The Hindu Business Line : Tatas want apology from Orient Express Hotels

The trigger
OEH said it did not wish to be involved in an attempt to improve the performance of Taj’s non-Indian properties.
An association with Taj’s brands and properties will result in a reduction of OEH brands & erosion in its RevPar premiums.

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Mumbai, Dec. 20 Taj Hotels (Indian Hotels Company of Tata Group) has demanded an immediate apology from US-based Orient Express Hotels (OEH) for what it said was misinformation and libellous language contained in a recent letter by OEH President & CEO, Mr Paul White, turning town the Indian company’s request for alliance talks.

“Any responsible company would have engaged in a conversation with its single largest shareholder, which we are,” said a letter sent by Mr R.K. Krishnakumar, Vice-President, Indian Hotels, to Mr White late on Wednesday.

Mr White’s letter had said that that OEH did not wish to be involved in an attempt to improve the performance of Taj’s non-Indian properties; and that an association with Taj’s brands and properties would result in a reduction of OEH brands and erosion in its RevPar premiums.

The Indian company’s letter supplied figures to show that on financial parameters, it compared better against OEH. Taking data for North America, Taj Hotels had 583 rooms against OEH’s 597; its occupancy rate was 72 per cent against 62 per cent for OEH.

Room rate, EBITDA

OEH’s average room rate was “meaningfully below” those of Taj Hotels’ properties — at $302, against $383 for Taj. Its EBITDA margin, at 25.9 per cent, was also below that of Taj Hotels’ at 40.7 per cent, said Mr Kumar’s letter.

Taj Hotels had acquired a 10 per cent stake in OEH in September this year, increasing it to 11.5 per cent later only to have a serious and credible foundation for discussions with the OEH board, the letter said: “We acted in the mistaken belief that your Board recognised its fiduciary duties and would act in a responsible manner to begin a dialogue with us.”

Taj Hotels never sought to compromise the independence of OEH, said Mr Kumar, responding to Mr White’s claim that “Taj’s approach to branding, whereby longstanding individual hotel brands are replaced with the ‘Taj’ brand, is contrary to the OEH approach.” Several international properties bought by the Taj group have not been rebranded, said Mr Kumar.

‘Limiting structure’

The Board and management of OEH do not respect the most basic tenets of corporate governance, said Mr Kumar. “As an example, Taj Hotels and Dubai Holdings (which holds 9 per cent stake in OEH), the two largest public shareholders of OEH, have been unable to enter into any meaningful dialogue with the OEH Board.”

The OEH governance structure severely limits shareholder participation, his letter said. (OEH has class A and B shareholders who have different voting rights).

“Interestingly enough, a substantial number of class A shares continue to reach out to Taj Hotels through telephone calls, e-mails, and approaches for meetings. To date, Taj Hotels has honourably declined their advances,” said Mr Kumar’s letter.