This Q&A first appeared in DNA Money edition on Thursday, Oct 25, 2012.
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| Nakul Anand |
ITC Hotels, India’s second-largest hotel chain, has close to 100 properties in over 70 destinations across four brands. The company, also among the most profitable hospitality firms in the country, has ten LEED Platinum rated super-premium luxury hotels in the country. Nakul Anand, executive director, ITC Ltd, speaks about his company’s plans and the Indian hospitality market in general. Excerpts from the interview:
A lot of new room inventory has been added in the local hospitality market. Do you think that has caused a glut?
The inventory addition is as anticipated, though I feel the demand for hotel rooms could have increased faster than supply. The current market scenario is true for the entire country, mainly because there is economic slowdown and our source markets are significantly under pressure.
The inventory addition is as anticipated, though I feel the demand for hotel rooms could have increased faster than supply. The current market scenario is true for the entire country, mainly because there is economic slowdown and our source markets are significantly under pressure.
How long do you think it will take the industry to reach a more optimal level of business operations?
I am a great optimist and would imagine most of the issues getting ironed out and demand taking off within a year. Business environment will be much better in the third-fourth quarter next fiscal.
I am a great optimist and would imagine most of the issues getting ironed out and demand taking off within a year. Business environment will be much better in the third-fourth quarter next fiscal.
The Indian hospitality market has evolved considerably. How has ITC kept pace?
Our philosophy always has been to make a meaningful contribution in multiple ways. We believe that business can and must play a role in enriching the country’s tourism landscape. Therefore, we have consciously moved from a single dimension of financial value creation to a triple bottomline philosophy of creating value that encompasses economic, environmental and social dimensions.
Our strategy is to clearly focus on a few niche areas and provide unique and differentiated value propositions to our guests. We have straddled the entire value chain and now cater to the emerging needs of travellers in different parts of the country through our four brands.
Our philosophy always has been to make a meaningful contribution in multiple ways. We believe that business can and must play a role in enriching the country’s tourism landscape. Therefore, we have consciously moved from a single dimension of financial value creation to a triple bottomline philosophy of creating value that encompasses economic, environmental and social dimensions.
Our strategy is to clearly focus on a few niche areas and provide unique and differentiated value propositions to our guests. We have straddled the entire value chain and now cater to the emerging needs of travellers in different parts of the country through our four brands.
How do you compare with other hotel companies in the country?
If you compare profitability (profit as a percentage of turnover) of other hotel businesses in our competitive set, we are the most profitable hotel company in India.
If you compare profitability (profit as a percentage of turnover) of other hotel businesses in our competitive set, we are the most profitable hotel company in India.
There were reports about challenging times ahead for luxury hotels. What is your take on it?
One needs to understand that hospitality is a long-term business. While there can be short-term blips due to various reasons, there is always a turnaround. We have seen many such phases in the past and that hasn’t really stopped the industry from growing. Our growth plans over the last three decades have been driven by investments. We continue to pursue this strategy and add large properties to our portfolio of super luxury hotels. Our recent addition in the luxury segment stands as testimony of our vision. We currently have 3-4 hotels under construction in the premium segment and 6-7 at the drawing board stage.
One needs to understand that hospitality is a long-term business. While there can be short-term blips due to various reasons, there is always a turnaround. We have seen many such phases in the past and that hasn’t really stopped the industry from growing. Our growth plans over the last three decades have been driven by investments. We continue to pursue this strategy and add large properties to our portfolio of super luxury hotels. Our recent addition in the luxury segment stands as testimony of our vision. We currently have 3-4 hotels under construction in the premium segment and 6-7 at the drawing board stage.
So there is no change in your outlay for future developments?
There is no change in our development outlay of Rs9,000 crore. Our current development pipeline has 40 hotels under various stages of development and all the funding will be done through internal sources.
There is no change in our development outlay of Rs9,000 crore. Our current development pipeline has 40 hotels under various stages of development and all the funding will be done through internal sources.
We are confident of doubling room capacity across brands in the next couple of years while simultaneously adding newer developments. In the years to come, we will have a portfolio of 150 hotels either owned or managed by us under one of the four brands.
Your new hotel ITC Grand Chola, Chennai already has competition from a host of domestic and international brands. How do you see this property shaping up in the coming years?
Luckily in hotels business, one is able to foresee trends 3-4 years ahead as most hotels take five years from ground breaking to get operational. We knew there will be additional supply and 4-5 new hotels would come into the market. We also know there will not be any significant new supply in the next five years. So there is a decent time to establish ourselves as a leader. Our hotel is uniquely positioned in the Chennai hospitality market and has already created a lot of excitement in a short span. Given the kind of facilities offered (accommodation, meeting / banquet space and restaurants), we foresee becoming a preferred destination for a host of corporate and social activities both domestic and international. In fact, we see in the MICE (meetings, incentives, conferences and events) segment, pharmaceuticals and automobile sectors contributing significantly to the hotel’s revenues.
Luckily in hotels business, one is able to foresee trends 3-4 years ahead as most hotels take five years from ground breaking to get operational. We knew there will be additional supply and 4-5 new hotels would come into the market. We also know there will not be any significant new supply in the next five years. So there is a decent time to establish ourselves as a leader. Our hotel is uniquely positioned in the Chennai hospitality market and has already created a lot of excitement in a short span. Given the kind of facilities offered (accommodation, meeting / banquet space and restaurants), we foresee becoming a preferred destination for a host of corporate and social activities both domestic and international. In fact, we see in the MICE (meetings, incentives, conferences and events) segment, pharmaceuticals and automobile sectors contributing significantly to the hotel’s revenues.
You are developing a hotel in Colombo. What factors led to the move? Is ITC getting aggressive on international presence?
It was a good opportunity in Colombo and the land parcel we got is a very ideal location for a hotel project. Sri Lanka is in proximity to India so managing the business affairs would be easier. We are looking at opportunities in Nepal but haven’t finalised anything yet. International presence for ITC is mainly driven by a pre-condition, that is, countries or destinations in close proximity to India and regularly frequented by Indian outbound travellers. So places like Singapore, Hong Kong, Malaysia, Thailand, etc would make for a strategic fit, else why should I have a hotel in the middle of nowhere. The whole world is coming to India to set up hotels and there has to be a very compelling reason to set up hotels in international markets.
It was a good opportunity in Colombo and the land parcel we got is a very ideal location for a hotel project. Sri Lanka is in proximity to India so managing the business affairs would be easier. We are looking at opportunities in Nepal but haven’t finalised anything yet. International presence for ITC is mainly driven by a pre-condition, that is, countries or destinations in close proximity to India and regularly frequented by Indian outbound travellers. So places like Singapore, Hong Kong, Malaysia, Thailand, etc would make for a strategic fit, else why should I have a hotel in the middle of nowhere. The whole world is coming to India to set up hotels and there has to be a very compelling reason to set up hotels in international markets.
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