Exclusive Interview with Ankur Gupta, Managing Partner, Brookfield Asset Management and Head of Real Estate, India
Gupta is gung-ho about the investment in The Leela Palaces Resorts and Hotels despite the downturn caused by the pandemic. He holds forth on what it would take to pivot the group, synonymous with Indian luxury, to the top of the hospitality game
How do see the Indian hospitality industry evolve?
The Indian hospitality sector is at a very nascent stage. The big brands such as The Oberoi Hotels or IHCL originally catered to high-end business travellers or foreign travellers. Beyond that, the hospitality segment expressed itself in a very limited manner. The Leela was the only brand that has tried to package Indian heritage and present it to a world traveller and today it is recognized as the World’s Best Brand. The Leela Palaces, Hotels and Resorts has been voted the World's Best Hotel Brand by Travel + Leisure, USA World's Best Awards Survey, 2020.
In the last few years, we have seen Hyatt, Marriott and other global brands establish themselves. But beyond that, there are very few organised operators, which is why we invested in an owner-operator-manager business in the country.
There is a huge opportunity as we see growth in urban areas. Not many countries can boast of this kind of growth we are witnessing in India. Urban growth fuels real estate and hospitality segments, which go hand-in-hand. People need to travel for business. As they get upwardly mobile, the need to travel for leisure arises. The heritage destinations in India and the many palaces in Rajasthan can offer Europe a run for their money. We have a living culture that is practiced even after 5000 years, the world traveller wants to experience.
Exterior Dusk, The Leela palace Udaipur
Why, then, is India lagging when it comes to attracting global tourists?
If I put my investor’s hat on, you can't take a two-year vision. You have to adopt a 10-year vision. Look at Bengaluru. Once, you could count the hotels on your fingertips. Now, it has expanded multiple times over. Gurgaon did not exist. Now, it is a bustling city, a metropolis. Cities such as Noida, Pune and Mumbai, too, have transformed completely. I believe, while there has been growth, the inflexion point has not been reached for the hospitality industry, a point that was witnessed by the commercial real sector in 2010-11. I would not agree that progress has not been made. There is a lot in the works and I believe the inflexion point is close at hand.
Take the entire travel system. For instance, airports have to be world-class for hospitality to gain. There is a huge co-relation. Fantastic airports have been built in the last decade in Mumbai, Bangalore, Hyderabad, and other cities. The government is working on building heritage, wildlife and other domestic tourism segments, besides putting urban cities on the tourism map.
What do you think the government can do to boost the tourism and hospitality sectors?
The government’s job is to build the nation. They are doing the right thing by building infrastructure and that would help our sector in the long term.
Unlike you, there are industry leaders who feel that the government can do so much more, for instance, offer subsidies…
Ask not what the country does for you; ask what you can do for it. As an industry, we should be offering to the government what we can do for the country.
Every industry thinks that the government should do more for them. The government has other more pressing concerns in the short term, than directly helping hotels, which it should do in the due course of time. We ask the government for an industry status or a longer loan period. But the government cannot decide the duration of loans; that is the bank credit department’s job.
We need to create an ecosystem where the government and industry can work in tandem. For instance, we did a great service during this pandemic by hosting doctors, health workers and creating quarantine facilities.
Monetary value is not the right way to look at things. Tourism contributes 10-12% to the employment figures, globally. So, let us put things in perspective and make the government take notice of why our sector needs an industry status and, hence, a support program during this pandemic.
Porte cochere, The Leela Palace Bengaluru
When do you see a revival of the hospitality and travel industries?
Any dislocation as caused by the magnitude of this pandemic cannot have a short recovery period. I believe there will be a recovery that will catapult the industries to levels better than what existed before.
Established business models have been challenged. However, people will want to travel and stay in hotels that are part of the organized sector, and this will help the industry tremendously. It should take us not more than two years to recover.
We are seeing a shift towards sustainability. Hotels will be far more sustainable in the future.
What has been the effect on your P&L?
Brookfield is fortunate to have a robust balance sheet and P&L. In the last three to four months, there has been massive disruption, with single-digit occupancies. The hospitality industry has never seen such a disruption before.
But 9/11 happened in Brookfield’s backyard, in the US, so it continues to stay in our organisation’s memory. People thought that they would never fly again. But the airlines opened with a new security protocol.
The question, in this case, is: What are the protocols and who is going to deliver them? Checking-in and out has to be seamless. That can happen only in the organised sector, this seamless transfer from the airport to a hotel. That can be achieved only when a hotel has a scale. It is difficult for those who do not operate on a larger canvas.
At The Leela has there been heightened technology integration?
Tech integration is not happening just because of the pandemic. A shift towards technology was in the works. The Leela needed a different approach while reopening. We needed to focus on the fact that our team runs hotels better! The hotels, as far as the luxury experience goes, were always up there with the world’s best.
The machinery needed to be oiled better. Hiring top talent in the industry has been a big focus for me. A lot of talent has joined the group; Anuraag Bhatnagar as COO and Anjali Mehra as VP – Marketing, among others. On the front-end, you see QR-coded services; you see contactless and seamless check-in and check-out.
You cannot take away the human element from hospitality. You need to establish a subtle balance between contactless and the feeling that you are being taken care of. We cannot do away with the level of service that people are used to, so the fine balance is important.
Boat Arrival, The Leela Palace Udaipur
Several changes must have been made at the hotel level due to the pandemic. What are these protocols and systems that will stay?
When you are the best in the world, you don’t have to change too many things; you have to improvise on them!
What is not going to change is the luxury quotient of our hotels. What will change is the way we deliver the experiences to customers. We need to have nimble operations and operate our P&Ls better. It is important to have a structure, but everything will not be centralized. It will be about establishing a matrix structure.
Under the new system being put in place, decision-making is happening on the spot and the accountability levels are high. So, there is more consistency in the way The Leela is run across all properties and departments, from technology-integration to F&B and marketing. The focus is on high-octane servicing. The ability to do this will differentiate and shape us.
We have continued to invest capital in this market. We bought 45 more BMWs to establish our luxury quotient. We needed to invest not just in our communications but also in our physical offerings. We got onboard The Leela Suraksha programme. Its association with Bureau Veritas is a stamp of quality and communicates heightened security.
Finally, everything is about growth. The communication we are sending out is that The Leela has the capital and the balance sheet support. There aren’t that many well-capitalised players in the market today with a strong bottom-line.
The element that remains constant is The Leela’s standing as a global brand. It remains part of the classic hotels' segment. What people may have once perceived as The Leela’s weakness, its lack of global outreach has been taken care of by Brookfield.
The Lobby, The Leela Palace New Delhi
Are you looking at taking Brand Leela international or do you plan to strengthen its Indian portfolio, with say 18-20 properties?
There are plans to take it international. The low-hanging fruit right now in India. We will also gain immensely by the right branding in the right markets such as South Asia and the UK. In these markets, there is instant recognition for the brand and not just among the Indian diaspora, but also among global travellers longing for Indian hospitality. There is no reason for India not to have an international hospitality brand.
Oriental came from Asia, Four Seasons came from Canada, Jumeirah is from the Middle East, and each carries its core principles of hospitality with them. I believe, the Indian wellness offerings would be well-received wherever we take them, from the US to Australia.
Under Brookfield’s ownership, we have the natural advantage of expanding The Leela to several destinations. We are the one of the largest real estate players globally, from Australia to LA, including London, New York, Toronto, NCR-Delhi and Mumbai. For us to expand the business in these destinations is a matter of the right economic choices.
Poolside, The Leela Palace New Delhi
What are your challenges of the Indian market?
Every market has its challenges. In the US, there is often way too much competition chasing the same transaction. Sometimes, you are dealing with more exuberant markets, which is also a challenge of a different magnitude.
In India, the challenges are unknown. In the US, you don't worry much about a property title. There is insurance to secure it. Many-a-times in India, you spend a disproportionate amount of time on titles, approvals, licenses, and such.
Large economies, like India, take time to figure things out. I am not being critical, but you waste a lot of time getting the basic stuff done, time that you could spend on development, asset management, growth and working the eco-system appropriately. These are challenges unique to a business in India but, sometimes, they are also opportunities to grow and do things differently.
Tell us about your plans for The Leela Hotels.
It has been a year since we have been managing hospitality assets in India, besides more than five years of investing in and operating other real estate commercial projects.
In India, Hotel Leelaventure, which we acquired, has four properties that we own, four that we manage, and three are in the pipeline, all under the brand name The Leela Palaces, Resorts and Hotels. We are also working on a massive redevelopment project and a very large club by India’s standards, near the international airport in Mumbai. Once developed, it will have 45-50 high-end serviced apartments and an exclusive by-invitation-only private club, which will be branded as The Leela.
The three hotels in the pipeline are Bangalore Bharatiya City, Gandhi Nagar Convention Centre, in partnership with the government, and the Hyderabad managed hotels.
Sea facing courtyard, The Leela Palace Chennai
Where do see future growth?
We don't set out targets that are not in the context of market opportunities. The opportunity when we acquired The Leela was to at least double the footprint, even as we maintained the brand standards.
The Leela is among the top brands in the world. We had recognised its brand value even before we received the Travel + Leisure award as the Best Hotel Brand in the World for 2020. The Leela epitomises Indian luxury and our vision is to strengthen the luxury brand.
It does not mean that we need to have The Leela hotels across the world. Brookfield is a global brand and by virtue of our association with it, Brand Leela will become a global brand. Our vision is to develop The Leela assets from 8 to 16 to 20 properties in the country. If we once thought that this would take us five years, it will take us lesser time now via JVs and acquisition of assets, particularly in the post-pandemic days, for growing The Leela business.
So, are you saying that growth will be speeded up right after the pandemic?
That is my expectation. The pandemic and its fallout may not be the only reason. There is a lot of dislocation in the capital markets. When a business is functioning through a cycle, a lot of inherent issues with weak balance sheets and capital structures get swept under the carpet. When there are issues of such magnitude, long-term capital is the need of the hour.
The Indian hospitality industry is fragmented and not very well capitalised. I see a very good opportunity for Brookfield and The Leela to be consolidators and capital providers. That is why I believe we can fast-track our growth plans in such a market.
The Leela manages hotels for four different owners. What are the challenges?
In any relationship, you feel the counterpart is important. You cannot blame the resources. We try and use the resources in the best way possible. We are not dropping the ball. The strength of the balance sheet support will be a key factor in the relationship.
Club Tower, The Leela Ambience Convention Hotel Delhi
Any plans for introducing diversity in The Leela hotels?
Diversity is important in all our businesses as it brings in balance. My agenda is to have more women in The Leela. For India, diversity would not just be of gender, but also of multicultural identities, regional representation…it would be about pluralism.
Will Brookfield only work with The Leela or are there plans to work with other brands in India?
The Leela is our business in India so that is our first playground. We need to put in efforts and capital behind The Leela business. Globally, we work with several brands such as Accor, Hilton and Marriott, to the extent that they are the providers of management services. But we are not opposed to investing in any business in the country.
Do you see any opportunities in the mid-market hospitality segment purely in terms of investment and returns?
Possibly when we start to focus on a particular space, the opportunities will flow. For now, we are purely focusing on the luxury segment. We have invested time in this vertical.
But I am not suggesting that we would not focus on other segments. We generally study a vertical, we are patient, and we invest in intellectual capital before the real capital flows in.
Luxury has a rather larger canvas. I don't think that luxury is only about the size of a room. It has a wider scope. It is about experiences and service quality. In today’s world, it is about safety and cleanliness, and the ability to manage a traveller’s every need.
Then there is the opportunity to get into other segments of luxury. For instance, creating luxury assets in wildlife sanctuaries; The Leela can help do this in the right destinations. We can expand to the hill stations, to religious destinations, in the wellness space… I see a huge opportunity for these expansions under The Leela banner, besides focusing on the core of the business, which encompasses all these.
The India service sector has grown rapidly. The top seven cities are growing at a massive pace. There is a need for business hotels. I believe there will be a void in the market. Some people do not stay in an organised hotel, instead of choosing to stay with friends and in guesthouses. However, the fear of coronavirus infection will persuade them to use the services of the organised hospitality sector. They are a captive market.
Exterior deck, The Leela Ambience Gurugram
On another note, what do you enjoy the most about your work?
Work has been exciting. I have enjoyed every bit of the journey. The Leela is putting together new management in place with very capable and strong leaders, and enabling them to grow the business alongside their personal goals is exciting.
Brookfield’s business was virtually non-existent in India 10 years ago. In 2015, we launched our real estate business in the country. Today, we are a dominant player in the market.
It has been fulfilling and satisfying. I don't see myself as a transactional person, as most asset managers are. I like to believe we run a good business; we have a sound plan that will work even in adversity.
As an investor and manager, you need to be contrarian when you are perceived and judged in the short term. There will be those who ask questions. Some have asked if this is the right price or time for acquiring The Leela? Should you buy more assets? Is it the right choice? That is when due diligence is required. We are constantly working at putting the pieces together with imperfect information, drawing up a business plan and ensuring it works.
What do you miss most about travelling on a personal level?
I miss travelling! Often, I was on a flight four times a week, meeting people, exchanging ideas and exploring different cultures. I also miss travelling with my family and I hope to make up for it.
What is it that you have learnt from the pandemic?
I have drawn my learning by observing people. How have they reacted to the pandemic, for instance? It is fascinating to see how people have organized their life around their homes, managed work from home, to see how they come forth to help others. All of us could have done more, but the fact that we have rallied around each other is amazing. We haven't lost that touch as human beings, a country or a civilization.
In my position, many-a-time I do feel the pressure building up. Every stressful situation, every unknown element that your team brings to you, you have to absorb the challenge and not just deal with it, but look for opportunity to solve problems and create long-term value. You have to be available to your team and provide vision of the long-term plan.