Taj's China foray nearly scrapped

China was supposed to house a 200-room Taj hotel, and a Vivanta by Taj hotel with 300 rooms, in Kunming Expo Garden of Yunnan province

Indian Hotels Company's (IHCL) ambitious plans to have Taj properties in China and, thus, become the first from the country to do so, might not see the light of the day anytime soon.

No less than four properties, three under the Taj brand, were scheduled to come up in different parts of China but these projects have been either almost scrapped or face long delays.

The Mumbai-based company had signed two management contracts in 2008 to operate new luxury hotels — one was to come up in close proximity to the Temple of Heaven, a heritage property, first constructed in 1420. Anil Goel, executive director (finance) and chief financial officer, IHCL, said: “Those projects have not fructified into operating hotels. It reflects the challenges that we face in the market; we are on hold for reasons beyond our control...They had their own issues and for all practical purposes, those projects are no longer active." China is now the world's biggest luxury market.

It was supposed to house a 200-room Taj hotel, and a Vivanta By Taj hotel with 300 rooms, in the Kunming Expo Garden of Yunnan province.

In 2012, IHCL signed an agreement with Yunnan Tourism Company to construct, develop and operate these hotels.

Also, Hotel Taj Temple of Heaven in Beijing was to have around 50 rooms, while a 300-room property at Hainan island was designed as a premium holiday resort.

A stretched balance sheet and debt burden of Rs 4,800 crore has led the company to shift focus to other parts of the globe, beside going slower. It now intends to have hotels in the Gulf Cooperation Council (GCC) countries and in Southeast Asia. None of these international projects will be funded by the company but will be executed through management contracts.  

Rakesh Sarna, managing director, IHCL, said: “When we look at our development plan and where we desire to be, China is on the list but, right now, GCC and Southeast Asia are on top of that list. Projects get signed over time and some projects fall away, as like the Temple of Heaven-Beijing one. It is a must for us to be in Mumbai, Delhi and Dubai but I am not sure if it is a must for us to be in Beijing. It would be wonderful to be in Beijing but not at the risk of exposing our balance sheet. There is an opportunistic strategy in China.”

IHCL would add 10 new properties with 926 rooms this financial year, up from the eight properties it added last year having 1,423 rooms. Properties to be added this year would be a Taj Hotel in the Andamans, two properties each under Vivanta By Taj and Gateway, and four under its Ginger category.

Except for the 300-room luxury hotel project in Hainan, all other projects in China have been put on the backburner indefinitely by IHCL. "The Taj in Hainan is very active. As recently as three weeks ago, we met with the owners; they had come to Mumbai to review the plans. There was a slight setback here because an architect passed away and that has caused some issues with the design and development of the plans. But, that project is active,” said Sarna.