Indian Hotels Company Limited, part of the Tata Group and operating such hotel brands as Taj Hotels, has seen notable growth in the last half-decade.
In September, the company saw its market capitalization surpass the 1 trillion Indian rupee ($11.55 billion) barrier for the first time. It is the eighth business owned by Tata to reach that point, but the first hotel or hospitality company.
On Jan. 13, IHCL completed its acquisition of the majority stake of Indian hotel firm Tree of Life Resorts & Hotels. It acquired 7,989 equity shares for 22,100 Indian rupees ($255.40) a share for a total remuneration of approximately 176.6 million Indian rupees ($2.04 million).
In an exclusive interview, IHCL’s CEO and managing director Puneet Chhatwal reflected on the company’s notable growth and strategy going forward.
In Chhatwal's last interview with HNN in February 2023, he said the firm had evolved into a nimbler organization that was highly adaptable and ready for any challenge. That nimbleness has resulted in an acquisition strategy to consolidate and grow, he said.
Much has changed at IHCL, and the company is expanding at a furious pace. Is this expansion still in keeping with the planned strategy?
IHCL set a new growth benchmark with 85 signings and 40 openings in 2024, taking its portfolio to 360 hotels with an industry-leading pipeline of 123 hotels. This record growth performance is attributed to the continued expansion of the brandscape.
IHCL launched the reimagined Gateway, a full-service hotel offering in the upscale segment, acquired majority shareholding in Tree of Life brand holding company, adding a boutique leisure offering and entered into a brand license agreement for The Claridges, commencing with management of the brand’s landmark hotel in New Delhi, extending IHCL’s luxury portfolio.
In line with IHCL’s strategy “Accelerate 2030,” the growth continues to be focused on capital light, accounting for 75% of the year’s signings. IHCL will expand its brandscape, deliver industry-leading margins, double its consolidated revenue with a 20% return on capital employed and grow its portfolio to more than 700 hotels while building on its world-renowned service ethos.
Is IHCL’s expansion via management contracts, or are you also looking at investment in properties and portfolios?
This growth has been primarily through the capital-light route, with the share of the managed inventory increasing from 26% in full-year 2017 to 43% in full-year 2024. For brands with smaller inventory like Tree of Life and our midscale brand Ginger, the route to growth will primarily be through fully fitted operating leases and select management contracts.
In addition, IHCL will continue to pursue select investments in keeping with its legacy of pioneering new destinations such as development of two island resorts under the Taj brand in Lakshadweep and a Vivanta and Ginger hotel in Ekta Nagar, Gujarat.
Is the format of travel changing in India? Is there a movement toward experiential travel, or is travel simply travel?
Post-pandemic, the industry has witnessed a permanent shift in consumer behavior wherein travel has become a part of a household or individual’s consumption basket. This has resulted in more frequent getaways and celebration-of-life events as people live in the moment, build connections and experiences. This shift creates significant opportunities across various hospitality formats.
Extending its brandscape to include a boutique leisure offering, IHCL acquired majority shareholding in the operating company of Tree of Life, joining hands with Ambuja Neotia Group. The brand will scale to 100 properties by 2030. This acquisition aligns with IHCL’s pioneering ethos of creating destinations and building and scaling new hospitality formats. In line with our growth strategy, it also reflects our vision of expanding existing partnerships.
Currently, IHCL is in partnership with Ambuja for seven hotels and resorts featuring notable properties such as the Taj Chia Kutir and Taj Guras Kutir in Darjeeling and Gangtok.
Signing the management of The Claridges Hotel in Delhi was notable. How does that famed hotel fit into IHCL’s world?
IHCL has entered into a partnership to expand the iconic Claridges brand with the signing of a management contract for its landmark The Claridges, New Delhi commencing in April. This signing aligns with our growth strategy to enhance IHCL’s presence in key metro cities with iconic assets.
The Claridges, a distinguished landmark in the district of Lutyens’ Delhi, provides a unique opportunity to expand our footprint at the nation’s most prestigious address, while also paving the way for potential expansion of our brandscape by growing The Claridges brand.
The recent trend shows Indians traveling more in India, its tourism industry driven by domestic demand, not so much by inbound guests. Does that change the way in which investors in India are viewing opportunities?
Post-pandemic, foreign tourist arrivals have been recovering, increasing year on year and in 2024 having reached 10 million, a 100% recovery. In addition to buoyant demand in domestic tourism, the coming years are expected to see a growth in inbound visitations.
How do you see the road ahead? Is the Indian hospitality industry going to boom?
Demand is expected to continue to outpace supply, especially in the top 10 lodging markets in India.
With India remaining among the fastest growing economies, matched with the world-class transport infrastructure and large-scale convention centers, the travel and tourism sector is expected to be among the top contributors to Indian gross domestic product and employment for both direct and indirect industries.