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ITC to focus on super luxury properties 16 May 2010

Business Standard

To reinforce position as a predominantly super-deluxe chain.

ITC plans to focus on super-luxury properties over the next five years in order to reinforce its position as a predominantly super-deluxe hotel chain.

ITC-Welcomgroup Hotels currently has 6,953 rooms in India; of which 3,017 are in the super-deluxe luxury category under the brand name, ITC-The Luxury Collection.

ITC-Welcomgroup properties are classified under four distinct brands - ITC Hotel "The Luxury Collection", WelcomHotels, Fortune Hotels and WelcomHeritage.

Dipak Haksar, chief operating officer - hotels division of ITC, told Business Standard, "We intend to focus our expansion plans on the premium super-deluxe hotels (ITC Hotel "The Luxury Collection") category with at least 10 upcoming hotels in this space, over the next five years."

"Our aim is to continue to build on land owned by us, to ensure faster growth prospects," . Haksar said.

In the immediate future, two new ITC Luxury Collection hotels are planned - a 600-room hotel in Chennai and the second, a new 400-room hotel 10cated adjacent to lTC's existing hotel in Kolkata.

According to sector analysts, any super-luxury hotel would have to invest between Rs 1 crore and Rs 1.5 crore per room, depending on the size. This includes the cost of building and interior design, but does not include the cost of land.

Overall, ITC is investing Rs 9,000 crore in all its hotel brands over the next five years.

Viraj Nadkarni, analyst with Angel Broking, said, "In a normal year, operating profit margin for super-luxury hotels is in the range of 35 to 45 per cent. The difference in profit margin for different category hotels does not vary much because the facilities are accordingly offered."

Currently, ITC's eight Luxury Collection hotels offer a blend of luxury and Indian hospitality. The room tariff for this category starts at Rs 11,OOO for the base category.

Comparatively, room tariffs for WelcomHotels, the five-star property that caters to the business and leisure traveller, vary from Rs 8,000 - 11,000. Fortune Hotels, all of which are on ITC's management contracts and cater to the cost-conscious travellers, command room tariffs between Rs 6000 and Rs 8000. On the other hand, the WelcomHeritage brand of hotels, comprising palaces, forts, havelis and resorts, has room tariffs between Rs 6,000 and Rs 11,000.

For the Fortune brand, alliances are a good way to hedge the risks. ITC earns a fee from the owner of the property for lending its name and running the hotel. The fee usually is a portion of the revenue earned. ITC only invests in lending the brand name and ensuring quality interiors and services. The latest hotel under the brand, the 84-room Fortune Inn Haveli in Gandhinagar, Gujarat, for instance, is an alliance. Fortune's various sub-brands help ITC straddle different price segments in the same city as well as allow it move into lower-tiered cities.

© ITC Limited