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Last Updated : Feb 17, 2018 10:01 AM IST | Source: PTI

Taj Group scraps mono-brand plan; eyes 25% margin, to add 50% more capacity by 2022

The Taj Group, the hotels offering from the Tata Group, has decided to shelve the mono- brand plan launched during the Cyrus Mistry era, and instead decided to forge ahead with a multi-brands strategy under a new revival strategy

The Taj Group, the hotels offering from the Tata Group, has decided to shelve the mono- brand plan launched during the Cyrus Mistry era, and instead decided to forge ahead with a multi-brands strategy under a new revival strategy, which targets an 800 bps increase in margins to 25 percent by 2022.

The group-run by Indian Hotels Company will adopt an asset-light model to increase its inventory, for which it has set a target of expanding by almost 50 per cent at 24-25,000 rooms from the present 17,000 keys across 144 properties.

The asset light strategy, stated otherwise means, the company will be more into management of new properties and not own them, Puneet Chhatwal, managing director and chief executive of ICHL, said here today, adding over 60 per cent of the new additions will be in the management model only.

The Taj brand, along with its two sub-brands-Gateway Hotels which runs the mid-segment/leisure brand Taj by Vivanta and the low-cost/business brand Ginger, together have a little over 17,000 rooms now.

Of this the premium/luxury Taj brand has around 13,000 rooms and the Ginger holds the rest. Of the total 144 properties, 128 are domestic and 16 overseas including three in the US.

"Our objective is to be the most iconic and profitable hospitality company by 2022. This is the roadmap we have finalised today with a 35-member core team and investors.

"Under this we target to grow our margin by 8 percentage points to 25 per cent from 17 per cent now and also to expand our capacity buy almost 50 per cent," Chhatwal who completed just 100 days at the helm of South Asia's largest hotel chain told a select group of reporters here.

When asked why the flippancy on the branding strategy, he said "30 0f the 35 member team as well as the analysts are happy that we decided to go along with the trodden path of multiple brands to tap market segments.

"Also, there is much more margins in the leisure and business segments where it is around 25 percent than the luxury or heritages segment where it is a paltry 7-8 percent" he said, adding the capcity addtions won't need large capex.

Last August 2017, the Tata Group under the new chairman N Chandrasekaran had appointed Chhatwal, who was heading Duetsche Hospitality/Steinberger Hotels, replacing the incumbent Rakesh Sarna, who was appointed by the sacked chairman Cyrus Mistry.

Sarna was one of the high-profile recruitments from outside the Tata Group by Mistry and both of them had decided adopt a revival strategy under which they had planned to bring all the three brands under the operating brand of Taj.

Sarna was hired personally by Mistry in September 2014 replacing the long-serving head Raymond Bickson.

For many years, its finances were under strain with mounting losses and low occupancies, which began after the 2008 global financial crisis and also due to a breakneck overseas expansion and acquisitions, including the luxury American property Oriental Express.

Last week, the company had reported a 12 per cent rise in consolidated net at Rs 112.61 crore for the December quarter, driven by higher revenue that rose 6 per cent to Rs 1,217 crore.

Last year, it had added and upgraded over 1,300 rooms including the flagship Taj Mahal Palace in Mumbai. It also opened six hotels (443 keys) under Ginger across Mumbai, Gurgaon, Lucknow and Gujarat.

Chhatwal announced a comprehensive five-year business strategy targeted at improving EBIDTA margins by 800 bps to 25 percent, and said they will deepen guest experience, strengthen leadership and achieve transformative growth leading to greater profitability and market leadership in each of their relative market segments.

Articulating the plan, he said the company has outlined a crisp overview of the vision, created with an eye towards maximising stakeholder value over the next five years.

The plan aims to build on the century-old legacy of the group and further strengthen its position by operating best in class portfolio of brands in the country and select overseas destinations.

But he was quick to add that most of the expansion will take place in the leisure and business segments as adding "an Taj Mumbai like property is just not possible.

"See, India is a large market. Kashmir will be Kashmir and so will be the Northeast or Chickamagalore or Ernakulam or Lucknow. So, adding a luxury property or a heritage property is just not feasible due to host of issues," he explained.

"Our greatest opportunities reside at the very heart of our brand. Our strategy is three pronged: restructure, reengineer and reimagine our portfolio to achieve 8 percentage points EBIDTA margin growth.

"This will be driven by a deep commitment to service excellence as well as implementation of revenue and profit- driving initiatives. Integral to our strategy of reinforcing the multi-product, multi-segment brandscape is the customer. We shall aim to have a value proposition for each of our customers at different points in their lifecycle," he added.

The Taj Group operates 144 hotels globally across four continents, 11 countries and 72 locations. Incorporated by the founder of the Tata Group, Jamsetji Tata, it has opened its first hotel, the Taj Mahal Palace, in Bombay in 1903.
First Published on Feb 16, 2018 11:34 pm
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