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chhatwal: Fundamental changes to continue driving growth for hospitality; room rates likely to appreciate further, says IHCL CEO Puneet Chhatwal

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Some ‘fundamental’ changes such as demand outpacing supply, the concept of ‘bleisure’ and Indians spending more and saving less, will continue driving the growth of the hospitality sector, and there is still room for appreciation in room rates, Puneet Chhatwal, MD and CEO of Tata Group backed Indian Hotels Company (IHCL) said in an interview to ET.

“People say that prices are high, but I have been telling people that you can’t expect us to offer a luxury Taj experience at upscale or midscale segment prices- the price of a Ginger or a Vivanta,” Puneet Chhatwal, MD and CEO of the Tata-owned Indian Hotels Company told ET. “As the Indian market matures, the guests also do not expect that. The revenue per available room will go up, but I also expect the room rates to go up. The average room rates throughout the year were not that high, but shot up only during peak demand times like Christmas and new year’s eve – Rs 14000-16000 is not very high for the luxury segment.”

Indian Hotels clocked a record profit of Rs 1,053 crore in financial year 2023, compared with a loss of Rs 265 crore in financial year 2022.

The hospitality chain’s revenue from operations was at Rs 5,810 crore in financial year 2023, up 90% from financial year 2022. The profit after tax numbers for the chain were higher than the profit after tax numbers of the three best financial years put together. The chain’s cumulative profit after tax for financial years 2006, 2007, and 2008 was Rs 974 crore.

Chhatwal said it is time to embark on the chain’s asset light model outside of India too.

“Every year, we will add a couple of hotels to the pipeline outside India. We are targeting growth in geographies close to the Indian subcontinent and selective growth in destinations such as Southeast Asia or Europe, the Middle East or locations with a very strong Indian diaspora,” he added.

He said the chain is ‘very well positioned’ given its growth, strong balance sheet, zero debt position and its free cash flow situation to consider inorganic growth opportunities.“If a great opportunity comes whether in India or abroad, we are in a good place to go for it. Our strategy is not necessarily to acquire unless it’s a very strategic asset. It should be futuristic, because it helps in building a destination. For instance in India, we did that with Goa and Kerala in the past,” he said.

“Now we are doing that with Lakshadweep. We are always looking for opportunities but they have to be sensible opportunities, and have to be a strategic fit for us,” he added.

In 2019, IHCL had announced a partnership with Singapore’s sovereign wealth fund GIC for an investment platform of Rs 4,000 crore to acquire fully operational hotels in the luxury, upper-upscale and upscale segments in India. That partnership was extended following the Covid-19 outbreak. Chhatwal said the chain would like to activate and operationalise this platform.

“It has suffered because of Covid. Now the expectations between buyer and seller have narrowed down significantly and very soon when the Emergency Credit Line Guarantee Scheme (ECLGS) is not applicable anymore, I think there will be some rationalisation in the market and some kind of consolidation. And if that is happening, then we are well positioned with that platform to take advantage of it,” he added.

He said as per the chain’s guidance, almost all existing hotels are recording sustainable, profitable growth. All old assets are profitable, and the new assets that have opened in the past twelve months are in the ramp up phase and majority of these are on the asset light mode.

“We have properties in 125 destinations. We are present in 31 states. Only three states in the North East and two union territories are left. This year we will open a hotel in Tawang in Arunachal Pradesh. By the end of this financial year, we should be in 132-135 destinations,” he said.

“We are building destinations. There are going to be two Taj resorts in Lakshadweep totalling 110 rooms, each on Suheli and Kadmat islands. There will be two new Vivanta and Ginger hotels in close proximity to the Statue of Unity in Ekta Nagar, Gujarat. We are adding a 100 room tower in Taj Ganges. We are going to completely revamp Taj Malabar in Kochi.”

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