The leader of India's biggest hotel brand company didn't sit idly by waiting for the industry to recover before setting his own strategy in motion.
Puneet Chhatwal, managing director and CEO of Indian Hotels Company Limited, or IHCL, said in an interview that the Mumbai-based company's action during the pandemic months set it up for success much more quickly.
"Everyone understood that something had to be done and that the status quo was not an option," Chhatwal said. "In hindsight, I would say strategy is one thing and executing strategy is another. The speed of transformation happened because we did not just sit back."
Indian Hotels Company's brands include Ginger, Vivanta and flagship Taj Hotels Palaces Resorts Safaris, among others. In November, Chhatwal began his second five-year term leading the company, which will keep him in place through November 2027.
Before his second term is up, Chhatwal said his vision is to expand Indian Hotel Company's portfolio to 300 hotels by 2025. The company's website states that it has more than 250 hotels in more than 100 locations and 10 countries.
In this Q&A, Chhatwal discusses how his company formed a strategy to thrive during the recovery from the pandemic, plans to grow the Indian Hotels brand and more.
How have you gone about transforming your company?
In my view, it is also to do with transformation of India from a developing nation to emerging as the fifth largest economy in the world, and with brands that are well-positioned. We are definitely among the top global brands from India.
We defined a strategy and stuck to it. And what we did during COVID-19 was possibly a game-changer for us. COVID was tough on the hotel sector, being locked down for so long. However, it accelerated the speed of transformation. ... The situation demanded we act fast, and this ability to react to the ground situation made us fleet-footed.
In line with the ethos of the founders and organization, we did a lot for the community. We served about 6 million meals across 13 or 14 hospitals all over India, hosting 1.25 million bed nights for frontline workers. There was no retrenchment, and emoluments were disbursed in a timely manner. We launched new initiatives like home stays and home deliveries to keep the growth going. Definitely, we have emerged stronger. As a legacy company from the House of Tatas, IHCL demonstrated resilience, innovation and character.
How did your strategy change in the light of these developments?
In February 2018, we came up with Aspiration 2022, our five-year strategy. In early 2020 when COVID struck, we realized that we needed to rethink our strategy. We had had six consecutive quarters of margin expansion and profitability and with the onset of [the pandemic], the industry fell off the cliff.
We called the new short-term strategy "RESET 2020," laying the ground for how to deal with COVID. RESET stood for ‘Revenue initiatives, Excellence in operation, Spend optimization, Effective asset management and Thrift,’ or being prudent.
These five key initiatives helped us emerge stronger whenever the industry opened up. Once COVID had petered down by April this year, we launched Ahvaan 2025 [the company's route map for profitability].
We have had two quarters of consecutive growth, and both have been record-breaking, the best ever in the history of the company. There is nothing to suggest that going forward that will not be the case for the remaining two quarters.
How tough was this process of transformation on the company and its employees?
Along with [the company's] legacy of 120 years, if you add authenticity, clearly defined jobs and responsibilities and a clear strategy that does not change every single day, then majority of the people will follow.
If you are walking the talk, more and more people believe in you and join. In our case, people grew with the organization, and their personal goals and aspirations matched. At least 300 people have gotten promoted twice. Many at least once. The ability to be flexible, being mobile and accept change helped in building the organization and necessary manpower.
Also, it worked because we did the fundamentals right. Firstly, we reimagined the "brandscape," added new brands and businesses, and then we brought in the growth. And the growth was driven by high-margin businesses rather than having capital intensive or asset-heavy growth.
Why the focus on a debt-free company? How will that strategy augment growth and fund further expansion?
We will generate enough free cash flow to be able to fund [expansion]. If there is a compelling project that needs debt funding, it doesn’t mean it should reflect in the corporate books.
For example, if we want to build a resort in Lakshadweep, we go in for 50% equity and 50% debt on that project. Our goal is to continue to maintain a nil net-debt position.
What is your current brand portfolio?
We always had Vivanta, Ginger and Taj. SeleQtions and Amã Homestays are new. Amã Stays & Trails happened through our internal asset-management exercise, where we began as an aggregator of bungalows of Tata Consumer Products, Tata Coffee, Tata Power and our own properties. Then it moved on to third parties’ villas and bungalows.
SeleQtions was created as a platform that is a soft brand, where you can get properties that are good in their respective marketplace to benefit from our procurement synergy, cost effectiveness, processes, procedures, marketing and distribution.
We transformed both Vivanta and Ginger. We have put Gateway in the drawer at the moment. We will take it out or add another brand, but at the moment our plan is to consolidate and get critical mass for our existing brands.
What can we look for in terms of new brand launches and growth from Indian Hotels Company?
After omicron subsided, there has been no looking back. The sector is doing 20% higher than in 2019-20 as a base, and we are doing a bit higher because we have had strong, not like-for-like, growth in our new businesses and hotels. We are performing higher.
The Taj and Ginger brands are both well on course to reach the 100-hotel milestone, and Vivanta, the 50-hotel portfolio milestone. On reaching this critical mass for each of these brands, we can evaluate the potential for an additional brand that could be anything like a boutique or an all-inclusive brand.
But things are evolving so fast that we will wait and watch for the next six to eight months before we can embark on that journey.
There is strong [gross domestic product] growth, the upcoming G20 Summit, the World Music Festival and World Cup cricket, all of which will boost inbound tourism. Events are happening that will fuel growth.
On this solidity, if current trends of growth continue, we will be ready with possibilities.
What does the future hold? Will the focus be on continued asset-light management?
We will move forward marrying the legacy of 120 years with our new-age businesses while leveraging digital. That’s the way forward. We have communicated to the market that the new businesses will be high-margin businesses. In order to achieve that, [growth] has to be supported through digitalization.
We are focused on developing a balanced portfolio mix with 50% asset-heavy and 50% asset-light. We are looking at how we can leverage Ginger going forward, how we can exponentially grow Ginger because you can build [that brand] in every district headquarters of India, which translates to a potential of 1,000 hotels.
We would like to be present in all segments so we can service the aspiration of all levels, given that India is a heterogeneous country.