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ITC: Enduring Value

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‘We are moving in the direction of owning more hotels’ 11 Apr 2009

Financial Express

The turmoil in the global economy has hit the hospitality industry hard. Despite being impacted by the slowdown, ITC’s mid-market brand of hotels, the Fortune chain, is growing as consumers are downgrading from luxury brands. Fortune Park Hotels is on an expansion mode and could also opt to own properties rather than just managing them, says Pawan Verma, senior executive vice-president, hotels, ITC Ltd, in conversation with Surabhi Agarwal of The Financial Express. Excerpts:

Where does the Fortune chain of hotels fit in the hotels division of ITC?

Each segment has its own dynamics. Fortune is primarily a mid-sized brand, and caters to the up-scale and the upper scale segment. Fortune is not competing with luxury brands in our portfolio.

How is this segment performing vis-a-vis your other brands, considering the tough market conditions?

It hasn’t performed as per our expectations, but is doing well. Everybody has suffered due to the downturn. The consumer is downgrading from luxury hotels as they are looking at cheaper options. We see it as an opportunity to grow the Fortune brand.

What has been the impact of the downturn on this segment, as compared to your other brands?

It is very difficult to put a number to it. All I can say is this segment’s revenues and occupancy are still growing, whereas the luxury brands are showing de-growth. The average occupancy at Fortune is around 60%. On the other hand, the luxury brands should have done around 80%, but are finishing at around 55%.

Since the consumer is downgrading, have you seen a shift from your luxury brands to Fortune?

There is a general shift in the market to lower-priced hotels and it is not necessarily from our own brands. But, yes, there is shift as people are downgrading.

Given the changing market dynamics, is there more focus on expansion of the Fortune chain?

With the launch of the Fortune Inn Grazia Hotel in Noida on April 10, we have 26 operating hotels. There are another 26 hotels that are in various stages of development and should be ready in two years. So, by 2011, we will have 52 operating hotels. At the same time, there are new hotels being signed.

However, if we come across a company that has 20 hotels, we will be open to buying it. By 2012-13, we are aiming to have around 100 hotels. That is the long-term vision. In the next two months, we are opening four more hotels and at least two more hotels will come up before the year end--in Goa and Hyderabad.

How keen are you on owning properties instead of managing them?

There are one-two properties that are already with us as they are legacy properties. But, we are looking at more properties. The funds will be provided by ITC. Initially, we will see how the prototype works. We are taking a long-term view. Good times will come, and so will bad times. We have seen bad times in the past also; so, this is not the first for us. It is a passing phase.

Owning a hotel means more profitability. Will this be the way forward for you?

You never know. We would also like to own the topline; right now we only get a service fee. But, there is a risk and reward to it. We are keen on owning properties and we are moving in that direction.

© ITC Limited