Taj Hotels, one of India’s biggest hotel chains, is aiming to expand its portfolio of properties by 36 percent to 300 in the next 3-5 years, a major chunk of which will come up under its asset-light strategy.
This expansion will add about 80 properties for the Tata Group-controlled Indian Hotels Company (IHCL) that currently has an inventory of 221 properties including 150 operational ones in India, 21 abroad and 50 in the pipeline.
Puneet Chhatwal, Managing Director and CEO, IHCL said, “If we could add 70 contracts during and pre-pandemic in three and half years, there is no reason why we can’t add another 80 in the next 3-5 years. So, our portfolio then becomes a portfolio of 300 hotels.” Chhatwal told inventors and analysts at the Investor Meet 2021 held a few days ago.
About 94 percent of IHCL’s properties in the pipeline are under the asset-light category, in which a company does not purchase land or the building but takes it on management contract and runs the hotel in exchange of management fees. Thus, the asset and its liabilities are on the books of the asset investor.
By the end of next 3-5 years IHCL will have 46 percent of its properties under management contract, 36 percent held by group companies and 18 percent under holding company, according to a presentation made by IHCL.
“The 6 percent (of the pipeline) represents very few properties, like the under construction Santacruz property which is not on the light model. We have a few of those exceptions and they are good to have because they are to build our brands for the future. They are the ones which are going to drive these brands and help in the repositioning of these brands going forward,” Chhatwal added.
From Rs 190 crore in management fees clocked in FY17, IHCL improved it to Rs 219 crore in FY20. In FY21 the fees collapsed to just Rs 89 crore due to the pandemic. However, IHCL has forecasted that fees would rise to Rs 350 crore in the next 3-5 years.
Ginger, the most affordable of the four main hotel brands of IHCL, could get the maximum chunk of the future pipeline of properties. From 78 properties presently IHCL targets to have 100-150 properties under the Ginger brand. Ginger has undergone a repositioning and is now categorised as ‘lean luxe’ rather than ‘budget’.