Even as the hospitality industry was the hardest hit by the pandemic, Indian Hotels Company Limited (Taj Group) continued to chart its expansion plan in 2017. 100 hotels have signed up in the last five years and 40 of them have opened. As of now, IHCL has now set higher targets and is betting bigger, encouraged by the country’s infrastructural development and expected growth in tourism. IHCL MD and CEO Puneet Chatwal told Sandeep Singh that he is pursuing a multi-brand strategy and is looking to expand and grow profitably through cost optimization, asset monetization and strategic partnerships. Focusing on renovating Adak, expanding Taj Hotels & Resorts and Homestays, Chatwal is also eyeing two new segments, ‘Hostel’ and ‘All Inclusive’, as he hopes to tap into domestic and international mass tourism in India. Parts Edited:
When the industry was in pain, you went for expansion as well as cost optimization. What is the reason for that and what are your plans?
Not that 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 grow the top line, grow margins by 800 bps, cut costs and monetize. So, we were well ahead in that cost journey and it was easy for us to switch gears.
As bad as Covid has been, it has also given the industry time to review its cost base, look at what is really needed, what the customer wants and restructure the way we work.
This industry is labor intensive and expensive, and on top of that, you have a 120-year legacy, so a lot of cleaning was required. Also, since we were Taj-centric, everything else was like a stepchild.
In the last 5 years, we have signed more than 100 hotels. It took us 115 years to reach 120 hotels and 5 years to reach 240. We have added 90 homestays.
It was also due to the multi-brand strategy — we are expanding some, revising others and looking to enter new categories and concepts.
In five years, we have entered 25 new destinations and we now cover more than 100 destinations in India. It’s going to be deeper. Last year we opened 13 hotels. We want to add more than 15 hotels every year and if we add another 100 in the next five, we should easily be 330-340.
From 2010 to 2017, our average margin was around 13-14 per cent and in our Call 2025 we have guided for an EBITDA margin of 33 per cent – an increase of 2.5 times. We also said we will restructure our portfolio to achieve a 50-50 mix between owned/leased and managed hotels. Currently, we are at 54-46.
All these have kept our people busy and engaged. At Tatas, we don’t fire people. During the pandemic, employees received their salaries, shareholders also received dividends from reserves, and we used the entire period to become debt-free.
What kept you going during the pandemic?
The belief was that this phase would pass and everything would be fine within a few months. So, it was trust and then, we continued to adapt. We had partners who were doing more hotels with us and so we kept signing.
However, if the closure had been for a longer period of time or we had known it would be closed, I very much doubt, we would have done what we did. It is very disheartening to see not a soul in the lobby of the Taj Mahal Palace, nobody in the corridors, not a soul in the parking lot and not a soul at the Gateway of India. It looked like a haunted place. So, two years were bad, but we had a very good three months (April-June), and we have a long way to go.
What gives you the confidence to go with aggressive expansion?
I think the tourism, hospitality and aviation position could be a game changer. Globally, tourism is one of the best job generators and can meet the work needs of a young population. Pre-pandemic, more than 10 percent of global GDP and jobs were related to the tourism sector, and about 25 percent of new jobs were created from the sector. I think we have that opportunity too.
Although 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 12 month destination and we haven’t used it.
I think if the infrastructure improves, the opportunities are huge and it’s 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 will work.
I would say that as an industry we didn’t value domestic tourism as much as we do today. Despite the impact of Covid, the last two years have seen people driving for long hours, taking their families out on holidays. This created a new section. Now it has become very important. Improvement in road infrastructure, people’s interest in driving and digitalization are going to be very beneficial for the industry in the next few years.
You are present in different categories, but where do you think the biggest opportunity?
Right now, we are only focusing on four categories and we may add one or two more over time. Taj has several brand extensions. The rest is pretty clear—advanced, we have Vivant; In terms of value, we have the reimagined Ginger; And SeleQtions is a platform for hotels that have a clear identity and strong brand names in the cities they are located in, such as The Connaught and The Ambassador in Delhi.
We have always focused on very elite, rich, traditional 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 make a lot of sense for us and are not present in a strong way in India. One is the ‘hostel’ (as it is called globally) which caters to backpackers and those looking for cheap accommodation. The second is ‘All Inclusive’, under which you buy a flight ticket with accommodation, food, drinks and all included in one price.
Our landscape within the Tata group is changing and we have three airlines (or perhaps two going forward) – there is an opportunity to bring something similar to what is offered in several European countries.
I think India has to cover everything in another 1-2 years. I am building all hypotheses on the government’s new infrastructure focus. From what I have heard, read or seen about investment in infrastructure development including ports and roads, I think it will really help India’s tourism growth. And then you can start mass tourism.
Speaking of mass tourism, do you want to revisit Ada?
We are developing a 371-room Ginger property in Santacruz, Mumbai. A similar phenomenon is happening in Bangalore. They will be transformative and reposition the brand Ginger, and so Total Ginger is on its way to restructuring. This 371-room gingerbread in Santa Cruz will serve as a billboard.
As of now, Ginger has 55 hotels in operation. Soon, it will be 100. Out of the 62 hotels we have signed up in the pipeline, about 30 are Ginger.
Besides, we are also doing ‘cuminization’ of ginger. So all-day dining in all ginger hotels will be done by Qmin, and every ginger will have a Qmin.
With so many brands, how do you make sure there are no cannibals?
As long as Vivant and Ginger remain a cookie cutter, we’ll be fine. For us, luxury is as obvious as the Taj. Ama Stays and Trails is in the home stay segment and SeleQtions is a platform for well-established properties with a clear identity. I’d say it was more annoying then than it is now.
Homestay, will you go to mass market?
Homestay is a segment that will grow. However, we have taken a conscious decision that whatever we do from the Taj group home must be in the premium segment and not in the mass. It can be for masses like ginger mass but in that it should be premium. Whatever we do never tarnishes the image of the Taj directly or indirectly.
We will be strong in the resort. We are manufactured in Goa, Kerala. We are strong in Rishikesh, Darjeeling. In this financial year, we opened Shillong and Tawang. We are also strong in Andaman and Maldives. We are going to Diu and hopefully, we will go to Lakshadweep and Kevadia.