BIDDING DOCUMENT

Issued on: 06.11.2016

for the

Selection of agency for development and

operation of Resort at Orvakal 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

Resort at Orvakal

Contents of RFP

1 Terms of Reference (ToR) 3

2 Scope Data Sheets 8

1. ANNEXURE 16

1.1. Annexure-I: Property site/ facilities: Orvakal RESORT 16

1.1.1. capital expenditure 16

Feasibility Report for Operations & Maintenance of

Resort at Orvakal

1 Terms of Reference (ToR)

1.1 About the project

The proposed property is at Orvakal in Kurnool 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%

Feasibility Report for Operations & Maintenance of

Resort at Orvakal

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)

Srikakulam 4 11.51 9.5% 8 582 0.2%

Visakhapatnam 5 11.44 9.4% 2 69,483 29.2%

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

Feasibility Report for Operations & Maintenance of

Resort at Orvakal

• Following graph indicates growth of branded hotel rooms and increasing occupancy

ratio of same over 3 years.

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

Feasibility Report for Operations & Maintenance of

Resort at Orvakal

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

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

Feasibility Report for Operations & Maintenance of

Resort at Orvakal

1.4 Orvakal, Kurnool District

Orvakal is a village and a Mandal in Kurnool district in the state of Andhra Pradesh. The

village is home to the Orvakal Rock Garden, which are silica and quartz rock formations

amongst pools of water. The Kethavaram Rock paintings from the Paleolithic era, are located

along a stretch of the Orvakal Rock Formations.

The city is well connected to Kurnool and Nandyal through road. Kurnool Railway station is

the nearest railway station.

Kurnool

Feasibility Report for Operations & Maintenance of

Resort at Orvakal

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 Land basic value Not Applicable

2 Upset Price –Minimum Assured Annual Revenue Share

(Rs. Lakhs)

21.22

3 Percentage Share of Total Revenues 7%

4 Google Map Not Applicable

6 Survey no. Not Applicable

7 Village Orvakallu

8 District Kurnool

9 Survey map Not Applicable

10 Engineering survey Not Applicable

11 Master plan ( if any) Not Applicable

2.1.2 Connectivity

Distance of Airport Railway station Bus station

Orvakal 176 Km

Kadapa

30 Km

Kurnool

0 Km

Orvakal

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 Belum Caves 90 Km A naturally formed cave with the constant

flow of underground water with a length

of 3229 meters making the second largest

natural caves in the Indian Subcontinent.

The cave’s deepest point (Patalganga) is

at a depth of 120 ft

2 Konda Reddy

Buruju

30 Km Konda Reddy Buruju is a part of Kurnool

Fort and also the only part left out of the

magnificent fort. Konda Reddy Buruju

Feasibility Report for Operations & Maintenance of

Resort at Orvakal

was a sentinel and was used as a prison.

Chronicles has it that, a revolutionary

named Konda Reddy was imprisoned by

the Nawab of Kurnool when he tried to

oppose him.

3 Rollapadu Bird

Sanctuary

30 Km Sanctuary hosts the endangered species

called Great Indian Bustard,mainly found

in grassy lands. It also hosts black bucks,

wild boars, Jackals, Russels viper, black

cobra etc and migratory birds.

Feasibility Report for Operations & Maintenance of

Resort at Orvakal

2.2 Minimum Development Obligations

APTDC proposes to place its resort property at Orvakal, 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. 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 Orvakal

1 Existing number of

rooms 20

2 (i)

Number of

rooms/cottages to be

added-Phase 1

15

2 (ii)

Number of

rooms/cottages to be

added-Phase 2

15

3 APTDC will provide Existing operational property with 20 rooms and

restaurant.

4 Operator will be

required to do

Construct minimum 30 (15 in phase 1 and 15 in phase 2)

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

Feasibility Report for Operations & Maintenance of

Resort at Orvakal

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 625

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 year, 55% for 3rd 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. (Year 1) 35

Nos. (Year 2) 50

Room Tariff (starting) INR 2500

Feasibility Report for Operations & Maintenance of

Resort at Orvakal

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 400 per occupied room/tented rooms.

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 35% and

thereafter.

— Profitability on Food & Beverage and bar services: The profitability has been assumed to

be 45% and 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 18.7% for the investment of the operator even after

paying 7% 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.

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.

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

Feasibility Report for Operations & Maintenance of

Resort at Orvakal

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

a. 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.

b. Investigate, study, operate and maintain the Project Assets/Project Facility

in accordance with the provisions of this Agreement, Good Industry Practice

and Applicable Laws;

c. Obtain all Applicable Permits in conformity with the Applicable Laws and be

in compliance with thereof at all times during the Service Period;

d. 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;

e. 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;

f. Provide, to the APTDC Officials, reports on a regular basis during the

Operations Period in accordance with the provisions of this Agreement;

g. Appoint, supervise, monitor and control the activities of Contractors / Staff

or any other service provider under their respective Project Agreements as

may be necessary;

h. Develop, implement and administer a surveillance and safety program for

the Project/Project Facility and the users thereof and the personnel

Feasibility Report for Operations & Maintenance of

Resort at Orvakal

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;

i. 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;

j. 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;

k. 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;

l. Ensure that the Project Site remains free from all encroachments and take

all steps necessary to remove encroachments, if any;

m. 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;

n. 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.

o. 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

p. Provide access to the auditors and inspectors of APTDC whenever APTDC

chooses to conduct such audit or assessment.

q. 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.

r. The successful bidder may be further permitted to construct additional

rooms/facilities as may be required to make the property more attractive to

Feasibility Report for Operations & Maintenance of

Resort at Orvakal

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 Orvakal 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 Orvakal 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 Resort at Orvakal

1. ANNEXURE

1.1. ANNEXURE-I: PROPERTY SITE/ FACILITIES: ORVAKAL 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 15 15

No of rooms 20 Price (Lakh INR) 14.5 14.5

Total Expenses directly on rooms 60 Lakh INR Furnishings 3 3

Restaurant 25 Lakh INR Total 262.5 262.5

Other Plant & Machinery 15 Lakh INR

Total direct expenses on cottages 525

TOTAL CAPITAL EXPENDITURE 625

Feasibility Report for Operations & Maintenance of Resort at Orvakal