Plagued by security concerns and a lack of clarity and coordination between concerned government agencies, the Delhi Aerocity project has failed to take off as planned, leading to immense time and cost overruns for the hospitality players involved. - By SHRIKANT RAO
In the tepid early morning light, the silver sparkler appears like an extraterrestrial on the horizon, its wing lights rippling and its body dipping before coming to wearily rest on the tarmac at Delhi's Indira Gandhi International Airport after a long, long journey. The jetlagged passengers waltz out of customs at the uber swank Terminal 3, and are within minutes transported to tranquil hospitality zones at Aerocity in nearby Gurgaon, along the edge of the airport. And then for a shower, a tall drink, and a soft bed to sink into...
Now hang on a minute. The creature comforts dream can be put on hold. For the Indian hospitality sector used to regularly mouthing that old adage Atithi devo bhava, it will be a while before the guests arrive in droves at the national capital's new hotel hub near the airport.
Six years after the hype and hoopla accompanying the announcement of a 45-acre hospitality zone in the immediate vicinity of the Indira Gandhi International Airport (IGI), the Aerocity project is facing problems going ahead. Construction is in spurts; it has been more or less stalled since mid-2011 owing to objections raised by local authorities. At present, close to two-thirds of the hospitality district is in various stages of completion - at least four of the hotels have been ready for months and are slated to open this year - but there is a big question mark over the date when the various hotels will open for business.
As is de rigueur in the national capital, VIP security appears to be the ogre. No one is quite ready to spell it out but possible scenarios - God forbid - include some whacko trying to bring down Air India One with a rocket from beyond the concertina wire rolls that separate the airport zone from the planned hospitality hub or a terrorist plot to put a politician in the sights of a rifle.
World over, hotels exist in the form of aerotropolises - a term that has found international currency in the case of airport cities like Dallas Fort Worth, Amsterdam Schipol, London Heathrow, New York JFK, Paris CGG, and Beijing National - which are built in close proximity to city airports. In the case of Delhi Aerocity, the perceived danger stems from the proposed luxury hotels being too close to the runway and hangars used to park aircraft belonging to VVIPs, and national security agencies like the Research & Analysis Wing (R&AW). Security minders are of the view that the hotels could offer a perfect launch pad for terrorists and other disgruntled elements, and therefore constitute a potential threat.
More recently, the hoteliers at Aerocity have had officers of the Delhi Police paying them visits with harebrained solutions to raise their hotel's security profile. These include windows - facing runway 28/10, barely 200 m away - being blocked with concrete, six-layered bulletproof glass panes (the purpose remains unclear as the threat is ostensibly to those inside the airport fence); demands to have two or more floors knocked off from existing structures; and boundary walls being raised so the tarmac doesn't come in the line of a potential assassin's vision.
This has proved to be more than an irritant for the international hospitality players; there are marquee names like JW Marriott, Ibis, Lemon Tree, Red Fox, Hyatt Andaz, Holiday Inn, Pride Pullman, Novotel, MGM Grand and Dusit D2 looking to conduct business at Aerocity. The matter assumes great significance because every single day of delay in completing work on the structures contributes to huge economic loss. Hotels like Ibis, Lemon Tree, Red Fox and Marriott - together accounting for 1,325 rooms - have been ready for months now. The Aerocity project delays have contributed to steep development fees being charged by Delhi International Airport Ltd (DIAL) at the airport to recover costs.
The ironies are rich here. While New Delhi's $3-billion airport terminal upgrade has led users to commend it - IGI's T3 is a good advertisement for India Inc despite the mishap with the roof in 2009 or the Metro link delay that followed - he ambitious Aerocity project on the plane port's fringe truly seems to be a disaster of planning and management.
Ask the minders of the mid-segment Lemon Tree Hotel for whom setting up business has been a sour experience. Merely finishing construction work early did not give Lemon Tree first mover advantage thanks to the latter-day security threat perceptions on the part of Delhi Police. The hotel is reportedly losing about Rs 10 crore every month just from keeping the property running and maintaining its upkeep. "The objections being raised are related to the views the hotel has, but they seem so much like they were made at the last minute," says Aradhana Lal, Vice President, Corporate Communications & Sustainability Initiatives, Lemon Tree Hotels. "And that is very inconvenient for hotels that are looking to launch business. All we can do now is to wait for approvals to come from the authorities for the various licenses."
Meanwhile, the high-end JW Marriott Hotel is slated for a phased opening next month. "The course of events is unfortunate but we are hoping the launch happens as planned and there are no challenges," says Balan Paravantavida, General Manager, JW Marriott, diplomatically. "Work on the hotel is continuing as per schedule." Evidently, with part of the 523-room hotel ready to open soon, it makes eminent business sense not to ruffle important feathers just before the big day. Hotels such as the Marriott have upgraded security on all their properties following the 2008 attack on its Islamabad hotel but the additional demands by Delhi Police have contributed to an increased sense of weariness.
For the hospitality firms that have already invested heavily in construction - close to Rs 12,000 crore is riding on the planned 16 hotel properties, not to mention Bharti Realty's 1.5 million sq ft retail and office spaces project, the Worldmark, which is also coming up in the neighbourhood - structural modifications will not just contribute to an architectural and design eyesore, but will mean revisiting original development plans and consequently lead to more time and cost overruns than already endured.
The hotels at Aerocity together are expected to add up to 5,400 hotel rooms, or about 45 per cent, to Delhi's limited inventory of 11,250 rooms in the branded segment besides generating direct employment to over 10,000 people directly and 30,000 indirectly. Quite clearly, unless the authorities give the all-clear signal, the hotels cannot start doing business. For a national capital that boasts of a Metro that runs extremely well and is counted amongst the best in the world, the snail-paced progress made by the Aerocity project seems to be tarnishing New Delhi's recent reputation for infrastructural derring-do.
Indeed, the chain of events at Aerocity, India's first major initiative in the hospitality sector since the Asian Games in 1982, has been catastrophic from the very beginning. Land for the project was allotted to the DIAL consortium in 2007 and construction began in 2008. It was only in 2011, long after the authorities had given their seal of approval to Aerocity's Master Plan, that Delhi Police brought security issues to the fore. Not long afterwards, the Union Home Ministry, the Bureau of Civil Aviation Security (BCAS) - he regulatory authority for civil aviation security in India - the Intelligence Bureau and RAW followed suit. A 10-member panel set up by BCAS to carry out a detailed investigation of the security issue and suggest solutions to plug loopholes could not make any headway. Massive differences amongst its members prevented the production of a unanimous report. The lack of coordination between various government agencies and lack of clarity on the issue combined to ensure a complete lack of solutions.
Why did the objections come so late in the day? It has now emerged that the security verification process was ignored because the Aerocity project was cleared in a rush; the purpose being to have the Aerocity hotels in place for the 2010 Commonwealth Games. "What is happening now is a consequence of that oversight," laments a senior bureaucrat at the Union Home Ministry. "But the hotels cannot be faulted now because the authorities did not practice due diligence early. It is unrealistic to expect the hotels to toe the police line."
In any case, there are not many takers for the oversight explanation. The hoteliers are now given to say that the objections from the police appear more like an afterthought; there are even suggestions that the threat perceptions could well be exaggerated, given that there are other high-rise constructions around the airport outside Aerocity that could present identical security hazards. Besides, there is also an elevated road near the hospitality hub overlooking the runway that could present danger. Mumbai's slums are presented as a classic case of the government being selective in its objections in the case of New Delhi's Aerocity.
The Aerocity hotels are also not buying the police argument that terrorists will sneak in weapons and use the structures to launch an attack on the airport side. Such a possibility, they say, can be controlled through foolproof security for both staff and guests. They are open to suggestions of security drills being vigorously followed and implemented in their premises. A foreign consultant with a leading hotel chain setting up base at Aerocity is, however, cynical. "The hotels might do their part to bolster security but a terrorist will always find a way to accomplish his objective whatever safeguards one might take," he says. "If security was the concern, permissions should not have been granted to the hotels prior to construction. We don't know from where these new requirements are suddenly springing from.
They seem to me more like a signal, and probably a prelude to some kind of monetary understanding to wrap up issues."
While the police perception of a threat hanging over Aerocity could be debated, it is a fact that security in the zone does not get the seriousness it deserves. A lot of people pass through the Aerocity area daily, making it difficult for agencies to monitor everyone. According to traffic projections by engineering consultancy firm RITES, the Aerocity project will add 3.4 lakh vehicles per day to the outer ring road by 2021. The figure will increase to 5 lakh by 2031. Traffic decongestion and monitoring of the area are, therefore, expected to become challenging tasks in the future.
It is not as if things are good now. Through a sting operation, a leading television channel recently exposed the chinks in IGI's armour by having reporters breach seemingly 'secure' areas of the airport. A mammoth piece of equipment - an earthmover - went missing from a construction site at Aerocity. If it weren't a serious matter for the harried hoteliers and the contractor owning the equipment - in this case, called Acumen Construction Pvt Ltd - it would have actually qualified as, well, funny.
But no one is laughing. While security might be the ostensible reason for the delays, there seem to be other factors in play. There are whispers that corporate rivals fearing loss of business could be obliquely responsible for the current stonewalling of construction at the hospitality projects being built around the airport. It is being pointed out that the new hotels would have taken away business from existing hotels in the city, known for its perennial shortage of premium accommodation close to the airport, and put tremendous pressure on tariffs. Thanks to weak demand, there has already been a 10 per cent subtraction in average room rates. The fear now is that with international brands like MGM Grand and Hyatt making an entry into Aerocity, competition would become cutthroat, further affecting occupancy and room rates within the city. Interestingly, the Aerocity project has in its wake contributed to the upgrade of existing properties within the city. Some hotels in the unbranded segment have even taken to attaching an 'Aerocity' tag to the names they previously used for strategic advantage.
In any event, for high-end hoteliers at Aerocity who are looking for a level playing field and want to make the most of India Inc's ambitious growth plan, the lack of progress on their projects is assuredly bad news. Consider the existing scenario: The Planning Commission in tandem with the Ministry of the Tourism looks to double foreign tourist arrivals from 6 million to 12 million within the Twelfth Plan Period (2012-17). In effect, this would mean the creation of 180,000 additional hotel rooms across the country at a capital investment of over Rs 125,000 crore. Although investor sentiment in Asia-Pacific markets - New Delhi and Mumbai appear in the global top 10 - is currently high, it appears unlikely that the obstacles witnessed by players at Aerocity will inspire such targeted growth.
"This is giving a very negative image of the country abroad, eroding investor confidence," says Amit Maitra, Managing Director, Lerch Bates, an international consultancy that has been involved with various projects at Aerocity like Accor Hotels and Bharti Aerocity. "Investments have already been made and withholding permissions so long after construction commenced is grossly unfair. The government should understand that it needs the hospitality sector to prop up the economy. With every year of delay thanks to rising material and labour costs, we are looking at a 25 per cent cost escalation." Despite the clear and present urgency, though, action from the government doesn't look like happening any time soon. Close to 26 million passengers fly in and out of Delhi every year and the numbers are expected to rise dramatically in coming years, leading to pressure on existing hotel inventories.
Lack of consensus
The matter has been debated by a committee drawn from various branches of government, each working at cross-purposes. While the Police have claimed that security clearances need to be obtained from the aviation regulator, Civil Aviation Minister Ajit Singh has been quick to give a clean chit to the hoteliers, saying there is no requirement for such a certificate - a clear case of mixed signals. While one section of the government approves the project, the other has been quick to rule it out, a case of the right hand not knowing what the left is doing.
The latest news is that a panel comprising officials of the rank of joint secretary from the Home and Civil Aviation ministries, and representatives from the Intelligence Bureau, R&AW and Delhi Police will be deputed to Chicago, Amsterdam and Dallas to study the security models adopted at the Aerocity projects there. The team is expected to submit its report by the coming month that will suggest a way out of the current impasse and propose methods to bolster security. This leads a project consultant to remark acidly, "Who's paying for the junkets is anybody's guess."
With there being no agreement reached on the potential threat posed by the under-construction hospitality zone at Aerocity between the two sides, Delhi Police has made it mandatory for all private developers and contractors to have their workforce vetted by them for security. More than 5,000 workers engaged in construction activity find themselves verified and their antecedents checked in view of the very high VVIP movement through the airport. Often, all construction activity is stopped nearly three hours before the arrivals and departures of important personalities to allow the area to be completely sanitised. Speaking of his woes, a contractor says, "Every time a neta passes by, it becomes a half-day for our people. Work takes a backseat."
Foreign tours apart, faced with increasing pressure from the opposition over inaction on the economic front and mounting criticism from a section of the hospitality sector on the handling of the Aerocity endeavour, the Aviation Ministry directed BCAS to come up with security requirements for the hotels. The result was a 10-point directive to the hotels at the end of January that included steps like strict access control with biometric entry passes for staffers employed after strict security clearance, restriction on carriage of firearms inside hotel premises except by security personnel; and an instruction to install bulletproof films on windows facing the runway.
Despite the ad-hoc measures, none of the hotels are clear about what needs to be done to address the issue in its entirety and lay the matter to rest. With the Delhi Aerocity project being affected by bungling both by the police and government departments, there are fears that similar problems could beset other airport hotel projects in the making. In its bid to achieve a higher growth rate, the government is looking to open up areas of economic opportunity like airport cities. However, the failure to operationalise Aerocity Delhi is already making investors wary. With hospitality projects stuck in the recently perceived security quagmire, private firms are wary of bidding for similar projects in Mumbai and other cities fearing a repeat.
The way forward
With the Aerocity projects not making much headway, what is the prescription to the existing problem? Maitra responds, "There should be an integrated approach to development. Security issues like granting of permissions to hotels along the perimeter of airports must be woven into the project's master plan at conception stage." There is also a need to cut down dramatically on the current practice of involving too many government agencies for clearances. There is assuredly an opportunity for a host of firms specialising in airport security systems - like Siemens, Raytheon, Harper Chalice Group, Advanced Perimeter Systems, Saab Group and Thales - to offer foolproof technological solutions to minimise threats. There is also a need to draw from the experience of international airports like Tel Aviv's Ben Gurion, dubbed the most secure airport in the world, and understand how aerocities around the world have been operationalised successfully.
The good news is that there now appears to be a sense of urgency regarding the matter, with the Federation of Hotel & Restaurant Associations of India (FHRAI), the umbrella body of the hospitality industry, recently taking up the matter with both the Aviation Ministry and the Prime Minister's Office. Vivek Nair, President, FHRAI, put things in perspective in his letter when he wrote, "Any prolonged and unwarranted uncertainty on receiving the final regulatory clearances can potentially undermine the viability of a landmark and prestigious project such as Aerocity."
But are the powers-that-be in New Delhi listening? As of now, there are few answers to the hospitality sector's security conundrum.
Looks like that soft bed on the edge of IGI will have to wait some more for the jetlagged traveller.
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• Security verification process ignored to clear Aerocity project in a rush.
• Business rivals could be responsible for stonewalling of Aerocity hospitality project.
• Private firms wary of bidding for similar projects in other cities fearing a repeat.
• The hotels at Aerocity together will add 5,400 hotel rooms, or about 45 per cent, to Delhi's limited inventory of 11,250 rooms in the branded segment.
• Aerocity will generate direct employment to more than 10,000 people directly and 30,000 indirectly.
• Investment in excess of Rs 12,000 crore is riding on the 16 planned hotels.
• Aerocity hotels are losing crores of rupees every day on account of delays. Lemon Tree Hotel alone loses Rs 10 crore every month.
• Close to 26 million passengers fly in and out of Delhi every year and the numbers are expected to rise dramatically in coming years leading to pressure on existing hotel inventories.
• There are 180,000 additional hotel rooms needed nationwide at a capital investment of over Rs 125,000 crore.
• Foreign tourist arrivals are to double from 6 million to 12 million within the Twelfth Plan Period (2012-17)
• The Aerocity project will add 3.4 lakh vehicles per day to the outer ring road by 2021. This figure will increase to 5 lakh by 2031.
Divergence and deadlock
In 2011, Delhi Police brought up the issue of security at Aerocity by claiming that the distance between the hotels and runway and the hangars was too close for comfort and could pose a threat to VVIPs like the Prime Minister and the President. In a letter to the Home Ministry and Ministry of Civil Aviation, they expressed their apprehensions about a security threat owing to the construction of high-rises and sought modifications in hotel structures.
In response, airport developer Delhi International Airport Ltd (DIAL) maintained that all mandatory clearances were in place from the very beginning of the project's development; that it received approvals from the Civil Aviation Ministry. It has also disputed police claims that the project constitutes a security risk while also pointing that the runway is actually at a far greater distance than what is being projected. The developer has also stated that all the structures in the area would have security components in place along with CCTV surveillance.
Amongst the clearances said to have been obtained by DIAL were approval of the master plan for the hospitality district from the Delhi Urban Art Commission, environmental clearance from the Ministry of Environment and Forests, and a no-objection certificate for height clearance from the Airports Authority of India for the Aerocity hotels. The matter has been reviewed by a joint committee on civil aviation security which includes Delhi Police, the Intelligence Bureau, SPG, BISF, NSG and representatives of the civil aviation and home ministries for the past two years.
Delhi Police says the permissions obtained by DIAL have little to do with their security threat perceptions and maintains that the hotels require vetting for security.
With the matter being thrown around like a yoyo between various departments without any solution in sight, the affected hotel chains have now sought intervention from the Prime Minister's Office.
SECURITY PERFECT: BEN GURION
No one can quite match the security standards adopted by the Israelis at Tel Aviv's Ben Gurion International Airport - dubbed the safest airport in the world. The airport is protected by near-invisible protective 'rings' of security thanks to homegrown technologies developed by the Israel Defense Forces (IDF). All areas of the airport including the perimeter - there are at least three barbed wire fences - monitored by cameras 24 x 7 and radar systems to keep a check on possible intrusions even during adverse weather conditions. Bolstering the perimeter intrusion detection system (PIDS) are closed circuit television monitors and a separate security control tower. In addition to physical fencing hardware, vibration and movement detectors have been installed, which provide warnings of possible perimeter breaches or wall scaling to security staff sitting at a central monitoring station. Every vehicle arriving at the airport is first made to pass through a preliminary checkpoint where it is subjected to a weight sensor, a trunk x-ray and an undercarriage scan. Such a robust approach has led to near invincible security at the airport. Further, security agents in plain clothes also pay close attention to various parts of the airport. This has minimised manpower costs and subtracted on possible security infringements. Incidentally, Ben Gurion Airport does not subcontract its security work to private operators.