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BIDDING DOCUMENT Issued on: 28.10.2016

for the

Selection of agency for development and operation of Resort at Dornala 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 Highway Resort, Dornala

Contents of RFP

1 Terms of Reference (ToR) 3

2 Scope Data Sheets 8


1 Terms of Reference (ToR)

1.1 About the project The proposed property is at Dornala in Prakasam district, Andhra Pradesh. The Operator will have to develop additional rooms, market the property and provide all services to the guests as per the standards from a facility which is rated as 2 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 Supplyand 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 Dornala, Prakasam District

Dornala is a Mandal in Prakasam District of Andhra Pradesh State. Dornala Mandal Head Quarters is Dornala town. It is located 129 KM towards west from District headquarters Ongole. Dornala Mandal is bounded by by Peda Araveedu Mandal towards East, Markapur Mandal towards South, Yerragondapalem Mandal towards East, Ardhaveedu Mandal towards South. Markapur City, Srisailam Project (Right Flank Colony) Township City, Vinukonda City, Macherla City are the nearby Cities to Dornala. Srisailam, Nagarjunsagar, Kurnool, Nagarjunakonda (Nagarjuna Sagar Dam), Guntur are the nearby Important tourist destinations to see.

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

Prakasam


1.4.1 Tourist arrival in Dornala Dornala is on the way to Srisailam at a distance of 40 km. The main reason for tourists visiting Dornala is Srisailam temple. As Dornala falls in Jungle area forest department closes check post gate after 9 PM till 6 Am in the morning to protect wild life in the forest. So tourists who comes from Rayalseema, Bangalore, Chennai, Vijayawada and Guntur stays at Dornala in night and visit to Srisailam in morning. • Daily tourism arrival in Srisailam- • Weekdays: 30,000 • Weekends: 1,00,000 Out of the total number of tourists visiting Srisailam daily, about 15% stays overnight in hotels. This shows that there is immense potential for operating hotel in Dornala.

Also, Department of Tourism is also keen on starting Safari ride in forest near Dornala. The starting point of Safari ride is 900 meter from Dornala property. Hence this will further adds to the occupancy ratio of the Hotel.

1.4.2 Other hotel properties in locality In Dornala there are total 5 private lodges for tourists stay (2 with 30 room capacity and 3 with 10 room capacity) charging INR 500-600 for non A/c room and INR 1000 for A/c rooms. The rates fluctuates based on high demand during peak season (Oct to Feb). Although there are 5 lodges in vicinity but the quality of rooms is very poor in comparison to Hotel Haritha, Dornala and hence these properties could not be compared with APTDC property.

1.4.3 Property Features • Property area: 4 Acres

• No. of rooms: 12 rooms in 3 cottages (4 rooms per cottage with 3-4 bedded) • A/C rooms: 4 • Non A/c rooms: 8 • Restaurant seating capacity: 64 • Other features: Water tank, generator, kitchen and storage space, children play area, open space

of around 1 acres


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) 4 acres 2 Land basic value Not Applicable 3 Upset Price –Minimum Assured Annual Revenue Share

(Rs. Lakhs) 26

4 Percentage Share of Total Revenues 15% 6 Google Map Not Applicable 7 Survey no. Not Applicable 8 Village Dornala 9 District Prakasam 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

Dornala 240 Km

Hyderabad

38 Km

Markapur

38 Km

Markapur

2.1.3 Proximity to various location / nearest tourist attractions

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

Importance of place Footfall numbers (approx.)

1 Sri Mallikarjun Temple Srisailam

40 Km Last halt point for Rayalseema pilgrims

30,000 /weekday

100,000/weekend

2 Dornala Reserve Forest

1 Km from entry gate

Not much None at present


2.2 Minimum Development Obligations APTDC proposes to place its resort property at Dornala, 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 15 years. 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 2 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 Dornala

1 Existing number of rooms 12

2 Number of rooms/cottages to be added

18

3 APTDC will provide • Existing operational property with 12 rooms and restaurant.

4 Operator will be required to do

• Construct minimum 18 additional rooms/accommodation • Upgrade existing rooms • Internal furnishing of all the rooms • Landscaping of the property • Interior furnishings and all movable equipment required for

running the hotel • All furniture, updation and replacement of air conditioning

systems in the entire premises • Upgradation of restaurant


• Improvement to landscaping provided by APTDC • All moveable equipment (for kitchens, rooms, ancillary services

etc.) • Construction of Swimming pool if viable

5 Operational Requirement • Operate as 2-star or above

6. Costing • All activities to undertaken by the 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 4 of Transaction structure part of this volume. The estimated cost of the works is about INR 346 lakh.

2.2.2 Project Operations The facility will conform to the standards of a 2 star or higher category. The project is assumed to be operational 365 days a year, with average occupancy for the rooms is expected to be 25% for first year of operation, 50% for 2nd and 3rd year, 55% for 4th and 5th year, and 60% there onwards till service year. It can be noted that the occupancy numbers are quite conservative.

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

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 Nos. 30 Room Tariff (starting) INR 1500

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. The revenue for Highway restaurant will also add up to total income from food and beverages. The highway restaurant will also attract Walk-ins which is assumed as 195 persons per day means a table turnover of 3 times in a day. Average per person spending is assumed as INR 150.


All average spending figures for restaurant will increase by 5% YoY basis.

2.2.6 Profitability of the facility The profits for the project would be the following

— Profitability from of rooms: The profitability has been assumed to be about 30% for first two years and 35% thereafter.

— 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

— The service period of 30 years commences after the moratorium period, which is maximum of 5 months from the date of signing of SA for property.

— The Project IRR is estimated to be 21% for the investment of the operator even after paying 15% of gross revenues to APTDC. This indicates a profitable investment.

2.2.7 Licenses and approvals All construction, operation and related licenses will be the responsibility of the successful bidder(s) 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 Project. The APTDC shall assist the Successful Bidder (s) on a best effort basis for the same.

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.

2.2.8 Minimum Service Obligations i. 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.

ii. In case hotel becomes operational earlier than the specified period (as per section 4), the revenue share will become payable from the date of the hotel becoming operational.

iii. 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.


iv. 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 two star or higher rating hotel 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 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.

2.2.9 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.

2.2.10 Conclusion The resort facilities at Dornala 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 Dornala 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.

Feasibility Report for Operations & Maintenance of APTDC Haritha Beach Resort Dornala

1. ANNEXURE

1.1. ANNEXURE-I: PROPERTY SITE/ FACILITIES: DORNALA HIGHWAY RESORT

1.1.1. CAPITAL EXPENDITURE

Capital Expenditure Calculation For expenses on Tents

Assumption year 1 year 2 year 3

Per room expenses 3 Lakh INR Room 18 0

No of rooms 12 Price (Lakh INR) 12 5

Total Expenses directly on rooms 36 Lakh INR Furnishings 3

Restaurant 25 Lakh INR Total 270 0

Other Plant & Machinery 15 Lakh INR

Total direct expenses on cottages 270 TOTAL CAPITAL EXPENDITURE 346


1.1.2. PROPERTY LAYOUT

Source: Google Earth


1.1.3. PROPERTY PHOTOGRAPHS

Outer view of property

selection of agency for development and operation of … who comes from rayalseema, bangalore,...

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