Chief of Indian Hotels Company Limited (IHCL) Puneet Chhatwal is optimistic about the hospitality industry’s growth over the next few quarters. In an interview with BusinessLine, he said the Tata Group’s hospitality arm is looking at growth in both its traditional as well as new businesses. According to Chhattwal, the company is ‘firing on all cylinders’. Edited excerpts
What is IHCL’s goal for this fiscal?
The journey is simple: focus on responsible, profitable growth and the growth is 360 degrees. It is focused on multiple brands; development in traditional Taj, Vivanta and Seleqtions, and flight kitchen and non-traditional businesses including Ginger, food and beverage, and Ama and Qmin. We want to stay ahead with all our initiatives.
Basically, keeping the core while stimulating new businesses has been the mantra because new businesses are high profit and high margin businesses, while the traditional businesses are capital and labour intensive. So if the new businesses, although small today, fetch 20-30 per cent of our revenues in the next three to five years, at a margin of 40 per cent, they help uplift the entire margin of the company and that is the strategy. This growth will help us grow our profitability, margins and top line; basically firing on all cylinders... 100+ destinations. We are opening a Vivanta in Ahmedabad and a Taj in Lucknow. North East is a key priority. So we are looking at different destinations and price points.
What is the company’s investment strategy?
We will keep investing in our assets as we have done over the past five years in all the hold properties, and we will keep building new destinations like Lakshwadeep and Havelock by building infrastructure and destinations. We will have an asset-light and asset-heavy mix because we have owned and leased properties and palaces which require that kind of an arrangement. But we will balance it out with new businesses and management contracts.
We have signed 110 contracts in the last five years, of which 40 have opened. We will be opening a hotel a month and will accelerate almost 16-18 hotels thisand the next financial year. We will open 32 hotels over next two fiscals. At the same time, we will keep signing new hotels so our pipeline will stay at 60 hotels which represent almost 30 per cent of the total portfolio. It is very aggressive because growth is distributed over different brands. This doesn’t include Ama which is at 90 of which 51 are operational.
This quarter’s results were extremely good. Do you see it continuing?
Unless a black swan event or a geopolitial issue unfolds, my take is that we will keep improving. Q3 is always the best. It will be like that going forward, Q4 is second best, Q1 is the third best and Q2 is the last in row but it will be stronger than 2019-2020 with whatever we can see today. We are optimistic, not cautiously optimistic.
What are the challenges and opportunities?
There are two-three things that we have to focus on. We are still lagging the US market at 85 per cent of pre-Covid. We think it will go up to 100 per cent. Second, inbound tourism has not yet happened. It will happen in October- November or maybe in the last quarter of this year. That is anybody’s guess because airline tickets are very expensive. All this is domestic, which is 85 per cent of the total revenue for the hospitality sector, but that 15 per cent is missing. And lastly the one-off events– as of December, India will be the chair and host for the G20 for 1 year. A lot of government delegates will set up pavilions in India and they will travel all over the country. So all that will give a boost and most importantly, the the demand is more than the supply.
Last quarter you mentioned that the partnership with GIC has been extended. What is the progress on it?
We were lobbying the ECLGS (Emergency Credit Line Guarantee Scheme), which ends in March 2023, for an extension. The gap between the seller and buyer is narrowing and once it goes away, we will know how many people are in a position to service the debt, and what kind of assets are coming into the market. In my mind, by October or November, we will be seeing an update on what exactly is coming to the market.