Taj Hotels CEO on the Sweeping Strategy Behind Delivering Best-Ever Financials

With travellers increasingly gravitating towards brands that not only epitomize the essence of world-class luxury but also follow responsible business practices, Puneet Chhatwal, managing director and CEO of Indian Hotels Company Limited (IHCL), expects his company to be well poised to pave the future of hospitality.

The company recently announced its long-term three-pronged strategy to drive responsible profitable growth — Ahvaan 2025. Under the plan, the brand plans to re-engineer its margins, re-imagine its brands while restructuring its portfolio.

Indian Hotels Company Limited, the parent company of Taj Hotels Palaces Resorts Safaris, aims to build a portfolio of 300 hotels, and clock 33 percent earnings before interest, taxes, depreciation, and amortization (EBITDA) margin with 35 percent EBITDA share contribution from new businesses and management fees by 2025-26, said Chhatwal in an interaction with Skift.

With its rich history of pioneering destinations such as Goa, Rajasthan, Kerala, Bhutan, Nepal and more recently, the Andaman Islands and Northeast India, Indian Hotels Company has continued to develop key tourism circuits in the country.

The company has recently opened Vivanta Pakyong in the eastern Indian state of Sikkim and has plans to open a hotel in the famed Tawang valley in the northeastern Indian state of Arunanchal Pradesh. A Taj hotel in Kerala’s Wayanad in the Western Ghats, known for its wildlife and spice plantations, is also in the offing.

The following is an interview with Puneet Chhatwal, who has been CEO since 2017. The chat is edited for length and clarity.

Skift: You have dubbed the first quarter ending June 30, the best in the history of the brand during the recent earnings call. What could have led to that “historic” performance?

Puneet Chhatwal: The first quarter of 2022-23 was the best-ever first quarter performance of Indian Hotels Company Limited (IHCL). This performance has been boosted by a surge in demand across markets and segments, with both, occupancy and rates exceeding pre-Covid levels. All our brands displayed growth and key metro cities such as Mumbai, New Delhi and Bengaluru showcased revenue per available room (RevPAR) levels exceeding that of first quarter of 2019-20. This combined with continued cost monitoring measures has led to margin expansion across all companies.

Skift: You have attributed the success of the first quarter largely to the asset-light model adopted by the company. What is your opinion on the asset-light model as opposed to owned properties?

Chhatwal: As per our strategy, we are focused on an asset-light growth driven through management contracts or operating leases. IHCL’s asset-light model will continue to create a balance between owned/leased and managed properties with a 50:50 mix — currently this ratio is 54:46. We have signed the highest number of new hotels in India over two consecutive years 2020 and 2021 and bulk of these 60 hotels in the pipeline are management contracts.

Our current pipeline consists of a 26:74 ratio of owned and leased versus management contracts. Of this 26 percent, the Ginger brand will contribute a significant share, including the flagship Ginger Santacruz in Mumbai.

Skift: What is Indian Hotels Company’s big picture business strategy? Are you happy with the current portfolio of brands?

Chhatwal: Our current portfolio of brands is helping us to address diverse customer segments at multiple price points and we will continue to cater to the evolving market landscape. Under Ahvaan 2025, IHCL will continue to re-engineer margins with an emphasis on sustained revenue growth, cost optimization and operational excellence. This will further strengthen the balance sheet with focus on free cash flows and be a zero net debt company.

To increase the earnings before interest, taxes, depreciation, and amortization share contribution from new businesses, the company, with its re-imagined brandscape, will scale the Ginger-brand portfolio to 125 hotels. Ginger will be one of the most significant growth vehicles for us. Amã Stays & Trails will be a portfolio of 500 and Qmin — our culinary and home delivery platform — will expand to 25 plus cities. Taj, the iconic luxury brand, is slated to grow to 100 hotels across the globe, and Vivanta and SeleQtions will scale to a portfolio of 75 hotels.

Skift: How do you hold your own against competition? Do brands like yours enjoy a home advantage compared to other foreign hotel operators when it comes to operating and thriving in India?

Chhatwal: Incorporated by the founder of the Tata Group, Jamsetji Tata, the company opened its first hotel — The Taj Mahal Palace in Mumbai in 1903. With our vast footprint enveloping the Indian sub-continent, today, IHCL has a presence in over 100 locations across India and is present in 31 out of 36 states and union territories. The group has the highest number of hotels across the country.

We are the only hospitality brand operating authentic palaces as hotels, were the first to put India’s rich safari circuit on the map with our luxury Taj Safaris, and are the only Indian hospitality company with marquee hotels in international destinations such as the New York and London among other global markets.

Skift: During the earnings call, you spoke about the success of various marketing campaigns. How has your marketing strategy changed over the years? Do you see a greater digital focus and are you looking to push more of direct distribution rather than through OTAs (online travel agencies)?

Chhatwal: The pandemic brought in a hawk-eyed focus on evolving customer trends, which led us to launch over six new brands and 15 new campaigns over the course of the past few months, each tapping into previously unexplored avenues of revenue. While our focus on traditional media platforms continues, we are cognizant that customer expectations are changing more rapidly than ever before, given the advent of digital technologies, which are reshaping the way customers discover and interact with brands and with one another. It is therefore pertinent for brands to adapt to the digital era, and our spends on digital too have increased to keep step with evolving consumer trends.

We are constantly re-imagining our offerings to ensure maximum delight for our guests and stakeholders. As a part of this re-imagination, the Taj InnerCircle programme, one of the most rewarding and awarded loyalty programmes, has now migrated into the super app — Tata Neu, which offers enhanced customer benefits. In the first quarter itself, we added 1 million new members to our IHCL base, coming primarily from the larger Tata Neu base – a 50 percent growth in loyalty base.

While we will continue to strengthen our owned platforms to reach out to and engage with a larger audience, we shall also seek strategic partnerships and collaborate with relevant stakeholders to create a seamless customer experience.

Skift: Having recently launched your third Taj branded hotel — Taj Exotica Resort & Spa, The Palm in Dubai, are you looking to increase the brand’s presence in other international locations?

Chhatwal: Indian Hotels Company has continued to chart its journey of rapid expansion, with an industry-leading signing of 50 new hotels in addition to opening 27 new hotels over the last 24 months, adding over 5,500 keys to its portfolio. Both the international as well as the domestic market are important for us. Internationally, we aim to target the locations that have good customer crossover and where our brands have great visibility and acceptance. Cities with presence of a large Indian diaspora who are ambassadors of our brand would be key entry points for us to venture into newer geographies.