With the Covid19-related uncertainties behind, Indian Hotels, which operates the Taj Group of luxury hotels, has set out on a strong expansion plan to cater to rising demand.
The pandemic had a huge impact on the hospitality industry, with the country in lockdown back in 2020 and international travel restricted for almost two years. However, now as Covid-19 cases have fallen, and with most people vaccinated and restrictions eased, things are returning back on track.
The Tata Group company, which currently operates 235 hotels, plans to expand to more than 300 hotels by 2025-26. It is also planning to scale up its new brand Ama Stays and Trails to over 500 properties, Puneet Chhatwal, MD and CEO of Indian Hotels said on Monday.
Of the 300 hotels, 100 will be under the Taj brand, 125 under budget brand Ginger and 75 combined will be under the Vivanta and Seleqtions brand.
In the last five years, it has signed over 100 hotels and opened 40 of them.
For now, demand is looking strong, although uncertainties of a possible new wave of the pandemic and geopolitical tensions still remain.
"The next three months, with the business on books and how the last seven weeks have been, we are trending on a 2019-20 plus a double digit increase on the like-for-like portfolio. If we add to that the 40 hotels that we have added, then we have a bigger increase, but mostly coming in fee income," he said.
The overall investments that the company makes will be in the range of 3-5 per cent of the revenue, said Chhatwal.
While the company expands, it is also focusing on an asset-light strategy, where by it will look at increasing the number of hotels it operates through management contracts. For instance, it sold its hotel in Visakhapatnam and is running it through a management contract.
Half of the portfolio will be owned, while the rest will be operated through management contracts, said Chhatwal.
Its also looking to sell some of its non-core assets, as the company looks to turn net debt free.
"In this business, cyclicality and volatility are very high. Sometimes, we are confronted with things beyond our control. So, we have decided to eliminate debt from our capital structure," said Chhatwal.
What should augur well for hotel operators is the fact that the demand currently is more than the supply and occupancy rates are also on the up. This will also drive room rates higher, said Chhatwal.
"Occupancies and rates are on the way up, stronger than they were in 2019-20 on the domestic front. With supply remaining constrained and demand being strong, the likelihood that the rates, occupancies and revenue per available room going up is very high, subject to any geopolitical crisis or another (pandemic) wave," he said.
Internationally too, many major markets like Dubai and London have started to see a strong pickup, he noted.