We will open a hotel per month and are on track to open 12 hotels by March 31: Indian Hotels CMD

Sometimes by cutting taxes, you create a catalyst for growth and your tax collection might end up being much higher than while levying higher taxes on businesses, says Puneet Chhatwal, MD & CEO, Indian Hotels. Excerpts from an interview with ETNOW.

How have you read into the GST cut for the sector to 18% from 28% earlier? Would it lead to lower pricing at the customer level and also lead to significantly higher demand?
The corrections made by the government are welcome changes for the tourism industry in general and especially for the hotel industry. So far, the hotel industry had to bear a very high tax rate of 28% for GST for rates above Rs 7,500. An equally important factor is the relief on the corporate tax rate and the culmination of both these are is a step in the right direction to promote tourism in the country. This in turn will be a very strong multiplicator of jobs and will be an important step in the right direction in building business in general and tourism in particular.

What about the reduction in rates for your company specifically? How much of a boost is the move to cut the e-Visa fee for foreign tourists visiting India?
For our company in general, it is very positive. It is positive for all companies and it is a very important relief as growth had really slowed down both on a global level as well as on the domestic front. This will be a very good step. Sometimes by cutting taxes, you create a catalyst for growth and your tax collection might end up being much higher than while levying higher taxes on businesses.

The domestic slowdown has prompted most sectors facing falling sales and profits to implement cost-cutting measures. How has the slowdown impacted occupancy levels for you? What are the cost-cutting measures you have put in place?
Before we embarked on the journey of Aspiration 2022 and announced it to the capital markets in February of last year, we said we will expand our margins by 800 bps -- from 17% EBITDA to 25% EBITDA and 50% of that was coming from cost optimisation. In a way, we have been doing a lot of these things for a period of almost 18 months and these have been evidenced in our results we had a very good Q1 one of the best but it was not really coming just because of the increase in top line it was also coming because of optimisation of our cost and of our overheads. We were on the right track and the optimisation and the tax structure will further boost our results on a profit after tax level.

You had also earmarked about Rs 4,000-crore investment over the next three years for acquiring properties in luxury upscale categories within India as well as in partnership with Singapore’s GIC. Walk us through the headway that you have made on this front. What have been some of the properties that you have identified?
We have identified a few projects that are now undergoing due diligence, I cannot mention which one these are but hopefully before the end of this calendar year, we would have at least one significant deal completed. We are not in a rush. We have three years for this Rs 4,000-crore platform. It is more important to do the right deal at the right time and the right contract for the right location then to rush into things. We believe that there will be enough opportunities coming on the market to acquire assets that we can reposition. We can use this platform to acquire these assets, so that, we gain both as a minority owner in both the asset as well as through management fees by managing the assets.

What are some of the strategic and tactical interventions that you have undertaken to increase market share? What is the current market share within the industry? We have talked about this frequently but can you once again reiterate those numbers?
We have taken a lot of initiatives to increase our market share by putting the right metrics in place, including specialised revenue management systems including renovation of our portfolios. We have upgraded 17 of our hotels to the Taj brand which resonates very well with the customer and the value proposition that the Taj brand has to offer.

The same thing on our loyalty programme with Taj inner circle and the improvements we have made therein including various brands that we have that has supported the Taj brand for several decades, like our club memberships on the chambers which was also recently re-launched on a global basis. A lot of these initiatives have helped us continuously gain our market share and almost 35% to 40% of our portfolio is outperforming the market by a significant margin.

Another 30% is in line with the market and on the rest, we are working so that it also becomes an outperformer to the rest of the market. That is very important when the top line is not growing at the level that we all want and expect to grow. The management is focussed on increasing it on a daily basis as we get into the most important second half of the financial year for our industry till 31st of March.

You intend to bring down the net debt from around Rs 1,975 crore to below Rs 1,000 crore. What is the timeline in place? What are some of the steps that you continue to work on to get there? Are you looking at selling any assets for the time being?
Selling non-core assets is a part of our strategy that we have communicated to the market. We will continue to do so with assets which are not strategic, which are not related to our core business. For example, the sale of some flats that we own is very important because when we bought them 40-50 years ago, giving accommodation as a part of salary package was something that was a norm in any industry and not only the hotel industry. The time has come to make that change. We will continue to do that but also redeploy capital by exiting ownership in tertiary markets like we did last year in Vishakhapatnam or in Trivandrum. Through our subsidiary or our affiliate companies like Oriental Hotels, we sold two properties and redeployed that capital into strategic markets . that provide us higher returns. In other markets, we let the local ownership help us provide management contracts and there we use our management capabilities to drive the performance in the company.

You are in talks with other Tata Group entities as well which includes Tata Power to convert their guest houses to homestays under the newly created brand which is Ama Trails & Stays. What is the strategy in place here?
It is definitely not on the model of Airbnb. It is our brand which we can use as an important step in the homestay segment and we are the first company to do so. We have already nine of these properties in operation, two more in Goa are getting into operation on 30th of September. We plan to add another 10 over the next three months with other and affiliate companies. The ambition is to get to a total of 100 before the end of the next financial year. The majority of these would come from within the Tata Group companies.

Are you sticking to the capex plan of 5% of the total group revenue which is around the Rs 8000 crore? What is the plan for room addition post the takeover of The Connaught as well in New Delhi?
We will be opening a hotel per month and we are very much on track to open 12 hotels by 31st of March. We have a couple of openings lined up although we have opened four already this year. But two more are awaiting an opening certificate. That takes it to six; another six to eight will follow before 31st of March. Also, already 14 new contracts have been signed in the first six months of this year.

Last year we had done 22 new contracts. So, far as managing our pipeline is concerned, we will add enough hotels to the pipeline and the more we add, the more are expected to open going forward. When it comes to capex, we have embarked on the journey of focussing more and more on the fee-based business.

The capex on new hotels has really been limited only to The Connaught in Delhi which we thought was a very strategic asset as it was in the capital city. Other than that, it is the renovations of Taj Man Singh which will happen over the next three years and the guidance we have given to the market is 4-5% of system wide revenue which is an industry norm for the normal capex per annum and that amounts to anything north of Rs 300 crore for us on an annual basis.

We will continue to invest in our portfolio to stay with the best in class brands and the best of the properties to be in line with our aspiration of being the most iconic and the most profitable hotel company of South Asia.