Puneet Chhatwal: “The industry survived on domestic tourism; infra is a key catalyst

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Puneet Chhatwal: “The industry survived on domestic tourism; infra is a key catalyst

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Although the hospitality industry has been one of the worst affected by the pandemic, Indian Hotels Company Ltd (Taj Group) has continued with its expansion plan that it mapped out in 2017. After signing 100 hotels in the last five years and with 40 of them opened so far, IHCL has set even higher goals and stakes bigger, enthused by the development of infrastructure and the expected growth of tourism in the country. Puneet Chhatwal, MD and CEO, IHCL, told Sandeep Singh that it has pursued a multi-brand strategy and is looking to expand and grow profitably through cost optimization, asset monetization and strategic partnerships. Focused on revamping Ginger, expanding Taj Hotels & Resorts and Private Lodging, Chhatwal has also set his sights on two new segments, Hostel and All Inclusive, as he anticipates a surge in domestic and international mass tourism in India going forward. Edited excerpts:

While the industry suffered, you focused on expansion as well as cost optimization. What led to this and what is your plan?

Not that we started doing anything during the pandemic. We came up with the Aspiration 2023 strategy in 2017. It was very clear and had a two-year clean cycle — 2018 and 2019. Part of the plan was to grow the top line, grow margins by 800 bps, reduce costs and monetize. So we were well ahead in that spending journey and it was easier for us to shift gears.

As bad as Covid has been, it has also given the industry time to review its cost base, look at what is really needed, what the customer wants and restructure the way we work.

This industry is labor intensive and expensive, and on top of that you have a 120-year legacy, so there was a lot of cleaning involved. Also, because we were so Taj-centric, everything else was like a stepchild.

In the last 5 years we have signed more than 100 hotels. It took us 115 years to get to 120 hotels and it took 5 years to get to 240. We also added 90 places to stay.

This is also due to the multi-brand strategy – we are expanding some, renewing others and looking to enter new segments and concepts.

In the five years, we have also introduced 25 new destinations and now cover over 100 destinations in India. It will get deeper. Last year we opened 13 hotels. We’re looking to add more than 15 hotels a year, and if we add another 100 over the next five, we should easily be at 330-340.

From 2010 to 2017, our average margin was around 13-14 percent, and in our Ahvaan 2025, we gave guidance for an EBITDA margin of 33 percent — an increase of 2.5 times. We also stated that we will restructure our portfolio to achieve a 50-50 ratio of owned/leased and managed hotels. We are currently 54-46.

All of this keeps our people busy and engaged. At Tatas we don’t fire people. During the pandemic, employees received their salaries, shareholders also received dividends from reserves, and we also used all the time to get out of debt.

What kept you going during the pandemic?

There was this belief that this phase would pass and everything would be fine in a few months. So that was the belief and then we continued to adapt. We had partners doing more hotels with us and so we continued to sign.

However, if the closure had been for a longer period or if we had known it would remain closed, I highly doubt we would have done what we did. It is very demoralizing to see not a single living soul in the lobby of the Taj Mahal Palace, no one in the corridor, parking lot and not a single living soul in front of India Gate. It looked like a haunted place. So it’s been a bad two years, but we’ve had a very good three months (April-June) and we’ve got a long way to go.

What gives you the confidence to continue with aggressive expansion?

I think tourism, hospitality and aviation positioning can be a game changer. Globally, tourism is the best job multiplier and can meet the job requirements of the young population. Before the pandemic, more than 10 percent of global GDP and jobs were linked to the tourism sector, and almost 25 percent of new jobs created were from this sector. I think we have that opportunity too.

While international tourists did not come, the industry survived due to domestic tourism and this proved that we have the capabilities. India is actually a 12 month destination and we have not used it.

I think if the infrastructure improves the opportunity is huge and it’s great to see the government’s focus on infrastructure. Infrastructure is the catalyst for tourism, tourism is the catalyst for GDP, and GDP is the catalyst for all jobs. I personally think there is an opportunity and a multi-brand strategy would work.

I would say that as an industry we didn’t care as much about domestic tourism as we do today. While Covid has had its impact, the last two years have seen people driving long hours taking their families on holiday. He created a new segment. Now this has become very important. The development of road infrastructure, people’s desire to drive and digitization will be very beneficial for the industry in the next few years.

You are present in various segments, but where do you think the big opportunity lies?

We are currently focused on only four segments and may add one or two more over time. Taj has several brand extensions. The rest is pretty clean – in the high end we have the Vivanta; in value we have the reimagined ginger; and SeleQtions is a platform for hotels that have a clear identity and are strong brands in the cities they are located in, such as The Connaught and The Ambassador in Delhi.

We have always focused on very elite, rich heritage tourism. But when we start aiming for mass tourism – both domestic and international – it will change the game.

Going forward, I can envision doing two more brands that will make a lot of sense for us and are not present in a strong way in India. One is the “Hostel” (as it is called globally) which is for backpackers and those looking for cheap accommodation. The second is All inclusive, where you buy a plane ticket with a stay, food, drinks and everything is included in one price.

Given that our landscape in the Tata group is changing and the fact that we have three airlines (or maybe two in the future) — there is an opportunity to come up with something like this that is available in several European countries.

I think India should get all inclusive in another 1-2 years. I build the entire hypothesis on the government’s new infrastructure focus. With what I have heard, read or seen about the investment going towards infrastructure development including ports and roads, I think it will really help the growth of tourism in India. And then you can start mass tourism.

Speaking of mass tourism, do you want to upgrade Ginger?

We are building a 371 room Ginger property at Santacruz in Mumbai. A similar thing is coming in Bangalore. They will be transformational and will reposition the Ginger brand, so a complete revamp of Ginger is in the offing. This 371-room Ginger in Santacruz will act as a billboard.

Ginger currently has 55 operating hotels. Very soon it will be 100. Out of the package of 62 hotels we have signed up, almost 30 are Ginger.

In addition, we also do “Qminisation” of ginger. So all day dining in all Ginger hotels will be done by Qmin and every Ginger will have a Qmin.

With so many brands, how do you ensure there is no cannibalization?

As long as Vivanta and Ginger stay cookie cutter, we’ll be fine. Luxury for us is as clear as the Taj. Ama Stays and Trails is in the home stay segment and SeleQtions is a platform for well-established properties that have a clear identity. I’d say it used to be more of a concern than it is now.

Will private lodgings go for the mass market?

Homestay is a segment that will grow. But we have taken a conscious decision that whatever we do from the house of Taj Group should be in the premium segment and not the mainstream. It can be for the masses like Ginger is for the masses, but within that it has to be premium. Everything we do must never directly or indirectly dilute the image of the Taj.

We will strengthen in the resorts. We established in Goa, Kerala. We are strong in Rishikesh, Darjeeling. This financial year we would open Shillong and Tawang. We are also strong in the Andaman and Maldives Islands. We are going to Diu and hopefully going to Lakshadweep and Kevadia.



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