Growth outside India will be selective: Puneet Chhatwal, CEO Indian Hotels

Mumbai: Eighteen months into the top job at Indian Hotels, chief executive Puneet Chhatwal is opening a new hotel a month to reach the target of 200 domestic properties in two years as part of the Tata group’s recent India-focus strategy. With an eye on profit, Chhatwal has also rewired the organisational culture to focus on performance and accountability.
“Growth outside India will be selective. We have enough of work to do in the domestic market,” Chhatwal said in an interview with ET.

There is sharper focus on the organisational culture being more collaborative, inclusive, transparent and performance oriented, he said. “We have regular strategy and culture meets to ensure every plan is publicly known to all employees and there are no surprises. Culture has to support strategy to meet goals. Every single role is made accountable to meet the core strategy, keeping in mind values and trust the company stands for.” Company insiders said there was an urgency and energy around the place that were missing earlier. “Complacency is not tolerated,” a senior executive said, seeking anonymity.

Handpicked from the Steigenberger Hotel Group, Chhatwal is sweating existing assets to boost profitability, adding new properties, cleaning up the brand architecture and reducing debt. While revenue has increased 10% in the past year and a half, cost reduction measures have ensured corporate overheads remained the same. “I am clear, we have to be the most iconic and the most profitable brand,” said Chhatwal.

Under the previous CEO, Rakesh Sarna, Taj followed a mono brand strategy but Chhatwal has tweaked it to suit his market segmentation approach. So, while Taj has remained the premium luxury brand of Indian Hotels, Vivanta is now a full-service brand aimed at secondary markets and select primary markets. Budget hotel company Ginger has been rebranded as an aspirational brand.

“Taj has for the longest time enjoyed monopoly in the 5-star hospitality space by default rather than design as an early entrant. But there has been a change in the way customers have bought hospitality in recent years, thanks to an Oyo or MakeMyTrip where even cost-conscious CEOs and CXOs are opting for more competitive pricing,” said Raghu Viswanath, chairman of Vertebrand Management Consulting. “Taj (Indian Hotels), therefore, cannot bask in its old glory and, while preserving its overarching brand value, has to segment what each of its brands means to the customer to be relevant."

A rebranded Ginger will be key to future growth in the company’s new blueprint and a sale-and-lease-back deal is currently in process with 6-7 hotels on the block.

The company is aiming for revenue from the domestic market to exceed 80% of the total in the coming years. International business contributes more than 30% to revenue and is now getting profitable after being a drain on the balance sheet in the past. After a recent Rs 1,500-crore rights issue, the company’s debt has come down significantly. “We will not take debt in the short term any more. The debt-to-Ebitda ratio went down from 6.4 in the last quarter results to 2.32 as of December 2018, and we will work towards reducing the leverage further," he said.

The Taj brand needs more momentum and big Indian cities like Delhi, Mumbai and Bengaluru could take 6-10 Taj properties, even as rapidly growing cities like Bhubaneswar present an opportunity, Chhatwal said. Given that Chhatwal took over the hospitality chain when the debt levels were high, growth stagnant and some hotels in international locations losing money, how difficult was turning around Indian hotels?

“My predecessors have built a great platform, I have to change the orbit,” said Chhatwal.