 "Churn continues at Indian Hotels")
India's oldest hotel company, Indian Hotels Company (IHCL), is going through constant churn, leading to the termination of contracts and sale of property amid plans for expansion as laid out by its board under a changed reporting structure.
On Saturday, the Mumbai-based firm, India's largest, decided against renewing management contracts of two Gateway properties, Jodhpur and Ahmedabad, and will thus exit them in May next year when the contract expires.
The company refused to provide reasons for the decision, while stating that it would "honour its contractual obligation to its stakeholders." Both properties have a common owner.
This is the fifth such exit by IHCL in 16 months. In September, the company pulled out from managing the Taj Palace, Dubai, after operating it for 14 years. Last year, it decided to stop managing the Taj Palace, Marrakech in Morocco, only a year after it took charge of the property.
The same year, its offshore wholly-owned subsidiary, Samsara Properties, liquidated the Blue Sydney hotel to Hong Kong-based Hind Hotels & Properties Group for Australian $32 million (Rs 180 crore).
While the company is shuffling its portfolio trying to boost revenues, it is looking to turn around its financial operations. For the past three years, IHCL has been making losses. It posted a consolidated loss of Rs 378 crore last financial year as against a loss of Rs 554 crore in 2013-14.
However, its performance in the first half of this year improved, as the company made a profit of Rs 51 crore against a loss of Rs 15 crore reported in the same period last year. But, the cost of finance continued to be its biggest worry with gross consolidated debt standing at Rs 4,331 crore by the end of September.
IHCL's new managing director Rakesh Sarna, who joined last year, had set a turnaround target of two years. Under him, IHCL will not hesitate to exit loss-making ventures or stalled projects, Sarna had said in an earlier interaction.
Besides, the fight to retain Taj Mansingh in Delhi against the New Delhi Municipal Council, IHCL is also battling the troubled Sea Rock project in Bandra, Mumbai. The project has been stuck since IHCL bought the 440-room property six years ago for Rs 680 crore and razed the defunct seaside hotel to build a complex of convention centres, meeting halls and retail outlets.
The company has not launched a new property under Taj in India since 2010 even as rivals Starwood, Marriott and Hilton have opened a string of properties. IHCL's first new property under the brand will open in January, when it opens the Taj Santacruz property near the domestic terminal in Mumbai.
Further, the India business is expected to come under fire with Marriott and Starwood joining hands globally. This merger will result in the formation of the biggest hotel chain in India, posing a direct threat to local players.
Recently, IHCL changed the internal reporting structure assigning roles on the basis of geography rather than brands, a model followed by fast-moving consumer goods companies. This was done for greater simplicity and accountability.
The division was made on the basis of region straddling across categories - luxury, premium and up-scale. It thus has heads for each of these regions - north, south, east and west. International properties remain under the watch of Sarna.
