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ITC: Enduring Value

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ITC will invest $2bn in hotel biz 07 Jul 2011

The Times of India

ITC is now the world's first and largest luxury green hotel chain. All its eight luxury properties have been awarded Leed (Leadership in Energy and Environmental Design) Platinum status, a creditable rating from US Green Building Council. Eight out of ITC's nine luxury hotels worldwide are certified Leed Platinum, says Nakul Anand, CEO of group's hospitality and travel division. Anand spoke to TOI on a range of topics from the industry scenario to ITC's proposed $2-billion investment in the sector. Excerpts:

There is concern of an economic slowdown caused by inflation, rising interest rates and higher fuel costs. The Eurozone crisis and the unrest in the Arab world are adding to the global uncertainties. The hospitality sector is one of the first industries to feel the effects of a challenging economic environment. How are you seeing this?

Economic factors impact the hospitality industry. And it does create an imbalance in demand and supply. These are, however, temporary in nature. There is immense potential for the tourism industry in India. Around 5.58 million tourists visited India, which is 0.58% of world tourism. India is an under-hotelled market. There is a shortage of one lakh rooms in the country. There is this myth that room rates in India are very high compared to other countries. This needs to be corrected. In Delhi, you would get a room for $200 a night compared to London where you would have to shell out $300-350 for a night. At times, here too rates touch the $350 level. But then, price is a result of demand and supply.

Supply is being added every month. In fact, the Indian hospitality landscape has changed significantly. A few years ago, there were just a handful of players, now every international chain worth its name is here...

The international hotel chains do not invest in India. They come through tie-ups with local players. They lend their brands and manage properties. Their global business model is to be asset light. Indian hotel operators follow a combination of business models: owning assets as well as management of properties. ITC Hotels will be investing $2 billion across our four brands to build capacity. We intend to double our capacity from the current 9,000 rooms. There are 40 hotels which are under construction, and these are either owned or managed by ITC.

Your rivals Taj and Oberoi have set up hotels outside India. Even smaller hotel operators like Royal Orchid too have expanded overseas. ITC Hotels, on the other hand, has remained completely Indiafocused. You have said in the past that you are open to global opportunities. Has anything worthwhile come your way?

We are driven by opportunity rather than strategy in our overseas plans. India is an under-served market. We are nowhere close to other countries in terms of room capacity. Malaysia has three lakh rooms, while Thailand has 2.5 lakh rooms. Our focus is to consolidate our position here.

Hotels across the globe are going green. They are adopting environmental friendly practices to be carbon positive, water positive, among other things. Could you touch upon your green initiatives?

We have been taking a series of measures to blend international green best practices with contemporary design without compromising on the luxury aspect. Some of the measures adopted include recyclable materials, renewable energy, auto power sensors in rooms and rainwater harvesting. As a result, eight of our luxury hotels are now rated Leed Platinum. Globally, there are only nine luxury hotels that are Leed Platinum. We are the first one to become the largest luxury green hotel chain in the world.

ITC Group has taken significant minority positions in some of your rivals - Oberoi and Leela groups. What is the plan ahead for these investments?

These are part of our treasury operations. We invest in businesses that we have knowledge of. I cannot comment on anything beyond this.

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