IHCL has profitability and service excellence on its mind

IHCL has profitability and service excellence on its mind

By Vinita Bhatia

The Indian Hotels Company Ltd (IHCL) has outlined a development strategy to drive its inventory growth in line with its five-year programme, titled ‘Aspiration 2022’. Riding on its strong performance in Q3 2018, the hospitality chain has come up with a three-pronged strategy to reach EBITDA margins of 25% in the next five years (currently it is at 17%). These initiatives are broadly classified as three ‘R’s – Re-engineering (margins, technology and people), Re-structuring (scale, simplification and selling) and Re-imagining (service, brandscape and portfolio).

Elaborating on this, Puneet Chhatwal, the newly-appointed MD and CEO of IHCL, said, “We will employ this strategy to improve our margins. By undertaking these initiatives, I expect 3% to 4% margin improvement would come from revenue enhancement, while cost efficiency measures that we undertake will contribute another 3% to 5%. We also want to focus on improving RevPAR in the domestic market (which is 84% of the company’s business) and bring it to the 2007-08 levels, when rates were truly viable.”

Having reduced its debt levels to INR 3,560 crore, IHCL, which has $1.2 billion in revenue, has set its sights firmly on focusing on improving profitability. The ‘Aspiration 2022’ strategy, therefore, concentrates largely on increasing revenue by ensuring better margins while keeping a tight rein on costs.

Opting out of the mono-brand architecture that was announced by erstwhile MD and CEO Rakesh Sarna, IHCL has now decided to go for a multi-brand strategy and will scale up operations under three brands – Taj, Vivanta and Ginger. Currently, the hotel’s inventory comprises 16,992 keys of which 25% each are management contracts and holding company associations, while the remainder are group companies. This year, Chhatwal revealed that IHCL will adopt an asset-light strategy where it will engage more into management of new properties, rather than owning them. He added that approximately 60% of the new additions will be under the management model.

The last year was a busy one for IHCL where it added and upgraded over 1,300 rooms including to its flagship hotel Taj Mahal Palace. Renovations at other hotels including Taj Lands’ End, Mumbai, Taj Bengal Kolkata, Taj Exotica Resort & Spa, Goa and Taj Fort Aguada Resort & Spa, Goa were also completed.

Chhatwal stated, “For the third quarter, our company demonstrated a good performance through enhanced revenues and cost optimisation measures. During the year, we added inventory and upgraded several properties in line with our efforts to consolidate our positioning of being an iconic and profitable hospitality company.”

Giridhar Sanjeevi, CFO, IHCL said, “As a consequence of balance sheet management

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