Puneet Chhatwal: “The industry has survived on domestic tourism; infra is a key enabler”

Even as the hospitality industry has been one of the hardest hit 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 over the of the past five years and with 40 of them open so far, IHCL has set itself even higher goals and is betting bigger, excited about the development of infrastructure and the expected growth of tourism in the country. Puneet Chhatwal, MD and CEO of IHCL told Sandeep Singh that it follows a multi-brand strategy and seeks to develop and grow profitably through cost optimization, asset monetization and strategic partnerships. . Focused on revamping Ginger, expanding Taj hotels and resorts, and homestays, Chhatwal has also set his sights on two new segments, “Hostel” and “All Inclusive,” as he expects to an increase in domestic and international mass tourism to India in the future. Edited excerpts:

When the industry was struggling, you opted for expansion as well as cost optimization. What led to this and what is your plan?

It’s not that we started doing something during the pandemic. We developed the Aspiration 2023 strategy in 2017. It was very clear and it took place over two years – 2018 and 2019. Part of the plan was to increase revenue, increase margins by 800 basis points , reduce costs and monetize. So we were way ahead of that cost journey and it was easier for us to shift gears.

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

This industry is labor intensive and cost intensive, and on top of that you have a 120 year legacy so it took a lot of cleaning up. Also because we were so focused on the Taj, everything else was like a son in law.

Over the past 5 years, we have signed over 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 host families.

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

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

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

All of this has kept 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 free ourselves from debt.

What kept you going during the pandemic?

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

However, if the closure had lasted longer or if we had known it would remain closed I am very doubtful we would have done what we did. It is very demoralizing to see no one in the lobby of the Taj Mahal Palace, no one in the hallway, the parking lot and not a soul at India Gate. It looked like a haunted place. So it’s been two bad years, but we’ve had a really good three months (April-June), and we still have a ways to go.

What gives you the confidence to undertake aggressive expansion?

I think the positioning of tourism, hospitality and aviation could be a game-changer. Overall, tourism is the best job multiplier and can meet the employment needs of a young population. Before the pandemic, more than 10% of global GDP and jobs were linked to the tourism sector, and nearly 25% of new jobs created came from this sector. I think we have that opportunity too.

While international tourists didn’t come, the industry survived on domestic tourism and it proved that we had possibilities. India is actually a 12 month destination and we didn’t use 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. Personally, I think there is an opportunity and a multi-brand strategy would work.

I would say that as an industry we don’t care as much about domestic tourism as we do today. As Covid has taken its toll, over the past two years we’ve seen people driving long hours, taking their families on vacation. He created a new segment. Now it has become very important. The development of road infrastructure, the willingness of people to drive and digitization are going to be very beneficial for the industry in the coming years.

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

At the moment we are only focusing on four segments and over time we might add one or two more. Taj has several brand extensions. The rest is fairly clean – at the top end we have Vivanta; in value, we have ginger reinvented; and SeleQtions is a platform for hotels that have a clear identity and are strong brands in the cities where they are located, such as The Connaught and The Ambassador in Delhi.

We have always remained focused on very elitist, rich and heritage tourism. But when we start turning to mass tourism – both domestic and international – it will be a game changer.

In the future, I can imagine doing two more brands, which will mean a lot to us and which are not very present in India. One is “Hostel” (as it is called around the world) which is aimed at backpackers and those looking for cheap accommodation. The second is ‘All inclusive’, under which you buy a plane ticket with accommodation, food, drinks and everything included in one price.

As our landscape within the Tata Group is changing and we have three airlines (or possibly two in the future) it is possible to offer something like what is offered in several European countries .

I think India must have all inclusive in 1-2 years. I base all assumptions on the government’s new emphasis on infrastructure. From what I have heard, read or seen about investments in infrastructure development including ports and roads, I believe this will really help in the growth of tourism in India. And that’s when you can start mass tourism.

Speaking of mass tourism, are you looking to give Ginger a makeover?

We are building a 371 bedroom Ginger property at Santacruz in Mumbai. A similar thing is happening in Bangalore. They will be transformational and reposition the Ginger brand, and so a total overhaul of Ginger is underway. This 371-room Ginger in Santacruz will act as a billboard.

To date, Ginger has 55 hotels in operation. Very soon it will be 100. Out of the pipeline of 62 hotels we have signed up, almost 30 are Ginger.

Additionally, we are also doing a “Qminization” of Ginger. So all-day dining at all Ginger hotels will be done by Qmin, and every Ginger will have a Qmin.

With so many brands, how are you going to ensure there is no cannibalization?

As long as Vivanta and Ginger stay cookie-cutter, you’ll be fine. Luxury for us is as clear as the Taj. Ama Stays and Trails is in the homestay segment and SeleQtions is a platform for well-established properties that have a clear identity. I would say it was more disturbing before than today.

As a host family, will you opt for the mass market?

Homestay accommodation is a segment that will grow. But, we have made the conscious decision that everything we do from the Taj Group home must be in the premium segment and not in the mass. It could be for the masses like ginger is for the masses, but in that setting it should be premium. Everything we do must never directly or indirectly dilute the image of the Taj.

We will become strong in the stations. We created in Goa, Kerala. We are strong in Rishikesh, Darjeeling. This exercise we would have opened Shillong and Tawang. We are also strong in the Andamans and the Maldives. We are going to Diu and hopefully we will go to Lakshadweep and Kevadia.

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