Good Business is visible at leisure destinations: Puneet Chhatwal, MD & CEO

Puneet Chhatwal, MD & CEO, Indian Hotels Company Limited (IHCL), spoke about being rated as the strongest hotel brand in the world, occupancy levels, expansion plans, debt reduction plans and margins among others during an exclusive interview with Swati Khandelwal, Zee Business. Edited Excerpts:

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Q: Congratulations! ‘Taj’ brand has been rated as the strongest hotel brand in the world in the ‘Hotels 50 2021’ report by Brand Finance. Tell us something about it?

A: It is just not for us but it is a big thing even for India because one brand of India has been rated as the strongest brand in the world. I think, it has happened for the first time and in the hotel industry anyways it is the first first time. So, it is a moment of pride and it will motivate our people and they felt good about it. Because no one even thought that this could happen. Last year, we were ranked India’s number 1 across sectors by this Brand Finance Company and this year it became number 2. So just not hospitality, not just hotels and this journey of the last 2-3 years the Brand has been doing quite good and is justifying the name Taj because Taj means it should be at the head. So, it fits well at the head and on the top of the world and what could be better than it.

Q: The process of unlocking has started in many states and the rate of infection is also reducing. So, let us know about the kind of on-ground response you are seeing from people and what are the occupancy levels at your properties? Also are you hopeful that things will get fine from here?

A: We are hopeful because we are coming back from a dramatic low. Last year in April, May and June, the entire industry was almost completely shut down. So, it had come to a zero revenue level and if seen accordingly then we will see 200-300% growth on a quarter-on-quarter basis because the base is zero. But still, international travel is closed. Still, there are many restrictions in the meetings at these centres including a number of people. You are well aware that the revenue from rooms is only 50% on average and the remaining 50% comes from food & beverage, weddings, meetings and conferences. There are several restrictions on these events but things are improving gradually. However, the second wave struck and it was more devastating as if there were one lakh cases in the first wave than there were four lakh cases in the second wave. The strict lockdown was imposed in the first wave but in the second wave, we are back on our feet in just 4-6 weeks. Unfortunately, the only truth that if there is a terrorism attack – as it happened for the first time in form of 9/11 then huge devastations were caused and it took a lot of time to recover the business. Then there were bombings in London, Madrid and Nice, then the recovery rate is faster because human beings are quite adaptable. If we get some help in aligning the sector in which the people who are vaccinated and have been vaccinated twice can travel freely as has been announced in Europe then the recovery could come fairly quickly. Whatever recovery is being seen so far is mostly driven by tourism and leisure demand because people are bored sitting at the homes and they wish to move out and this a holiday time. So, our hill stations are full, a good recovery has started in Goa. So, a good business is visible at leisure destinations.

Q: What is the current occupancy level on an all-India basis on an average? Also, several schemes have been announced on room tariffs. So will it affect the margins and have you adopted a strategy to undercut and increase the volumes?

A: No. Such strategies are very short term in itself and it does not bring any benefit, however, in long terms it damages things. But at this moment, occupancies are quite low and there is a need for business for every Hotel Company and hotel due to which rate cuttings are done. But it is a short term phenomenon. We have seen that between November and February – a good period of four months – the rates were higher than the pre-COVID levels, especially at our properties in Goa and Rajasthan. We did very very well. Still, the same trend is visible to us in Rishikesh, Shimla, Rajasthan and Goa. So, the rates and occupancy levels are quite good. But when it comes to average across India than the average across India basis was at around 40% level and hopefully, as every month passes by it will increase by 5% to get above 50%. And once it touches the 50 levels then it will become a cash flow positive and chances for the same is good. Of course, there is one thing that no one knows that what will happen and will the third wave will strike or not, if yes, how devastating it will be. It is very difficult to say. But as usual, I am very optimistic. Last year April, May and June, our revenues in the industry average across India dropped to 15% of the pre-COVID levels. So, if we reach 35-40% then that will be more than double the increase within three months despite the second wave impact that continued from mid-April to the end of May. So, I think, further increase will be seen in July, August and September, at least this is what the trends are suggesting in terms of bookings, pick-up and revenue and this is quite positive.

Q: What are your expansion plans? The last time we spoke around March then you said that there is no stopping on that and you are continuing with the plans that you had. So, let us about the new properties that would be launched in FY22? Also, during a concall, you said you will partner with GIC and look forward to some stressed assets. So, do you have any M&A opportunities on the radar?

A: Let me start from the last one, where it was quite difficult with GIC because if the valuation of the existing opportunities is done in a complete lockdown period then the gap between the buyer and seller increases a lot and finally that gap has narrowed a lot and valuations have turned fair, so, we will be looking together with GIC towards the opportunities that will come on the way in next 6 to 8 months because people were also benefitted a bit due to the moratorium. Secondly, as far as our growth strategy is concerned then our growth strategy is also not only on a number of hotels but it has also been on the number of brands and establishing new brands not just for hotels but in other businesses such as we started the food delivery business with Qmin and Home Stay Business with Ama and Group of Businesses with 7Rivers. So, they all will continue in full steam ahead. An important aspect in this in which may have not been able to understand because our past has been owner-operator but now we are pursuing a new strategy from the last three years is Asset Lite Strategy in which we are offering our management services. We do not employ our capital in this and that helps us to grow our brands and the number of destinations. Today, when we talk about India then we became the strongest with over 150 hotels in operation and another 50 in the pipeline. So, we have a portfolio of 200 hotels in India, itself, plus another 22 outside of India. International destinations have thankfully for us have got a good start and they are a bit ahead of India. Destinations like New York, San Francisco and London are opening gradually. Dubai was very strong even in the last 7-8 months and the Maldives have also been quite strong. But now Sri Lanka is also opening gradually, so, I think it will be good.

Q: What are your debt reduction plans and you also had a strategy for the purpose but disruptions were caused due to the COVID? So, what are the margins that you are expecting and what are the debt reduction plans that you have tweaked or reworked amid the current scenario? 

A: At this point, I can’t say much because there is nothing concrete to say. But the management’s focus -for the last 3.50 years since the Aspirations 2022 or reset strategy was announced – has not changed yet. We would like that our debt level, whatever means are available with us, should return to the pre-COVID levels and our strategy of margin expansion will continue because the number of brands and businesses that are being added is high margin businesses. So as demand returns and high margin business starts running, automatically EBITDA margin expansion should take place and I think, it will make us a more resilient company where volatility will reduce and it is a journey that was started and will not end in three or six months but it takes around 6 years of which three years are over and three more years are left. Hopefully, we will not change course and debt reduction and margin expansion are important tasks for us.