Indian Hotels Company plans 10 more Taj-branded luxury hotels by 2020

Indian Hotels Company (IHCL), which runs India’s largest home-grown hotel chain the Taj Group of Hotels, may harbour grand plans for its mid-market brand Ginger but the company has no intention of giving up what it knows and does best — luxury hotels across major metros and resort cities. 

IHCL Chief Executive Officer (CEO) Puneet Chhatwal said by 2020, the company would open 10 new luxury 

hotels in Ahmedabad, Chennai, Darjeeling, Gangtok, Goa, Alwar (Rajasthan), Tirupati, Wayanad (Kerala), and two locations in Dubai (The Palm and Jumeirah Lake Towers). Currently, IHCL operates 150 hotels, of which 71 are luxury and Taj-branded. In the last year and a half, it launched five other Taj-branded hotels in the Andamans, Rishikesh, Simla, Udaipur, and Agra.

The ten new hotels will add 1,600 keys to the company's inventory. Specifically, Chhatwal said, "The growth engines for Taj hinge on the firms’ brand equity, market positioning as well as a recent tie-up with private equity firm GIC, which is expected to power ongoing acquisitions over three years with a Rs 4,000-crore war chest."

Aspiration 2022, a project used to create a target for growth, aims to grow its entire portfolio by 50 per cent, which means adding 8,000 rooms to the current 17,000 by 2022. Of that upcoming inventory, 40 per cent, or 3,000 rooms, will come from the Taj brand. 

 "Part of the GIC fund may also be used to turn around and monetise existing assets," said Chhatwal. The new platform will drive all-out acquisitions, he added, and not target green field hotels. 

So far, ARR rates have climbed slowly by around a half per cent and real growth will come when those rates move at double digits for the Taj brand. However, growth is coming in the luxury segment. 

"We now have seen a 10 per cent revenue growth in food and beverages for the last financial year as well as room revenue driven largely by the Taj brand," Chhatwal said. Taj-branded hotels drive around 60 per cent of turnover.

The biggest challenge for the Taj brand is also its biggest strength. "There is a strong emotional connect that dates 

back to many decades and continuing to build on those expectations is what we strive to accomplish and achieve on an ongoing basis." 

For example, he said thousands of people have memories of the Sea Lounge at the Taj Mahal Palace, Colaba. Changing that can be a double-edged sword because destroying a nostalgic connection means risking customer loyalty.

While IHCL’s focus on luxury, bid to cut costs, and slash debt was started by Chhatwal's predecessor five years ago, the last year and a half saw the company benefit from maintaining that. International expansions from the US to Australia to the Orient have been curbed with overseas plays restricted to cities followed by in-bound tourists or Indian travellers, i.e. Dubai, London, and Saudi Arabia. Domestically, the focus has been on growing Ginger, combined with an asset-light focus on building on its core — luxury and five-star hotels in metros and destination cities.  IHCL has good reason to keep that going.

Marriott International, which runs nine luxury hotels under its own flag in India and another 14 through a tie-up with the ITC under its Luxury Collection, has at least nine more luxury hotels in the pipeline for the next three years, said Neeraj Govil, area vice-president (South Asia) for Marriott International. 

Future hotels include two JW Marriott hotels, two W hotels and, two new Ritz Carltons as well as another three undisclosed properties that will be opening. French multinational AccorHotels, Europe’s largest hotel group, sees similar potential for Indian luxury hotels. AccorHotels will bring its Raffles brand to India and open a luxury hotel in Udaipur on a 21-acre private island in the middle of the Udai Sagar Lake by next year and another Raffles Jaipur, which will open in 2022, says Lokesh Sabharwal, the company’s vice-president (development and special projects, South Asia). He said a 646-keys Fairmont Mumbai was under construction and it was also engaged in developing a Fairmont in Goa.  The hotel world is getting divided into global majors or specialists and anything in between, including aggregators, will eventually get squeezed, said an analyst who tracks the sector. 

What makes the Taj brand unique is its history of Eastern hospitality combined with a tradition within the Tata group that hearkens back to 1903 when group founder Jamsetji Tata started it and it was the first building in the city to use electricity to have Turkish baths and English butlers. 

“We are not a pure luxury hotel brand anymore, but luxury is at our core,” Chhatwal said.