New MD’s ‘3R’ strategy to push up Indian Hotels profitability

Having completed 100 days after taking over as the MD & CEO of Indian Hotels (IHCL), Puneet Chhatwal is ready for a three-pronged strategy – Re-structure, Re-engineer and Re-image – to drive profitability through better margins for the hospitality company.

Through this strategy, Indian Hotels is seeking to improve EBITA margins from the current 17 per cent to 25 per cent by 2022.

“We want to improve our revenue per available room [revpar] in the domestic market and bring it on a par with 2007-08 levels when it was at its peak. There is a lot of work to be done and we want increase our EBITA margins by 8 per cent in the next five years, and this would be through a three-pronged strategy of Re-structuring, Re-engineering and Re-imaging the portfolio,” said Puneet Chhatwal, MD & CEO, Indian Hotels.

New strategy

Having reduced its debt levels to ₹3,560 crore, the 115-year-old company is now planning to further monetise its land parcels, properties and other non-core assets to drive its profit margins. Building alliances with group companies, selling property such as apartments owned by the company and engaging with more management contracts instead of buying hotels, are some of the ways in which the company would be improving its margins.

“Over the years, we have given about 100 apartments to our employees on rent and we could think of selling them. We could even think of forging internal and external partners with our retail group companies such as Starbucks and Croma to set up shop within our hotels and also have external partnerships with car rental companies. Besides we could also improve our IT and digital capabilities through group company TCS,” he said.

However, it is yet to monetise its properties such as the Sea Rock land in Mumbai, which is awaiting environmental clearance.

Adopting a ‘one IHCL and one Tata’ strategy, the 144-hotel chain would be taking up its room count from 16,000 to 24,000 by 2022 under brands such as Taj, Vivanta and Ginger. It would add 4-5 Taj Palaces in the next 18 months since the luxury segment comprises nearly 38 per cent of its portfolio.

“We have $1.2 billion revenues for the group and the highest growth is in the luxury and business segment. The budget brand of Ginger has yet to turn around though,” he added.

While it has upgraded some of its properties such as Vivanta and Taj in places like Gurgaon, the fate of its other brands – Gateway, President, Ambassador and Savoy – hangs in balance. It has decided to reverse its earlier decision of having a ‘monobrand’ strategy of a single brand under Taj to go back to a multi-brand presence across the chain.

“India is not one country and there cannot be a one size that fits all. We cannot have a Taj brand in smaller cities as India is not just about the metro markets such as Mumbai and Delhi. There have to be different segments and price points,” he said.

With occupancy levels at about 64 per cent, Indian Hotels claims to have a 20 per cent market share in the domestic hospitality industry.

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