Exclusive Interview: Puneet Chhatwal, MD & CEO, The Indian Hotels Company Limited (IHCL)
Chhatwal ambitious vision ensures that an iconic hospitality group is profitable too
What has the journey of re-structuring IHCL been like?
We have made significant progress on the key pillars of Aspiration 2022. Our re-imagined brandscape, with its unique experience and sustainable value proposition for each hotel brand, is resonating very well with our customers and partners. We have signed 50 new hotels in the last two years and this growth momentum has helped us reach a portfolio milestone of 200 hotels. IHCL has harnessed the diverse brandscape to drive growth through management contracts. Forty three per cent of our portfolio is now hotels on management contracts, as against 32% two years ago.
What have been your learnings and challenges?
I came from a mature market to a market that is at an inflection point. I was fortunate to use the learnings and best practices from my international exposure to identify the DNA of the organisation and reinforce the culture for success. This journey was built on a strong culture of inclusion, empowerment, collaboration and focus on execution. A significant mindset change was required across the organization to believe in what was possible. At times, the inherent competitive spirit within Indian culture did tend to become a hindrance to team spirit. But today, I am pleased to note that the entire organization is working as one to achieve our 'Aspirations'.
You have managed to make IHCL profitable without any staff attrition. Can you tell us about your HR strategy?
Our people are integral to the enviable brand equity of IHCL. The first thing we did was to include 40 of our senior leaders in creating the ambitious 5-year business strategy. This was supported by ‘culture meets’ that helped in fostering an environment of collaboration and teamwork. It has helped people to take accountability, and become highly engaged and invested in the company’s success. We are also future-proofing our talent to ensure they are ready for the growth that is coming from within the industry and IHCL’s aggressive pipeline.
In a growing company, there is an opportunity for all associates to not just grow internally through promotions and re-deployment, but also take up larger and more productive roles. We have collaborated with reputed international hospitality schools such as Les Roches and ESSEC. It is a step in the direction of making our employees future-ready.
What have been the points of evolution for the group?
The company has demonstrated a financial turnaround and delivered eight consecutive quarters of margin expansion in line with Aspiration 2022. The Profit After Tax, EBITDA and EBITDA margins for the first nine months of FY 2019/20 were the highest in a decade.
The re-imagined brandscape has enabled the company to transform from a hotel business to a hospitality eco-system. We have managed to reposition and unlock value from our existing brands as well as foray into adjacent businesses, such as homestays, plantation trails,microbreweries, etc. The foundation of this journey has been a reengineered culture, renewed value systems, focus on collaborative performance and an enabling organic structure.
We have achieved EBITDA margin expansion for eight consecutive quarters and 400bps since we announced Aspiration 2022. Significantly, we have reached a milestone of 200 hotels, with an inventory of over 25,000 rooms in over 100 locations. Fifty new hotels have been signed in the last two years and we have opened 12 hotels in 11 months, or over 1 hotel a month, in FY 2019-20, Ginger has reached a milestone of 50 hotels in operation, with 18 in the pipeline.
(From left to right) Deepika Rao, MD & CEO, Ginger; Giridhar Sanjeevi, Ex. VP & CFO; Prabhat Verma, Ex. VP – Operations, South India, International & Ancillary Businesses; Renu Basu, Sr. VP - Global Sales & Marketing; Puneet Chhatwal, MD & CEO, IHCL; Suma Venkatesh, Ex. VP - Real Estate & Development; Rohit Khosla, Ex. VP – Operations, North & West India; Sagar Dighe, CEO, TajSATS.
IHCL seems to be weighing heavily towards ‘pure management’ contracts, particularly for your top three brands—Taj, Vivanta and SeleQtions. How has this strategy panned out over the last few months?
Our development strategy is well-poised to take our portfolio to a balanced 50:50 between owned or leased vs managed portfolio. In the last two years, IHCL has signed 50 new hotels, of which over 75% of the hotels are management contracts. This has helped us leapfrog the management contract mix in our portfolio from 32% two years ago, to 43% today. Presently, the share of management fees stands at 5% of our topline, but we expect it to grow significantly. Given the nature of the high-flow through (~75%) in management contracts, such portfolio growth will result in significant margin expansion.
Given that leased properties in your portfolio are owned by someone else, what are the checks and balances IHCL has put in place to ensure that the interference in the running is minimum?
Hotel owners are our partners in business operations. Aligning priorities with the owners is critical for efficient operations and business performance. We have a great relationship with our owners and work closely with them. We believe in a culture of inclusion wherein is active engagement and communication with the owner. We truly believe that our values of 'Trust, Awareness and Joy' form the cornerstone of the relationship with our owner partners. When owners trust us as an operator, are aware of our strategies and experience joy through mutual growth. Some of our owners have signed multiple hotels with us, such as Shriji Arvind Singh Mewar of Udaipur and the GVK group.
What is your vision for Ginger?
Ginger has re-imagined the budget segment to lean luxe, a first of its kind in India, with focus on blending work and play, individual and collective, global and local. Today, 20% of the portfolio has been repositioned as lean luxe and commands a 26% premium on pricing. We reached a milestone of 50 operational Ginger hotels recently and have just announced plans to open a 371-room flagship Ginger in Santacruz, Mumbai, located between the international and domestic airports.
Our vision is to bring Ginger’s pioneering lifestyle-approach to the mid-scale hotel space to over 100 locations across India, spanning more than 9,000 keys, through a mix of managed and leased properties.
What sort of brand equity do the SeleQtions and amã properties add?
SeleQtions is a soft brand, a careful curation of famous and distinctive properties. These hotels have their own individual identity. amã Stays & Trails offers guests local immersive experiences in heritage and colonial bungalows. These brands offer IHCL a diversified portfolio so that, as a group, we can cater to different market segments and emerging customer needs around experiential travel.
Given the economic slowdown in India, are you apprehensive that it will, at some point, hit where it hurts —your earnings and profits?
It is the management’s responsibility to address the volatility in today’s world and navigate through challenges to deliver on all our promises, including profitability and margin expansion. We are a global company and there are several issues happening somewhere in the world, at some point of time. We have been addressing these concerns and have yet been profitable. We will continue to work hard in the future as well.
You have a vision of transforming IHCL into a hospitality group, which straddles several different formats. Could you tell us more?
Our iconic brand Taj continues to grow from strength to strength every year. Additionally, our endeavour is to take our other brands to new heights, not just in accommodation, but across our array of service offerings. Our objective is to maximise the potential of each brand, including those nested under the service retail brand expressions, which include The Chambers, Jiva Spa, niu&nau salons, Khazana and our F&B offerings.
F&B is at the core of the transformation that you are enabling. Can you offer us some details on the formats being experimented with?
The company is re-imagining its F&B offerings with new innovations and partnerships. IHCL has tied up with AB InBev, the world’s leading brewery, for an industry first on-site chain of microbreweries. We recently announced a partnership with globally acclaimed Italian restaurant chain, Paper Moon, and will open the first Paper Moon in India at Taj Fort Aguada Resort & Spa, Goa. We are also focused on scaling our F&B brands and are taking our iconic restaurant brands across the world. Shamiana opened at Taj Jumeirah Lakes Towers in Dubai. House of Ming will soon open at St James Court in London. Bombay Brasserie is going to open at Vivanta Heathrow in London, apart from having our presence in our London, Cape Town and Dubai hotels.
Interestingly, IHCL has stated that its room v/s F&B revenue is 45% v/s 40%. What are the reasons?
India has always delivered strong revenues in the F&B segment. IHCL has signature restaurants such as Golden Dragon, Wasabi, Karavalli, House of Ming, Thai Pavilion, Konkan Café, Michelin-starred Quilon, Bombay Brasserie, the Michelin restaurant in Campton Place, etc. These restaurants are iconic dining destinations and have their own following. Weddings is also a big business in India—banquet revenues add to the F&B kitty. Taj has hosted some of the most prestigious celebrity weddings. Our new concepts are expected to offer further fillip to our F&B revenues.
IHCL is renovating and reimagining The Chambers for a younger audience and expanding its properties in India and abroad.
How has The Chambers been reimagined to meet the demands of a business traveller today?
The Chambers—Taj’s exclusive business club—was re-imagined and relaunched with enhanced features and benefits, including global membership and additional exclusive services and experiences. The Chambers at Taj Mahal Hotel, New Delhi is being renovated extensively to become the flagship Chambers of IHCL. We have also announced a new Chambers at Taj West End, Bangalore and in London, opening soon in 2020.
IHCL already has 158 hotels and 18,845 keys operational, with 42 in the pipeline and another 6,178 keys. Do you consider this to be unwieldy?
The growth has been across brands and covers diverse segments. We outlined our growth plans and ambition to scale up to 25,000 rooms by 2022 in our five-year business strategy. We have put systems and resources in place to handle this growth.
Rambagh Palace, Jaipur is an integral part of IHCL's palace hotels portfolio.
Your graphs show us that the RevPAR performance of Chennai, Hyderabad and Bangalore is far bigger than Mumbai and Delhi. Can you tell us what is leading to growth in the southern markets?
The primary reason is that in each of the markets, we have been able to garner higher occupancies in hotels that were renovated last year. In Bangalore, we relaunched Vivanta MG road after an extensive renovation and upgraded the hotel to the Taj brand. The occupancies and RevPAR surged as a result. Similarly in Chennai, Taj Connemara opened after complete renovation and has been ramped up in occupancy significantly this year. Taj Fisherman’s Cove Resort & Spa and Taj Coromandel, too, have had a sizable increase in RevPAR after their renovation last year. In Hyderabad, we have a surge in RevPAR in Taj Krishna and Taj Deccan post their renovation last year.
What do you think are the biggest strengths of IHCL as a group?
IHCL‘s biggest strength has been and remains our people. Our 32,000+ committed and passionate workforce bring significant value to its stakeholders. The company’s legacy of 116 years, underpinned with TAJ and Tata's core values, has won hearts and minds of the people. The rich portfolio spanning iconic hotels that are landmarks and symbols of hospitality, the authentic palaces, idyllic resorts, safaris and lean luxe hotels are key differentiators for IHCL and have all been the recipients of many awards and accolades.
The lobby of The Taj Jumeirah Lakes Towers which spells class and sophistication.
What do you consider some inherent weaknesses and how do you expect to deal with those?
With any 100+ year old organization comes its own set of legacy challenges. However, we believe that a weakness is also an opportunity. It certainly took us time to align the entire organization to rally behind the stated objective of Aspiration 2022 and start delivering in a collaborative manner.
But as they say, a heavy tanker takes time to move, but when it starts rolling, it's difficult to stop it. Today, we are far more team oriented than individualistic and the results of working towards one goal is already visible in the eight consecutive quarters of margin expansion.
IHCL is known for it’s connect with the community, which is at the core of your hotels. How has that helped the group to create brand value and a strong foundation?
Inclusion and business responsibility are embedded in our DNA, and we are proud to carry forward the beacon of community service. We promote livelihood (by facilitating skills training), support our neighbourhoods (by retaining their heritage and maintaining tourist sites) and drive societal welfare (through the Taj Public Service Welfare Trust and our charity activities). We have also inculcated best practices like procuring local and sustainable materials. IHCL is recognised as a pioneer and leader in sustainability and societal responsibility and has been a recipient of multiple awards and accolades for our contribution to society and nation building.
(This story appears in the March, 2020 issue of Hotelier India. You can buy our tablet version from Magzter.com. To visit our Archives, click here.)