Indian Hotels Company Limited (IHCL) is seeing a huge opportunity for the company in its new brands and new businesses and sees revenue contribution from them rising, in the medium term.
Revenues from the flagship Taj brand is seen dipping to 66 per cent from 70 per cent now. In addition, the profitability margin contribution from the new brands is much higher as less capital is required leading to a higher return on invested capital.
The Tata group-owned hospitality major is also eyeing more opportunities on foreign shores and is looking for synergies with the conglomerate’s airlines business, according to Managing Director and Chief Executive Officer Puneet Chhatwal. Recently, the management interacted with some global funds and institutional investors and gave a glimpse into the company’s future plans.
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The rise in domestic travel has pushed up room rates as occupancies are rising and Chhatwal said there was more room for the rates to rise further, up to 40-50 per cent of their corresponding global partner city.
Brands
Under the flagship Taj brand, the company has 95 hotels and five more are being added. In terms of operational portfolio, Taj’s contribution is over half while it also contributes about 77 per cent to the company’s operating profit.
Outside the Taj are brands such as Selections, Vivanta, Ginger, Taj SATS and two new businesses, food delivery service Qmin, and homestay brand Ama Trails and Stays. While Taj is overwhelmingly the driver in the company’s operating profit other brands and businesses are also contributing more and Indian Hotels plans to add to the non-Taj portfolio substantially in the coming years.
Overall, IHCL is aiming to have over 300 hotels in its portfolio by the end of FY25 from 257 now, with 33 per cent EBITDA margin and zero net debt. For the December quarter, the company reported an operating margin of 32.1 per cent.
International operations
With three major airline brands - Air India, Vistara, and Air Asia India - which will shortly be merged into one, Indian Hotels is also planning to create synergies here.
With the acquisition of Air India the company by default, has added more international destinations on its flight routes. Chhatwal said that the company will be “opportunistic in foreign locations,’ and “may derive synergy from the airlines business of Tata.”
Indian Hotels currently has operations in the US, Maldives, Dubai, Sri Lanka, and the UK - where it owns the impressive St James Court in London, where reportedly the negotiations were held between the Tatas and Boeing to purchase 470 aircraft for Air India.