Indian Hotels Co. Ltd MD and CEO Puneet Chhatwal speaks about the company’s expansion plans, competition, margins, and the need for a balanced portfolio in an interview. Edited excerpts:
We have been very blessed. Occupancies have been up, the rates have been up, and our revenue that we reported for the nine months, especially in Q3, went up significantly. So, year-to-date (YTD) we are looking at a double digit growth in revenue and almost a 27% increase in Ebitda.
We are also witnessing a very healthy growth in the upper upscale and luxury segment. 70% of our portfolio trades in that positioning which is really helping us to drive performance because any increase that comes as an incremental increase on top of the rates actually trickles straight to the bottomline.
Can you give us some projections on what the room addition could look like over the next 6-12 months and what would the capex plans be of the company?
We have added 22 contracts to our pipeline in the current financial year. We hope to continue with this trend and our ambition is to open a hotel every month commencing next financial year. Most of that will be on a management fee based model, it is not our own investment so which will help us balance our portfolio.
We are very confident that this growth will help us achieve, what we call our aspiration 2022, in increasing our margins by almost 50% coming from 17% Ebitda margin to 25% and growth in our portfolio is a very important pillar of this journey.
You said that you are 70% exposed to premium luxury hotels, but for the remaining 30%, is there now more severe competition coming from the likes of Oyo or Airbnb, are margins crunched over there?
Competition is always there and competition is healthy. However, we would like to believe that real hotel brands is different than the ones which you mentioned. So, we do see a big opportunity in that segment with our Ginger brand which we have completely revamped in the last 6 months; opened the first Ginger in the lean-luxury segment as we call it, in Panjim, Goa and 10 more will follow this year and see kind of a refurbishing over the next 12-18 months. I think that will revolutionize the positioning of this brand in this segment and lead a branding charge on the Indian subcontinent.
What is the positioning of Ginger and the non-super-luxury brands? Is it more business customers they cater to, are they that dependent on holiday customers in the first place?
I think over the last few decades, Indian Hotels has done quite well in creating several leisure destinations. So our portfolio is very well balanced in terms of having a significant presence in Goa, Kerala. We just opened a resort in Andaman. We are going to take over another property as we announced, Cidade de Goa as of April. We own almost the palaces market in Rajasthan. So I think our portfolio that way is quite balanced.
We need both, we need the business travellers and we need the leisure travellers. We witnessed very healthy growth in the leisure segment especially in December and we are hoping that we will benefit from that in the holidays post Holi and also during the Easter break in our leisure destinations.
You did mention that you are looking to increase margins from 17% to 25 % by 2022. Can you tell us how you plan to do that on the operational front, in the sense are you looking to cut costs and if yes by how much. Also, are you looking to turnaround or close any of your loss making properties?
There is not one single formula that works like this. So it is a little bit of a science in our ability to grow the margins.
However, as you rightly said, it is very important to focus on the fundamental business and one of the ways to do it is to gain your market share more and more. So, almost 40% of our portfolio is performing much higher than the market, and another 30% is kind of gaining market share.
Last week, 108 economists and statisticians hailing from some of India’s best academic institutions including The Indian Statistical Institute, Jadhavpur University, several Indian Institutes of Management, Jawaharlal Nehru University, and a few foreign universities marked their protest at the political interference they smelt in the government not releasing the unemployment data and in releasing a questionable back-series of the gross economic product (GDP) via the NITI Aayog.
Firstly, such a protest need not come only from economists. It should have been signed by citizens of every and any profession, since as tax payers we have a right to know the total output, and the pace at which the government is able to grow it. More important, companies and investors, both foreign and Indian, need to have good clean GDP, census, employment, urbanization, wages and other data to know where and how and how much to invest. Likewise, foreign exchange traders, importers and exporters all need reliable GDP data since a bunch of other numbers are measured as a percentage of the GDP, be it fiscal deficit, current account balance, savings, investment, currency with the public etc.
Even more interested in clean data should be the governments, both state and centre, since the ceiling on their ability to spend —the fiscal deficit is fixed as a percentage of the GDP. Design and implementation of everything from national highways, to railways to health programmes to employment schemes to movement of foodgrains require the government to have good census data. The Central Statistics Office also calculates the monthly inflation data, on which depends the monetary policy of the RBI, which in turn determines what a rupee can buy at home and visà-vis other currencies. Any doubt on the integrity and independence of the central statistical body can be extremely debilitating for the financial markets in particular and indeed for the entire economy. It appears that no one in the central or the state governments nor even among the opposition parties have appreciated the magnitude of the problem.
The time to take action is now. The report of the National Statistical Commission chaired by former RBI governor C. Rangarajan had in 2007 recommended the setting up of a National Statistics Commission (NSC) to oversee and upgrade the work of the CSO and the NSSO (National Statistical Survey Organisation).