Indian Hotels aims to grow its portfolio to more than 700 hotels by 2030, shares rise 3%

Indian Hotels Company Ltd (IHCL) shares rose 3% on November 19 after the hospitality major unveiled its "Accelerate 2030" strategy.

"Under the plan, 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 over 700 hotels while building on its world-renowned service ethos," said IHCL in a press release.

Puneet Chhatwal, Managing Director and Chief Executive Officer, IHCL said, “IHCL has surpassed its guidance by achieving a portfolio of 350 hotels, with over 200 hotels in operation and delivered ten consecutive quarters of record financial performance. This strong performance, coupled with a robust balance sheet, positions us well to accelerate our growth momentum. Enabling this vision are long term structural tail winds for the sector including India’s forecasted GDP growth of over 6.5%, government’s continued focus on infrastructure spend, hotel demand outpacing supply and the rising affluence of the consumer base.”

He added, “IHCL remains steadfast in its commitment to realise India’s tourism potential with its vision of ‘Accelerate 2030’, of being the most valued, responsible and profitable hospitality eco-system in South Asia. IHCL will expand its brandscape with the launch of new brands, tapping the heterogenous market landscape and taking its portfolio to 700 hotels by 2030. Doubling its Consolidated revenue to Rs 15,000 crore, scaling new and re-imagined businesses to over 25% share of revenue and continue to generate industry-leading margins and return on investment, while maintaining its renowned service excellence.”

At 1:15 pm on November 19, IHCL's shares on BSE were trading 3% higher at Rs 759.95 apiece.

The hospitality chain's 2030 plan includes a portfolio of 500 operational hotels from 232 as of October 2024. Under its brands that are seeing a steady growth like Vivanta, Taj and SeleQtions, the company aims to sign and open 15 hotels per annum. Under the brands that are seeing accelerated growth like Gateway, Ginger, Tree of Life, IHCL looks to open 30 such hotels every year and target singings of 50 such hotels.

While there are grwoth drivers like long term demand tailwinds and limited supply resulting in
favorable demand supply balance, there is room for improvement in Average Room Rate (ARR).

ARR is a metric used to measure the value of how much revenue a given hotel can make for a paid rented room.

Current ARRs have to grow at a sustainable 7-10% for a new greenfield to be viable, IHCL said.

In FY08, ARRs had peaked with IHCL's ARR at $267 while industry wide ARR for five-star hotels stood at $190. However in FY24, IHCL's ARR stood at $185 and industry wide ARR was at $106.

In its presentation, IHCL also highlighted that for a luxury hotel room the current ARR stands at Rs 15,500 while the capital expenditure (capex) for a room of a green field project is Rs 3.5-4 crore.