Even as the hospitality industry was one of the hardest hit by the pandemic, Indian Hotels Company Limited (Taj Group) continued its expansion plan in 2017. Over the past five years 100 hotels have been signed up and 40 of them have opened. So far, IHCL has set even higher targets and is betting big on the buoyant by infrastructure development and expected growth of tourism in the country. IHCL MD and CEO Puneet Chhatwal said Sandeep Singh That it is following a multi-brand strategy and seeks to expand and grow profits through cost optimization, asset monetization and strategic partnerships. While revamping Ginger, focusing on expanding Taj Hotels & Resorts and Homestays, Chhatwal has also focused on two new segments, ‘Hostels’ and ‘All Inclusive’, as they expect to see domestic and international biggies in India. There will be an increase in scale tourism. Edited excerpt:
When the industry was in crisis, you went for cost optimization along with expansion. What is the reason behind this and what is your plan?
It’s not like we started doing anything during the pandemic. We came up with the Aspiration 2023 strategy in 2017. It was very clear and had a clean run of two years – 2018 and 2019. Part of the plan was to increase the top line, increase margins by 800 bps, reduce costs and monetise. So, we were well ahead in that cost journey and it was easy for us to change gears.
As bad as COVID was, it gave the industry time to review its cost base, what exactly is needed, what the customer wants and to restructure the way we do things.
This industry is laborious and cost intensive, and plus, you have a 120-year legacy, so a lot of cleanup was needed. Plus because we were so crown-centric, everything else was like a stepchild.
In the past 5 years, we have signed over 100 hotels. It took us 115 years to reach 120 hotels and 5 years to reach 240. We have also added 90 homestays.
It was also due to the multi-brand strategy — we are expanding some, innovating others and looking to enter new segments and concepts.
In five years, we entered 25 new destinations and now we cover over 100 destinations in India. It is getting deeper. Last year we opened 13 hotels. We want to add more than 15 hotels per year and if we add 100 more in the next five, we should easily be at 330-340.
From 2010 to 2017, our average margin was approximately 13-14 percent and in our call to 2025, we’ve guided for an EBITDA margin of 33 percent — a 2.5 times increase. We have also stated that we will restructure our portfolio to achieve a 50-50 mix between owned/leased and managed hotels. At the moment we are at 54-46.
All this has kept our people busy and engaged. At Tata, we do not fire people. During the pandemic, employees got their salaries, shareholders got dividends from reserves and we used the whole time to be debt free.
What were you doing during the pandemic?
There was a belief that this phase would pass and everything would be all right in a few months. So, it was faith and then, we kept adopting. We had partners who were doing more hotels with us and so we kept signing.
However, if the shutdown had been longer or we knew it was going to be closed, I highly doubt, we would have done what we did. Not to see a soul in the lobby of the Taj Mahal Palace, no one in the corridor, not a soul in the parking lot and at the Gateway of India is very demoralizing. It seemed like a haunted place. So, two years were bad, but we had very good three months (April-June), and we have a long way to go.
What gives you the confidence to go with the aggressive detail?
I think the state of tourism, hospitality and aviation can be a game changer. Globally, tourism is the best multiplier of jobs and can meet the job requirements of the young population. Before the pandemic, more than 10 percent of global GDP and jobs were related to the tourism sector, and about 25 percent of new jobs were from this sector. I think we have that opportunity too.
While international tourists are not coming, the industry has survived because of domestic tourism and it has proved that we have potential. India is actually a destination of 12 months and we have not used it.
I think if infrastructure improves, the opportunity is huge and it is great to see the government’s focus on infrastructure. Infrastructure is the catalyst for tourism, tourism is the catalyst for GDP, and GDP is the catalyst for all jobs. I personally think there is an opportunity and a multi-brand strategy would work.
I would say that as an industry we didn’t care about domestic tourism as much as we do today. While the impact of Covid was there, in the last two years we have seen people driving for long hours, taking their families out on holidays. This has created a new section. Now it has become very important. The development of road infrastructure, people’s willingness to drive and digitization are going to be very beneficial for the industry in the next few years.
You are present in different sectors, but where do you think the big opportunity lies?
At the moment, we are focusing on only four segments and over time we may add one or two more. There are many brand extensions of Taj. The rest is pretty neat – upscale, we have the Vivanta; In Price, we have Ginger re-imagined; And Salesforce is a platform for hotels that have a clear identity and strong brand names in cities like The Connaught and The Ambassador in Delhi.
We have always been focused on the very elite, rich, heritage tourism. But when we start going for mass tourism – both domestic and international – it will be a game changer.
Going forward, I can envision doing two more brands which will mean a lot to us and are not present in India in a strong way. One is the ‘hostel’ (as it is called globally) for backpackers and those looking for cheap accommodation. The second is ‘All Inclusive’, under which you buy a plane ticket with accommodation, food and everything included in one price.
Given that our landscape is changing within the Tata Group and the fact that we have three airlines (or maybe two going forward) – there is an opportunity to come up with what is offered in many European countries.
I think India has to involve everyone in the next 1-2 years. I am building all the hypotheses for the government to focus on the new infrastructure. From what I have heard, read or seen about investment in infrastructure development including ports and roads, I think it will really help in the development of tourism in India. And only then you can start mass tourism.
Are you looking to improve on Ginger when it comes to mass tourism?
We are building a 371 room ginger property in Santa Cruz, Mumbai. One such case is coming to the fore in Bangalore. They will be transformative and reinvent the brand Ginger, and, therefore, a total Ginger revamp is on the way. This 371-room Ginger in Santa Cruz will act as a billboard.
So far, 55 Ginger hotels are running. Very soon, it will be 100. Of the 62 hotels we signed on, about 30 are Ginger.
Apart from this, we are also doing ‘cuminization’ of ginger. So all the hotels in Ginger will be served by cummins for the day, and each ginger will have one cummin.
With so many brands, how do you make sure there is no cannibalism?
As long as Vivanta and Ginger remain cookie cutters, we’ll be fine. To us luxury is as clear as the crown. Ama Stays & Trails is in the home stay segment and Selections is a platform for well established properties that have a clear identity. I would say it was more disturbing before than now.
In the homestay, would you go to the mass market?
Homestays is one such segment that will grow. But, we have taken a conscious decision that whatever we do from the house of Taj Group, it should be in the premium segment and not in the mass. It may be to the masses as ginger is to the mass but within that, it must be premium. Whatever we do should not directly or indirectly undermine the image of the Taj.
In the resorts we will be stronger. We made in Goa, Kerala. We are strong in Rishikesh, Darjeeling. We would have opened Shillong and Tawang in this financial year. We are also strong in Andaman and Maldives. We are going to Diu and hopefully we are going to Lakshadweep and Kevadia.