Its Chairman Amin Ahmad, who boasts more than three decades of experience as a leading bridge constructor, set his sights on the hospitality business in the mid-2000s. He also believes in the significance of securing patient investors who remain steadfast during challenging times. Keep building quality assets that enable you to charge premium prices and generate incremental revenue over decades; this is the philosophy behind the rise of Best Holdings Ltd as Bangladesh’s most premium hospitality operator. Its Chairman Amin Ahmad, who boasts more than three decades of experience as a leading bridge constructor, set his sights on the hospitality business in the mid-2000s. He also believes in the significance of securing patient investors who remain steadfast during challenging times. In a recent conversation with The Business Standard, he shared how his company, which was aggressively building infrastructure, eying value appreciation and premium pricing, faced a series of hurdles in business. He also discussed how it overcame the tough times that posed a threat to his dream of establishing a luxury hotel-resort empire in Bangladesh.
The first hotel and expansion moves
There is no mistake in demand assessment and location selection for the Le Meridien Hotel, the most expensive five-star hotel in Bangladesh, according to Amin Ahmad. “It is also a top hotel in the region, as foreign guests visiting Dhaka don’t mind paying Marriott International’s Asia-Pacific flagship hotel even more than they pay for the Mumbai Taj Hotel.” However, the construction halt and delayed utility connection then deferred Le Meridien Dhaka’s opening by seven years, and that was the first blow to the company’s financials, said Amin Ahmad, who was well accustomed to borrowing from banks to build and payback later. “The Tk900 crore Le Meridien project would not burden us with loans if we could start on time,” he said. The Le Meridien Hotel project, starting in 2005–06, came into commercial operations in 2015, and until the pandemic, the hotel was earning incremental revenue. Prior to the pandemic, alongside the development work of the Le Meridien Hotel, Best Holdings’ preparation for other expansion projects – a Marriott hotel, luxury resorts, private villas, and an economic zone in Bhaluka, Mymensingh; Le Meridien Service Suite and Apartments in the capital; and agro-farming in Bhaluka and Noakhali – was going on with the help of increasing equity from a group of investors that opened avenues for adequate financing from large banks, both in the form of loans and convertible bonds. In 2019 alone, Best Holdings borrowed Tk1,200 crore through bonds to gear up its expansion, and a substantial amount of the debt has already been repaid through cash and conversion to equity. Just after the expansion moves, the pandemic came to bite the business. A drastic drop in occupancy rate –from 73% in 2019 to 16% in 2020 – squeezed the company’s revenue to Tk113 crore in fiscal 2020–21, nearly two-thirds of that two years earlier. “We still thank our hedging move during the pandemic,” Amin Ahmad said as Le Meridien in 2020 secured three-year contracts with several airlines whose crews needed accommodation while the world’s visitors were staying home. Meanwhile, the room rents are 70-80% higher nowadays at Le Meridien Dhaka, and the hotel awaits much higher revenue in 2024 as the contract renewals must be at the current market rates. The occupancy rate in 2023 bounced back to above the pre-pandemic level, and the company’s revenue resurged to around Tk300 crore in fiscal 2022-23. “We are paid the highest price in the region not only because of the infrastructure investments we made; instead, it is more about the global brand that the visitors can instantly relate to and rely on even before their flight to Dhaka,” said Hasan Ahmad, managing director of Best Holdings. Debt servicing, amid revenue losses, became a worry for the company when Covid was signaling an outbreak and Amin Ahmad thanked its lenders and bond investors, who, counting on the company’s future, converted huge debts into equity. The asset base and liabilities Bank loans for Best Holdings itself have come down to below Tk200 crore already, which can be repaid out of only two years of profits from the Le Meridien hotel. However, due to the set of expansion projects by itself and the two subsidiaries, the company still has a consolidated leverage of around Tk1,600 crore, which helped build a gigantic total asset of over Tk7,300 crore. Deducting all the liabilities, including the Tk491 crore deferred tax liabilities, Best Holdings’ consolidated equity surged to Tk5,220 crore at the end of June 2023. The deferred tax liabilities mainly arose due to a revaluation surplus, and the company will not have to pay them until it sells off assets, said Amid Ahmad. Five-time revenue target by 2028 Le Meridien Dhaka alone would see 50% revenue growth in the next five years, said Best Holdings MD Hasan Ahmad, adding that the company preferred accelerating growth through the expansion projects. In fiscal 2027-28, Best Holdings and its two subsidiaries together would generate more than Tk1,600 crore in revenue, which would be five times that in the last fiscal year, he expected. “If we had stopped after the first hotel, the upcoming acceleration would not be possible.” An industry average profit margin would be enough to clear all debts and leave only assets for the company, said Ahmad, adding that it expects a much higher margin due to the premium brands. In fiscal 2022-23, Best Holdings secured over one-third of the net revenue as net profit after taxes. The Best Holdings projects The company, set to raise Tk350 crore from an initial public offering (IPO), will increase the number of Le Meridien rooms by 58 by the end of this fiscal year from 304 now. Le Meridien Commercial, a premium shopping space within the hotel, is going to be another source for some Tk20 crore in revenue a year. The Muslin: Luxury Collection Bhaluka, a Marriott brand resort, is to be operational by July 2025. Its over 200 deluxe rooms and bungalows, along with the restaurants, banquet hall and meeting rooms, artificial beach, golf course, and so many other luxury amenities, would bring the company over Tk150 crore in revenue in 2028, the company expects. The substantial cost of the project would be borne from the sale proceeds of private luxury villas nearby. The 4,000–5,000-square feet private villas would be managed and maintained by Marriott, and private individuals can buy them now as they are scheduled to open in March 2025. In a similar move to build and sell part of the projects to finance the construction cost of the remaining assets that the company would own for years-long revenue, it has another project in the capital, LM Service Suite and Apartments, Bashundhara. The construction cost of the 198 suites sized 600 square feet each would be borne by selling the 114 of the 3,200 square feet of service apartments there. The suites would start earning revenue in fiscal 2027-28, according to the company’s internal assessment shared with TBS. Agro projects, mainly on leased land in Bhaluka and Noakhali, generated over Tk67 crore in revenue last year, and the company does not have the ambition to grow the business too fast in the coming years. The two subsidiaries IconX Hotels Limited, where Best Holdings’ stake is 51%, owns the five-star “Marriott Bhaluka” hotel, and starting commercial operations in July next year, it would earn over a first-year revenue of Tk93 crore that should rise to over Tk200 crore in 2027–28, the company expected. There are more than 3,500 factories around the Dhaka-Mymensingh highway that attract thousands of high-net-worth individual visitors, including foreigners, there, said Amin Ahmad, adding that they are commuting from Dhaka now and can stay at the luxury hotel. Adjacent to the Marriott Commercial Complex, which has 2.81 lakh square feet of space to accommodate eight bank branches, 138 luxury shopping units, a cineplex, a food court, and two convention halls, it would be operational by the end of 2024, and Ahmad believes the demand is already there, and growing demand would let the company earn nearly Tk80 crore in revenue in 2027-28. Dhamshur Economic Zone Limited, where Best Holdings owns more than 51% of the shares, is building an economic zone on an 846-acre area in Bhaluka, and the company expects the beginning of revenue generation in mid-2025. The industrial blocks would be on around 620 acres of land, while the remaining area would be used as service blocks. The economic zone would earn a revenue of over a thousand crore taka in total by 2028, as the zone would thrive further in industrialisation, said Ahmad.