 "Global foray became a drag on IHCL's financials")
High buyout costs, challenging global economic conditions, fierce competition from established marquee brands and the fear of losing share at home forced the Tata group’s Indian Hotels Company Ltd (IHCL) to scale down and relook at its international plans.
From recurring losses from its three properties in the US to aborted or delayed plans in China, the world’s biggest luxury market, and the inability to take Vivanta by Taj and Gateway brands global, IHCL has struggled to keep pace with other successful Tata group companies.
Led by the luxurious New York-located Pierre (also known as Taj Manhattan) IHCL’s US-based properties has collectively clocked a loss of Rs 510 crore in the past three years, according to information disclosed in its annual report. IHCL took the Pierre on long-term lease, with a minimum lease payment per year of $5 million (Rs 30 crore).
Earlier this year, the company decided to sell the Taj Boston for Rs 839 crore to service its ballooning debt. IHCL’s total net consolidated debt as of last financial year stood at Rs 4,717 crore, while its standalone debt was Rs 2,268 crore.
In 2014, the company sold another marquee property in Australia, Blue Sydney, for Rs 180 crore, for unspecified reasons. The same year, it pulled out of Taj Palace Marrakech in Morocco. Last year, the company abruptly exited the management contract entered to run the Taj Palace in Dubai.
Last financial year, the company clocked a profit of Rs 350 crore from its foreign entities, compared to a loss of Rs 728 crore reported in 2014-15. An outside-India turnover of Rs 1,640 crore formed 35 per cent of IHCL’s total turnover last year.
At present, IHCL operates 16 hotels outside India – in Sri Lanka, the United Kingdom, South Africa, the Maldives, Malaysia, Bhutan and Nepal, in addition to the three in the US. These properties are a mix of owned, leased and managed ones.
One of IHCL’s biggest ambitions during the time of its former managing director and chief executive Raymond Bickson was to capture the China market. As many as four agreements were signed between the company and Chinese entities for managing luxury properties there. However, nothing concrete has moved on the ground since.
Bickson, who had been hand-picked by Ratan Tata, ran the company for a little more than 10 years before being ousted two years ago. With a clear mandate to grow Taj outside the country, he strived to generate as much revenue outside India as the company did within India.
A Hawaiian national, Bickson also helped negotiate IHCL’s attempted takeover of Bermuda-based Belmond (formerly Orient Express Hotels), which recently ended in a loss-making effort.
IHCL found synergies with Belmond in the way it ran its properties, some of which were centuries old and, so, carried a heritage tag, just like Taj. IHCL had started operations more than 115 years ago, with its first property Taj Mahal Palace built at Mumbai’s Colaba, opposite the Gateway on India.
From recurring losses from its three properties in the US to aborted or delayed plans in China, the world’s biggest luxury market, and the inability to take Vivanta by Taj and Gateway brands global, IHCL has struggled to keep pace with other successful Tata group companies.
Led by the luxurious New York-located Pierre (also known as Taj Manhattan) IHCL’s US-based properties has collectively clocked a loss of Rs 510 crore in the past three years, according to information disclosed in its annual report. IHCL took the Pierre on long-term lease, with a minimum lease payment per year of $5 million (Rs 30 crore).
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Nearly $110 million (Rs 630 crore) was spent by IHCL on renovating the Pierre alone, which started operations in 2009, four years after the company took it on lease. By the time the Pierre came back on stream, the economic health of the world deteriorated with the fall of Lehman Brothers.
Earlier this year, the company decided to sell the Taj Boston for Rs 839 crore to service its ballooning debt. IHCL’s total net consolidated debt as of last financial year stood at Rs 4,717 crore, while its standalone debt was Rs 2,268 crore.
In 2014, the company sold another marquee property in Australia, Blue Sydney, for Rs 180 crore, for unspecified reasons. The same year, it pulled out of Taj Palace Marrakech in Morocco. Last year, the company abruptly exited the management contract entered to run the Taj Palace in Dubai.
Last financial year, the company clocked a profit of Rs 350 crore from its foreign entities, compared to a loss of Rs 728 crore reported in 2014-15. An outside-India turnover of Rs 1,640 crore formed 35 per cent of IHCL’s total turnover last year.
At present, IHCL operates 16 hotels outside India – in Sri Lanka, the United Kingdom, South Africa, the Maldives, Malaysia, Bhutan and Nepal, in addition to the three in the US. These properties are a mix of owned, leased and managed ones.
One of IHCL’s biggest ambitions during the time of its former managing director and chief executive Raymond Bickson was to capture the China market. As many as four agreements were signed between the company and Chinese entities for managing luxury properties there. However, nothing concrete has moved on the ground since.
Bickson, who had been hand-picked by Ratan Tata, ran the company for a little more than 10 years before being ousted two years ago. With a clear mandate to grow Taj outside the country, he strived to generate as much revenue outside India as the company did within India.
A Hawaiian national, Bickson also helped negotiate IHCL’s attempted takeover of Bermuda-based Belmond (formerly Orient Express Hotels), which recently ended in a loss-making effort.
IHCL found synergies with Belmond in the way it ran its properties, some of which were centuries old and, so, carried a heritage tag, just like Taj. IHCL had started operations more than 115 years ago, with its first property Taj Mahal Palace built at Mumbai’s Colaba, opposite the Gateway on India.