

2 Hotel GRT 3 star + 84 (12 suits)

3750-8000 + taxes

Conference Hall, Banquet, Restaurant, Bar, Swimming Pool, Gym, Business meeting hall

3 Sarovar Grand 3 star + 50+ 3000-6000 Conference Hall, Banquet, Restaurant, Bar, Gym, Business meeting hall

4 Best Western SVN Grand

2 star + 42 2300-3500 Conference Hall, Banquet, Restaurant

These hotels have occupancy ratio of 60-70% and charges premium in room rates and F&B services from customer. Kakinada Beach Resort is a beautiful property located at the Kakinada Beach and very near to Hope Island. This is the only resort in entire Kakinada city. There is a stretch of beach at Kakinada and this property covers most of it. Property is situated at around 15 kms from the main city and free from hustle and bustle of the city.


Source: Google Earth

1.4.3 Property Features Property comes under CRZ III area

• Property area: 13.38 Acres

• No. of rooms: 18 rooms (All double bedded AC rooms) • No. of Tented beach side rooms: 6 rooms (All double bedded AC rooms) • Current Occupancy: 47-50% Other facilities:

• Restaurant:45 pax seating capacity

• Bar 45 pax seating capacity

• Beach Side restaurant: 40 Pax seating capacity

• Conference hall: 35 pax seating capacity

• Children play area

• Parking area

• Sit out deck

• Boating unit


2 Scope Data Sheets

2.1 Scope Data Sheet for Development of the project

2.1.1 Project Information memorandum

S. No Item Details 1 Area of the land (Acres) 13.38 acres 2 Land basic value Not Applicable 3 Upset Price –Minimum Assured Annual Revenue Share

(Rs. Lakhs) 54

4 Percentage Share of Total Revenues 26% 6 Google Map Not Applicable 7 Survey no. Not Applicable 8 Village Kakinada 9 District East Godavari 10 Survey map Not Applicable 11 Engineering survey Not Applicable 12 Master plan ( if any) Not Applicable

2.1.2 Connectivity

Distance of Airport Railway station Bus station

Kakinada 80 Km

Rajahmundry

15 Km

Kakinada

15 Km

Kakinada

2.1.3 Proximity to various location / nearest tourist attractions

S.No Name of the place Distance from the project site

Importance of place

1 Hope Island 5 km Hope island is being developed as a tourist destination

2 Coringa wildlife sanctuary

3 Km 2nd largest stretch of mangrove forests in India with 24 mangrove tree species and more than 120 bird species

3 Annavaram Temple 45 km Famous temple of Lord Veera Venkata Satyanarayana Swamy


2.2 Minimum Development Obligations APTDC proposes to place its resort property at Kakinada, under Renovation, construction and operation and maintenance by reputed private operators. The development of additional rooms is envisaged to be on a Public Private Partnership (PPP) basis for the Service period of 30 years, within the CRZ norms. APTDC proposes to contract reputed hotel / resort operators to manage these properties on an “as-is-where-is” basis. The hotels shall have all modern facilities, conform to development guidelines and should apart from conforming to the minimum standards laid down by the APTDC, also incorporate best practices and standards practiced in the industry. These terms and conditions will be specified in the Service Agreement between APTDC and the Successful Bidder. The scope of work for the selected bidder/bidders shall include O&M of existing facility and inter alia construction of additional rooms, interior decoration or renovation, marketing, operations and management of the hotel Projects in accordance with the provisions of the RFP comprising of Terms & Conditions, Scope of work and Service Agreement. The service provider will have to market the property and provide all services to the guests as per the standards from a facility which is rated as 3 stars or above. It will include all room services cleaning, cleaning and maintenance services, food and beverage services, banquet and related services. It will also include transport and logistics required, travel desks, any health club / spa services if required. The Operator will be entitled to fix the prices of these services and change the rates thereof whenever it deems it. The service provider will have to provide rate lists to APTDC and certified revenue statements every month (at the end of the month within 7 days) with detailed break up various heads revenues. Transaction structure: Following are the details of budget allocated and expected infrastructure to be developed:

S. No Particulars Kakinada

1 Existing number of rooms 18 rooms in cottages + 6 tented rooms

2 Number of rooms to be added 21 (please also refer to 2.2.10.(s))

3 APTDC will provide • Existing operational property with 18 rooms, 6 tented

rooms, restaurants and bar • Proper fencing of the property

4 Operator will be required to do

• Construct minimum 21 rooms/accommodation permitted under CRZ III norms or any other competent authority as required

• Internal furnishing of rooms • Interior furnishings and all movable equipment required for

running the hotel / resort • All furniture, updation and replacement of conditioning systems


in the entire premises • Upgradation of restaurant and bar as per 3 star hotel standard • Improvement to landscaping provided by APTDC • All moveable equipment (for kitchens, rooms, ancillary services

etc.) • Construction of swimming pool and modification of children

play area as permitted under CRZ III norms

5 Operational Requirement

• Operate as 3-star or above (certification to be taken within 24 months of start of operations)

6. Costing • All activities to undertaken by the O&M operator at their own expenses after the handing over of the property by APTDC

2.2.1 Feasibility of the project The list of finishing works to be undertaken by the operator is listed at section – 3 Transaction structure part of this volume. The estimated cost of the works is about INR 302 lakh.

2.2.2 Project Operations The facility will conform to the standards of a 3 star or higher category. The project is assumed to be operational 365 days a year, with average occupancy for the rooms in expected to be 50% for first year of operation, 55% for 2nd year, 60% for 3rd year and thereafter till 30th year. It can noted that the occupancy numbers are quite conservative and as per current occupancy of 3 star + hotels in Kakinada. For tented rooms the occupancy percentage is 25% for first two years, 30% from 3rd and 4th year, 40% from 5th to 7th year and 50% from 8th till the end of service year.

2.2.3 Revenues from the Project The project is expected to have the following revenue streams 1. Revenue from room tariff 2. Revenue from food and beverages (restaurants & bar) Apart from this the operator can also add spa unit as per 3 star hotel standard

2.2.4 Revenue from Rooms Tariff The room tariff assumed based on inputs from department of tourism, Andhra Pradesh and are as follows

Particular

Type of facility Double occupancy rooms Double occupancy tented rooms

Nos. 18 27

Room Tariff (starting) INR 3,500 INR 1,750


Tariff of tented rooms are kept at half the prices at that of room tariff. Also tariffs will be increased after every two years and will reach up to INR 6,056 for rooms and INR 3.028 for tented rooms till the end of service year.

2.2.5 Revenue from Food and beverages Food and Beverages revenue, a significant contributor to the profits of a hotel, is assumed to be INR 500 per occupied room/tented rooms for first year of operation which will increase by INR 100 in every two years till the end of service period. Revenue from bar is assumed to be INR 300 per day per person and walk-ins of 60 persons per day. The revenue for beach side restaurant will also add up to total income from food and beverages. Walk-ins for beach side restaurant is assumed as 160 persons per day means a table turnover of 4 times in a day. Average per person spending is assumed as INR 150. All average spending figures for bar and beach side restaurant will increase by 5% YoY basis.

2.2.6 Profitability of the facility The profits for the project would be the following 1 Profitability from of rooms: The profitability has been assumed to be about 30% for first

two years and 35% thereafter. 2 Profitability on Food & Beverage and bar services: The profitability has been assumed to

be 40% for first two years and then 45% thereafter. Room tariff is assumed to be escalated at 5% per annum, to account for inflation in operation and maintenance (O&M) expenses

2.2.7 Service period The service period of 30 years commences after the moratorium period, which is maximum of 45 days from the date of signing of SA for property.

2.2.8 Project Feasibility Analysis The Project IRR is estimated to be 20.1% for the investment of the O&M operator even after paying 26% of gross revenues to APTDC. This indicates a profitable investment.

2.2.9 Licenses & Approvals All construction, operation and related licenses will be the responsibility of the successful bidder(s). Obtaining bar and liquor license is also responsibility of the successful bidder


The developer is responsible for obtaining all the facility related licenses. The developer shall obtain all licenses from relevant authorities for the operation of their corresponding hotel / beach resort Project. The APTDC shall assist the Successful Bidder (s) on a best effort basis for the same.

2.2.10 Minimum Service Obligation i. After APTDC handing over the site to the Operator, the Operator will complete the

obligations and make the Project operational. If the Operator fails to make the project operational within the time specified by section for the specific project, the Minimum Assured Annual Revenue Share will still become payable.

ii. In the case the operator is unable to make the property operational even after the lapse of the specified period, APTDC may at its discretion extend the period without prejudice to the rights to receive payments as above. In case, if the project is not completed even then, it will be treated as an event of default and will be dealt with in accordance to the Service Agreement.

iii. After APTDC handing over the site to the Operator, the Operator will complete the obligations defined in the above table and make the Project operational. If the Operator fails to make the project operational within the time specified by section for the specific project, the Minimum Assured Annual Revenue Share will still become payable. In case hotel/ resort becomes operational earlier than the specified period (as per section 4), the revenue share will become payable from the date of the hotel/ resort becoming operational.

iv. In the case the operator is unable to make the property operational even after the lapse of the specified period; APTDC may at its discretion extend the period without prejudice to the rights to receive payments as above. In case, if the project is not completed even then, it will be treated as an event of default and will be dealt with in accordance to the Service Agreement.

The Operator shall at its own cost and expense:

a. The Operator has to run the APTDC property at the awarded site as a three star or higher rating hotel/ resort facility

b. Operator is entitled at set the tariff terms for all facilities and services it provides at the property and also entitled to change such rate whenever it deems fit. However at the end of each quarter the operator will provide a detailed breakup of the revenue at the end of each quarter.

c. Investigate, study, operate and maintain the Project Assets/Project Facility in accordance with the provisions of this Agreement, Good Industry Practice and Applicable Laws;

d. Obtain all Applicable Permits in conformity with the Applicable Laws and be in compliance with thereof at all times during the Service Period;

e. Procure and maintain in full force and effect, as necessary, appropriate proprietary rights, licenses, agreements and permissions for materials, methods, processes and systems used in or incorporated into the Project;

f. Ensure that each Project Agreement contains provisions that would entitle APTDC or a nominee of APTDC to step into such agreement at APTDC’s discretion, in place and substitution of the Operator in the event of Termination pursuant to the provisions of


this Agreement; provide all assistance to the APTDC as they may reasonably require for the performance of their duties and services under this Agreement;

g. Provide to the APTDC Officials reports on a regular basis during the Operations Period in accordance with the provisions of this Agreement;

h. Appoint, supervise, monitor and control the activities of Contractors / Staff or any other service provider under their respective Project Agreements as may be necessary;

i. Develop, implement and administer a surveillance and safety program for the Project/Project Facility and the users thereof and the personnel engaged in the provision of any services under any of the Project Agreements including correction of safety violations and deficiencies, and taking of all other actions necessary to provide a safe environment in accordance with Applicable Laws and Good Industry Practice;

j. Take all reasonable precautions for the prevention of accidents on or about the Project Site/Project Facility and provide all reasonable assistance and emergency medical aid to accident victims;

k. Not to place or create nor to permit any contractor or vendor or service provider or any other person claiming through or under the Operator to create or place any Encumbrance over all or any part of the Project Assets, or on any rights of the Operator therein, save and except as expressly set forth in this Agreement;

l. Be responsible for safety, soundness and durability of the Project Facility including all structures forming part thereof and their compliance with the Specifications and Standards;

m. Ensure that the Project Site remains free from all encroachments and take all steps necessary to remove encroachments, if any;

n. Operate and maintain the Project at all times during the Operations Period in conformity with this Agreement including but not limited to the Specifications and Standards, the Maintenance Programme and Good Industry Practice;

o. Remove promptly according to Good Industry Practice, from the Project Site, all surplus construction machinery and materials, waste materials (including, without limitation, hazardous materials and waste water), rubbish and other debris (including without limitation accident debris) and keep the Project Site in a neat and clean condition and in conformity with the Applicable Laws and Applicable Permits.

p. Provide to APTDC at the end of each quarter/month as agreed in the SA audited profit and loss statement within 7 days of the end of the quarter / month.

q. Provide access to the auditors and inspectors of APTDC whenever APTDC chooses to conduct such audit or assessment.

r. All necessary clearances and permits required from the relevant authorities should be obtained by the Successful Bidder and the Successful Bidder shall adhere to all relevant guidelines/ recommendations / standards/ requirements prescribed by statutory bodies, Central/ State Government and its ministries / agencies, professional bodies and associations as applicable including adherence to labor laws to Employee State Insurance, Provident Fund, etc.

s. The successful bidder may be further permitted to construct additional rooms/facilities including convention hall, amphitheatre, open air movie theatre, etc as may be required to make the property more attractive to tourists. All such addition can be either permanent/ semi-permanent constructions after obtaining all requisite permissions and clearances from the competent authorities.


2.2.11 Insurance The Operator shall, at its cost and expense, purchase and maintain during the Operations Period, insurance to cover against:

(a) loss, damage or destruction of the Project Facility, at replacement value; (b) the Operator’s general liability arising out of the Service; (c) liability to third parties; and (d) any other insurance that may be necessary to protect the Operator and its

employees, including all Force Majeure Events that are insurable and not otherwise covered in items (a) to (c).

The Operator shall pay the premium payable on such insurance policy (ies) so as to keep the policy(ies) in force and valid throughout the Service Period and furnish copies of the same to APTDC. Each insurance policy shall provide that the same shall not be cancelled or terminated unless 10 Days' clear notice of cancellation is provided to APTDC in writing. If at any time the Operator fails to purchase and maintain in full force and effect any and all of the insurances required under this Agreement, APTDC may at its option purchase and maintain such insurance and all sums incurred by the APTDC therefor shall be reimbursed by the Operator forthwith on demand, failing which the same shall be recovered by the APTDC by exercising right of set off or otherwise.

2.2.12 Conclusion The resort facilities at Kakinada will enable leisure tourists visiting here to stay for 2-3 nights and could offer exciting packages and desired services to all kind of tourists. Apart from regular bookings the operator can also market this property to large companies having presence in Kakinada to organize offsite parties and annual meet. Also, it will contribute to the vision of the Government of Andhra Pradesh in catalyzing tourism growth in the State, and leverage its unexplored natural assets for increasing tourism inflow and creation of infrastructure.


1. ANNEXURE

1.1 ANNEXURE-I: PROPERTY SITE/ FACILITIES: KAKINADA

1.1.1. CAPITAL EXPENDITURE

Capital Expenditure Calculation for expense on Cottages Item Assumption unit Assumption unit

Per room expense 5 Lakh INR No. of Rooms 18 Renovation of 6 old tented rooms 6 Lakh INR Per Cottage expenses 5 Lakh INR Tents 21 Total Expenses directly on rooms 90 Price (Lakh INR) 6 Lakh INR Total Expenses directly on cottages 132 <<Total 132 Lakh INR Restaurant 40 Lakh INR Other Plant & Machinery 40 Lakh INR TOTAL CAPITAL EXPENDITURE 302


2.1 PROPERTY LAYOUT


2.2 PROPERTY PHOTOGRAPHS

22 Feasibility Report for Operations & Maintenance of APTDC Haritha Beach Resort, Kakinada

23 Feasibility Report for Operations & Maintenance of APTDC Haritha Beach Resort, Kakinada

selection of agency for development and operation of beach ... · performance of existing hotels in...

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