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IHCL’s Chhatwal: Hope is not a strategy

Mere months before the world was forced to shut down due to the COVID-19 pandemic in 2020, the Mumbai-headquartered Indian Hotels Co. Ltd. (IHCL) was riding high on the success of one of the most profitable years in the history of the company. “We were in a high achieving zone. We said we would add 15 new contracts every year for five years when we announced our strategy for 2022. Since announcing the strategy, we achieved 80% of our goals in 50% of the time,” said Puneet Chhatwal, managing director and CEO of IHCL. “We signed almost 27 contracts in the year and life was going fine until we were struck with COVID. We were back to ground zero. It was a reminder that things happen differently than you imagine or hope.”

As the year progressed and people thought the worst was over, India was hit by an even deadlier second wave of COVID, forcing hotels to be shut all over again after a brief period of much-needed recovery.

“We were doing fine till mid-March and the second wave hit India. It left its devastating impact in north India, especially in New Delhi, around April,” Chhatwal told HOTELS during a mid-July interview.

“There were some islands of excellence because recovery was led by leisure, which did exceedingly well than in the pre-COVID period. From November to March, our properties in Goa performed better than pre-COVID levels. We gained extraordinary market share because of people’s trust in the Taj brand.” – Puneet Chhatwal

Bullish on recovery

However, despite the loss and despair, IHCL instead looked at the situation as a way to minimize losses.

“If there’s one positive thing that has resulted from COVID, it has taught us to fight and come back stronger. We managed to secure operating profit between October 2020 to February 2021 across our portfolio,” Chhatwal said. “In India, we saw five good months of business. During this period, although revenue fell 60%, costs also came down by 45%. We saw successfully reduced our fixed cost by 28% without letting any of our staff go. In fact, we were able to redeploy some of the corporate staff which helped adjust the staff to room ratio.”

Chhatwal, now leading IHCL since November 2017, is confident the company is inching closer to the pre-COVID levels of performance. He hopes to outdo last year’s performance and achieve 60% to 75% of the pre-COVID revenue, provided there’s no devastating third wave. However, even if the imminent third wave does sweep across India, he still aims at reaching 40% of IHCL’s pre-COVID figures.

Even before India was hit with the second wave, Chhatwal said IHCL’s performance in some markets in India bounced back remarkably well.

“There were some islands of excellence because recovery was led by leisure, which did exceedingly well in the pre-COVID period,” he said. “From November to March, our properties in Goa performed better than pre-COVID levels. We gained extraordinary market share because of people’s trust in the Taj brand. Our properties in Rishikesh, Shimla and Srinagar (all in northern India) did exceptionally well.”

Newer opportunities

In the latter half of 2020 as the lockdown eased in India, people’s travel sentiment saw a steady rise. Tapping on this pent-up demand and fueled by the convenience of remote work and school, IHCL introduced the ‘INNERgise’ offer in some Taj hotels that offers a “wholistic travel experience” — accommodation combined with immunity-boosting, healthy meals and holistic spa therapies.

“This isn’t a conventional travel purpose but is transforming into a wholistic, immunity boosting, protective reason for travel,” explained Chhatwal. “Travel is an inherent need and recovery is led by this principle, along with the easy availability of vaccines. The travel and hotel industry has the unique ability to tap on latent demand. We tend to capitalize on sources of demand and come up with promotions to encourage travel, which drives recovery.”

The pandemic has changed people’s outlook, with most travelers preferring a longer duration vacation. Responding to this change, IHCL has been focusing on Ama Trails & Stays, the first branded product in India’s homestay market comprising heritage bungalows, guest houses and homestays across India. At a time when short-term home rental platforms like Airbnb have proliferated in India, Chhatwal does not consider these platforms as competition for Ama.

“Platforms like Airbnb are mostly based on the DIY model, which is not the segment we are foraying into,” Chhatwal said. “We focus on the premium, luxury segment, be it any market sector we enter. Our home stays are fully serviced by our hotels, and offer the same level of upscale, luxury service as our other hotels. While premium may not be exclusive and niche, it’s also not for the mass market.”

The lounge at Chambers, the exclusive members-only club in the recently refurbished Taj Mahal Hotel in New Delhi

Another brand which flourished was QMin, IHCL’s recently-launched gourmet food delivery platform, which the company utilized to deliver meals to healthcare providers in India.

Last year, IHCL delivered 3 million meals after the first wave and hosted frontline workers in 75,000 rooms in its hotels. This was done through the funds it raised for the Taj Public Service Welfare Trust, which was established in the aftermath of the 26/11 terror attacks in Mumbai. After the second wave, IHCL served an additional 1.4 million meals under the QMin brand, according to Chhatwal.

Besides functioning as a food delivery service in 16 Indian cities, a QMin food truck was recently launched in Mumbai.

Future of weddings

At any given time, weddings play a major role to boost revenue for IHCL. With its picturesque hotels in top locations, Taj hotels perform well among Indians, expatriates as well as foreigners looking to get married at an exotic destination. However, since March 2020, strict COVID protocols in India that restrict the guest list to only 50 persons, has been a cause of concern. Chhatwal said the lockdown meant no elaborate weddings at the hotels as the ceremonies were conducted at people’s homes on a very small scale.

People, however, have eventually found a hack to bend the rule. “Indian weddings are fancy week-long social events. While the number of guests is capped to 50, hosts are smart enough to invite different sets of guests for each of the ceremonies that take place across several days, ultimately taking the total number of guests to more than 100,” Chhatwal said. “While this trend is temporary, people still spend the same amount of money for weddings.”

Ama Trails & Stays is the first branded product in India’s homestay market comprising heritage bungalows, guest houses and homestays across India.

More offerings

IHCL recently reopened the iconic Chambers – the exclusive members-only club – in the recently refurbished Taj Mahal Hotel in New Delhi. The uber luxury, private busines club has enjoyed patronage from an illustrious group of people since it was first started over 40 years ago. Currently, Chambers is in operation across seven cities, including Dubai, and the eighth is soon to open in London. Two more are in the pipeline – one each in Bengaluru and New York.

Chhatwal is also upbeat about 7Rivers Brewpub, which was launched late last year in Taj MG Road in Bengaluru in partnership with AB InBev, the world’s largest brewer. The first-of its-kind brewpub also has an on-site microbrewery. It is the only brand IHCL doesn’t own and only operates. Nonetheless, it plans to scale it to 10 to 15 in other Taj properties, Chhatwal said.

IHCL is also known for its exotic jungle safaris and lodges. While these are quite sought-after, it’s still a small and evolving business, Chhatwal added.

“Jungle safaris and lodges build a halo around the business but it’s still a small business,” he said. “We have just 10 properties and 150 rooms and we are trying to expand it. It’s still five years from maturity.”

Way forward

Chhatwal is confident of the hotel industry’s resilience and IHCL’s performance. Talking about the Taj hotels’ strengths and plans of expanding their portfolio, he says they are in a comfortable zone despite the pandemic hampering business for months.

“Our plan for 2025 was to have 250 hotels in operation and 300 as the total portfolio,” Chhatwal said. “Today, our total portfolio is 221 hotels, of which 54 are in the pipeline and 167 in operation in India and abroad. IHCL signed 17 hotels and opened seven new hotels in FY 2020-21, a record for the industry.”

Ginger, their chain of “lean luxe” budget hotels, has been driving growth. There are 78 Ginger hotels today, of which 58 are in operation, and Chhatwal is aiming for a portfolio of 100. He is also focusing on Ama and hopes to achieve a portfolio of 100 Ama properties by the next fiscal year.

He said IHCL’s pipeline in India is about 50 hotels and roughly 16 homestays. In the pipeline of hotels, almost 50% will be driven by the Ginger brand and the rest by Taj, Vivanta and SeleQtions. It also plans to increase the footprint of QMin to cover 25 cities. “More importantly, our strategy is to own and dominate certain markets like Goa, Mumbai, New Delhi, Bengaluru and Chennai,” Chhatwal said, adding that the cluster approach of dominating certain markets is the way forward for them. “For example, we have 18 operating properties only in Goa and 17 properties in Delhi-NCR. No other group can dream of coming close to this number and that’s what we strive for.”

Besides functioning as a food delivery service in 16 Indian cities, a QMin food truck was recently launched in Mumbai

On emerging stronger

When dealing with a pandemic situation, it is important to identify the right time to boost tourism, hotel and aviation business, Chhatwal said. As additional waves of the virus emerge, Chhatwal feels the Indian travel industry needs to have a strategy in place.

“We need to work on COVID protocols for travel and ensure that it is uniform across India,” he said. “A lot depends on international travel also. Fortunately, the peak travel season in India is between October to March, so we have some time to open up. We can and wait and watch till September 15 to see how things are progressing.”

The need of the hour is a relief package, Chhatwal added. “This sector has been paying all statutory obligations, although hotels were unilaterally closed on orders by the Central or state governments. We paid licensing fees, excise fees, property tax, minimum electricity charges. For an industry that’s paralyzed, hooked to a ventilator and almost about to enter a mortuary, it is not right as a lot of lives and livelihoods are dependent on the revival of the industry.”

At the end of the day, hope is not a strategy, perseverance and resilience are, Chhatwal said.

“There’s a German saying – ‘es kommt immer anders als man denkt,’ that means life will always take a different path than you imagine it to be. That’s what I learned of this experience,” Chhatwal added. “Personally, it was a trying time as well. My family lives partly in Germany and partly in the U.K. But I’ve stayed in touch with them and made it a point to make out time to speak to them daily and visit them as often as I could.”

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