How Indian Hotels plans to spread its wings

In a departure from the past, when IHCL adopted the organic route for entering markets like London and New York, this time around the expansion will be acquisition-led.

Indian Hotels Company Ltd (IHCL) will soon embark on an international expansion in the second phase of the five-year strategy, its managing director and chief executive officer (MD and CEO) Puneet Chhatwal crafted within 100 days of taking up the top job in November 2017.

The 115-year-old hospitality arm of the Tata group is also working on a plan to unlock value in the high margins non-hotembers (club membership brand for the ultra high net worth individuals), Jiva (wellness brand), food and beverages (F&B), TAJsats (airline catering) and Ama Trails & Stays (homestay).

In a departure from the past, when IHCL adopted the organic route for entering markets like London and New York, this time around the expansion will be acquisition-led.

“In the second half of Aspiration 2022, if we want to go international, we can’t do it organically. We have to go for four to eight hotels,” Chhatwal said.

The company will prefer buying out a firm that has multiple assets in its fold as compared to buying just two to three hotels.

Buying such a firm will not only be more viable financially but will also help IHCL give a better toehold in a new market.

It will help build on the local capability, which is critical for overseas operations, particularly in non-English speaking countries, he added.

“Personally I feel, if the foundation is getting weak, you can’t build a sky-scraper.

"In 2002, IHCL was very strong and had cash to invest. We are on track to bringing back the confidence through consistent profitability,” said Chhatwal.

Even as IHCL remains sharply focused on India, the confidence to step up presence in markets outside India stems from the improved performance of the international business, which forms 15 per cent of IHCL’s operational inventory.

IHCL’s consolidated total income rose to Rs 4,595.38 crore in FY19 against Rs 4,165.38 crore a year ago.

Earlier this month, the Mumbai-headquartered firm stitched an agreement with GIC, Singapore’s sovereign wealth fund to create a Rs 4,000 crore platform that will acquire marquee assets in India and help IHCL monetise stake in wholly-owned assets, as part of the asset light strategy the company has been pursuing under Chhatwal’s leadership.

At the end of the fiscal that ended in March, IHCL had 41 per cent of the total hotel properties in its fold on management contracts.

“If we are successful with GIC in India, we will go outside, and it could be a partner in future,” said Chhatwal.

Meanwhile, the owner of Taj, Vivanta, Ginger and Seleqtion brands plans to boost the adjacent segments within the hotels business that will start unfolding in a bigger way.

For instance, over the next three months, IHCL plans to introduce three new concepts in the F&B segment.

These include opening an Italian restaurant in partnership with an Italian firm and a Indian dining concept.

Also, in a first ever for a five-star hotel chain, IHCL is looking to introduce live brewings of beer for its guests.

All the three F&B concepts will be introduced in a phased manner at select Taj branded hotels which are best known for fine dining restraunts that specialises in Indian, oriental and continental cuisines.

“Food is big in India,” said Chhatwal, pointing out that F&B in India accounts for as high as 47-50 per cent in company’s top line.

For TajSATS, the company’s airline catering services in which Taj controls 51 per cent, IHCL plans to diversify into non-airline segments.

The company’s wellness business, with 62 spas under the Jiva brand, is also set to get a boost.

With an annual membership of Rs 20 lakh, The Chambers boasts of over 2,000 ultra-high net worth individuals as its exclusive members.

Plans are afoot to introduce The Chambers in Taj James Court in London and extend it to more cities in India.

The company’s homestay business under the Ama Trails & Stays brand will also see an expansion from the current 11 properties to 25 by this fiscal.

“When I look back, one of the biggest turning points in the 19 months that I have been with the company was retaining Taj Mahal Delhi (Mansingh). It gave the teams a lot of self-pride and self-esteem,” Chhatwal said.

Rashesh Shah, analyst at ICICI Securities, while hailing the move, said, “The enhanced focus on the non-hotel segments and expansion in international business will help IHCL in driving up the margins.”

Photograph: Courtesy, Tata.com