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ITC: Enduring Value

Media Centre


ITC sees hotel business picking up in a year 25 Oct 2012

DNA

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, spoke with DNA 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.

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.

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.

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.

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.

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.

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 in 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.

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.

© ITC Limited