The Turbo Charger

EVEN AFTER having finished the 2018-19 financial year with a profit after tax (PAT) of Rs 287 crore, the highest the company he heads has earned in 11 years and lifting its EBITDA up by 25 per cent, IHCL CEO and Managing Director Puneet Chhatwal isn’t taking his foot off the accelerator. 

Indeed, much has changed since the nattily turned out CEO’s earliest encounter with the Taj in his home city, Delhi. That was back in 1979-80, when the Taj on Mansingh Road was barely a couple of years old and Chhatwal, then a student, could walk unrecognised into the glittering hotel at night, wait for an hour to an hour and half for a Cona Coffee priced at Rs 4 (including refills), and then walk back home at 3 in the morning. 

It was unusual behaviour in a city that was then known to go to bed after the end of the Doordarshan evening bulletin at 9:30 p.m. It’s this ability to be different that Chhatwal has brought to his job, which he took up 20 months ago after a 28-year stint in Europe, where, after graduating from IHM Pusa and working as a manager at The Ashok, he went to pursue a master’s in management at the prestigious ESSEC Business School in Paris, currently ranked No. 4  in the world by FT. 

In the short time that he has been at the helm of the 116-year-old company, Chhatwal has infused a youthful dynamism into it, driving it relentlessly towards the goal of becoming South Asia’s “most iconic and most profitable” company, with an inventory of more than 25,000 rooms, by the year 2022. 

Expressed evocatively by the umbrella phrase Aspiration 2022, which encompasses brands such as Khazana and Jiva Spa, and also embraces the newest addition, Ama Trails &  Stays, Chhatwal’s vision is to take IHCL to new geographies both in India and overseas, balance the portfolio by dividing it into equal halves between owned and managed hotels, acquire iconic hotels such as Cidade de Goa, get into the business of mountain resorts with Taj Theog Resort & Spa in Shimla, grow the ‘lean luxe ‘ segment with the re-invented Ginger brand, and become the first branded player to enter the homestay segment. 

Under Chhatwal’s leadership, IHCL is all set to touch each point of the life cycle of travellers with a brand that fits their budget.  “Change,” he said in a video interview with BW Hotelier, “is the only constant in life.” That changewas palpable when at the start of the 2018-19 financial year Taj won the bid, after much legal wrangling, for the iconic Taj Mahal Hotel, New Delhi, and signed a 33-year licence contract for it with the New Delhi Municipal Council (NDMC) on April 1, 2019. 

For Chhatwal, it must have been a sweet homecoming. Taj Mansingh, which is how it is popularly known, is now all set for a makeover, starting with the Chambers, Machan and the lobby (Wasabi by Morimoto, its signature Japanese restaurant, has been shut). And it wouldn’t be shut during the renovation, which will take up two to three years. 

A look at IHCL’s activities over the past month gives an idea of the pace of this change inside the turbo-charged hospitality behemoth. 

IHCL has inked a Rs 4,000-crore (US$ 600-million), three-year deal with Singapore’s sovereign wealth fund, GIC, to create a three-year investment platform to acquire fully operational hotels, including those that are distressed or underperforming, in the key lodging markets. Kok Sun Lee, Chief Investment Officer, GIC Real Estate, exuded confidence. “We look forward to working closely with established partners such as IHCL to pursue attractive opportunities and capture the [Indian hospitality] sector’s growth potential.” 

In his video conversation with BW Hotelier, Chhatwal described the deal as “getting the best of both worlds”, for IHCL will not only be able to pursue acquisitions in an asset-light format, with its equity contribution pegged at 30 per cent and the balance 70 per cent coming from GIC, but also have management contracts in place with the acquired hotels to feed its fee-based business model. 

Elsewhere, IHCL has entered the nascent yet religiously significant Gorakhpur market in Uttar Pradesh after signing a management contract to run under the Vivanta brand a hotel being built by AD Estate Developers overlooking the river Rapti. On the other side of the state, IHCL has signed an agreement with Sincere Developers to manage under the Taj flag the Agra hotel owned by the realty firm. With this arrangement in place, IHCL will have two hotels in Agra, with the old Taj View migrating to the distinctive  SeleQtions brand. 

“We are well poised to open one hotel per month as a result of a healthy pipeline and the confirmed momentum of signing new contracts,” Chhatwal said, looking back at a financial year that saw IHCL signing 22 hotels in the current financial year -- adding an inventory of more than 3,200 rooms to its pipeline via 18 management contracts and four operating leases. 

Explaining why he’s aggressively pursuing the management contract route, Chhatwal said it was the “sweet spot” in the global hospitality industry landscape  -- and definitely a “hedge” against market volatility. “Our core business is managing hotels, not real estate,” he said, emphasising that by the year 2022, the IHCL portfolio will have a 50:50 split between owned and managed hotels. 

The reinvented Ginger brand, whose new look was unveiled in Panjim earlier in the year, is also in the news. In the holy city of Dwarka in Gujarat, IHCL has opened a new 98-room Ginger hotel off the Porbander-Dwarka national highway (NH-51). This is the 46th Ginger in the country and it reflects the brand’s new philosophy of planting its flag at key religious destinations across the country. 

This fast-paced expansion comes with a human resource challenge. Does IHCL have the bandwidth to ensure that the hotels it is signing up offer the service quality the world has come to expect from a Taj? “Any addition of strength does bring with it its own share of challenges,” Chhatwal said. “But it also provides an opportunity for a fast-growing company to grow its stars into bigger stars. People who are F&B managers or front-office managers today can aspire to get on to the fast track and become general managers, which is very difficult if you are not growing at the speed you need to grow.” Accelerated growth, Chhatwal said, enables companies to retain talent. 

Talking with Chhatwal is like catching up with a whirlwind, for each sentence of his comes loaded with a new revelation, which is to be expected from the CEO of a company that seems to be doing the equivalent of a Formula One car burning rubber on the race tracks. The email Q&A with Chhatwal that follows conveys a sense of the kind of turbocharger he is and why he’s the right man at the right place. Excerpts: 

BWH: Aspiration 2022 is the new buzz phrase at IHCL today. What are the main components of this vision? 

In line with Aspiration 2022, we aim to increase our room inventory to more than 25,000 keys in all categories and enhance our geographical footprint in India and growth markets overseas. We signed 22 hotels with an inventory of 3,200 rooms in the last fiscal.  Our pipeline has grown in this financial year and we expect the pace to increase in 201920 given our focus on development, our strong and multisegment brandscape, and our unique value proposition for owners and partners. Internationally, we aim to target the locations that have a huge customer crossover and where our brands have great visibility and acceptance. Cities with a large Indian diaspora, who are ambassadors of our brand, will be key entry points for us to venture into newer geographies. 

BWH: IHCL has just created a Rs 4,000-crore fund with GIC (Singapore’s sovereign wealth fund). How will it help IHCL to go asset light?

IHCL has a strategic partnership with GIC for a Rs 4,000-crore (US$600 million) investment platform over a period of three years. This platform will be used to acquire fully operational hotels in the Luxury, Upper Upscale and Upscale segments in India. It will look at potential hotel assets primarily located in the key lodging markets of the country. Our mandate is to acquire fully operational hotels, which will also include distressed or underperforming hotels that can be turned around banking on IHCL’s experience and capabilities. IHCL will be able to pursue acquisitions in an assetlight format with a 30 per cent equity contribution from IHCL and the balance 70 per cent from GIC. Each acquisition is intended to be in a separate SPV (special purpose vehicle) with its own funding. The hotels acquired will be managed by IHCL under its various brands and complement the company’s current growth aspirations via management contracts. 

BWH: Do Tier-II and Tier-III cities and towns have the kind of potential that market analysts believe they have? What will your growth strategy be in these cities and towns?

The idea is to invest in any market with a good business potential that also offers opportunities for scaling up to a healthy growth. As far as the domestic market goes, the focus will be on the top 15 states ranked by GDP, established destinations that are blessed with good access, and locations around renowned national wildlife parks. Vivanta is a good brand fit for such cities and towns. 

For Ginger, the focus will be on the top 80 cities, based on population, connectivity and commercial importance. And for leisure, we will continue to look at pioneering new destinations and locations that are part of a circuit or near important national wildlife parks. 

BWH: Are you planning a relaunch of the Ginger brand to make it younger and more vibrant? 

The Ginger brand journey is aligned to Aspiration 2022, which defines a brandscape that addresses diverse customer segments and price points. It will be an important growth vehicle for the company and we are looking at quickly scaling up the brand to a large number of hotels across India. It has been repositioned in the lean luxe segment.
The new identity of Ginger presents a co-existence of contrasts through re-imagined spaces blurring the lines of work and play, bringing about a fusion of global and local, and create experiences that are vibrant, quirky, intuitive and smart. Ginger underwent a major repositioning and we unveiled the brand’s new look in the lean luxe segment at Ginger Panjim in Goa. 

BWH: Going forward, what are your plans to offer affordable accommodation options to the domestic leisure traveller? How important is this market segment in the light of the remarkable growth story of OYO Rooms?

To be able to achieve sustainable growth and profitability, one needs to look at scaling and this will mean we need to keep an eye constantly on the market dynamics and adapt our branding approach to suit diverse, highgrowth and relevant market segments. The company has re-imagined a multi-product, multi-segment brandscape to have a value proposition for customers at different points in their life cycle. The new brandscape has Taj, SeleQtions, Vivanta and Ginger. The Company entered a new segment -- plantation trails and stays -- with the launch of Ama Trails & Stays, India’s first branded product in the homestay market. It signed a management contract with Tata Coffee for nine heritage bungalows in Coorg and Chikmagalur, and will add two of its own bungalows in Goa by mid-next year. Ginger and Ama Trails & Stays are affordable accommodation options within their segments.

BWH: A number of hotels are outsourcing their restaurants as part of a strategy to go asset light. Do you intend to do something similar, especially in small towns, as you expand rapidly? Conversely, what are your plans for your restaurants in your iconic properties?

 We will consider all business models. The food and beverage business has been one of our biggest strengths and we have produced the country’s most loved restaurants that have made it to some of the world’s best lists as well. Expressions is the new umbrella brand for services and retail, and it comprises Taj Khazana, Jiva Spa, Chambers, Ama Trails & Stays, Salons, and Food & Beverage outlets. We believe Expressions has tremendous potential for scale and synergy. We are also looking at new and innovative food and beverage concepts. These will be launched before the end of 2019. 

BWH: You have recently launched the SeleQtions brand. What is the rationale behind it? How do you see it growing in the years ahead? Which of your existing hotels will come under its umbrella?

The new brand, SeleQtions, is a collection of named and distinctive hotels. We believe the brand has great potential to grow. It was launched with 12 hotels across the country. The vision for the brand is to celebrate individuality by offering unique experiences through landmark hotels that have their own legacy and charm. The 12 hotels include those present in the seven key lodging markets of India: President, Mumbai; Ambassador, New Delhi; The Connaught, New Delhi; Blue Diamond, Pune; Cidade de Goa; Tajview, Agra; and Devi Ratn, Jaipur. The other hotels are Pratap Mahal Ajmer; Savoy, Ooty; Gateway Coonoor; Gateway Chikmagalur; and Gateway Varkala. 

BWH: The Taj website has seen a major revamp in the last couple of years. Has it helped you get business back from the OTAs? What is the percentage of your business that you get from the website, compared with what the OTAs give you? What is your target percentage? 

The company has individual brand websites  – Taj, SeleQtions, Vivanta and Ginger. We have revamped the websites to make them more content-rich and simple to navigate. The traffic from our websites has grown year on year and we will soon be reaching our double-digit targets. OTAs remain an important channel and partners.