Top Indian hotels weather the slowdown, high debt trips Taj

An aggressive expansion in the hotel industry that led to an excess supply of rooms, coupled with the global economic downtrend hitting Indian shores at just the wrong time, the country’s hospitality industry has had a mixed bag in recent times.

Of the top three hotel chains in India—-Indian Hotels Company Ltd (IHCL), which owns the Taj Hotels; East India Hotels that runs the Oberoi and Trident Hotels; and ITC Hotels—-the worst affected is IHCL, even though it has undertaken massive expansion drives, both at home and abroad.

Its topline has been growing continuously, but IHCL logged losses in the last two financial years, while its peers ITC and EIH registered profits.

“IHCL’s losses for 2013 were mainly due to the provisioning it did on account of the two write-offs worth Rs. 670 crore in the past two years on its investment in Orient-Express Hotels (OEH),” a source close to IHCL told HT.

“Despite pressure on the industry to reduce rates, EIH has registered increased footfalls into India and sold 40,000 additional nights, equivalent to 85 additional rooms every day. Besides, its FB and Spa segments have contributed to its overall growth and consistent profits,” a senior EIH official said.

Interestingly, the profits have come despite a strategy of staying away from the mid-size and budget segments, remaining firmly anchored in the luxury and super-luxury segment.

“ITC’s long-term outlook for the Indian hotels industry is bullish with prospects of revival in the global and domestic economy,” an ITC spokesperson said.

“India is still grossly under-roomed even when compared to some of the smaller South-East Asian countries like Singapore, Malaysia and Thailand,” the ITC spokesperson said.

The overall weak sentiments are reversing, albeit slowly, since the new Narendra Modi-led government assumed charge. Several steps have been announced in the budget, which are expected to provide a direct fillip to the economy. This would in turn have a positive bearing on the hotel industry.

From here, things can only get better for the industry.

The sudden exit of Raymond Bickson, IHCL’s MD and CEO, on Thursday took the industry by surprise. Bickson, a Ratan Tata pick, joined the company in 2003 and made the hotel chain a global force. It was under him that the Taj group launched several new brands such as Ginger, Gateway and Vivanta.

Several overseas properties were also acquired including The Pierre in New York City, the Ritz-Carlton in Boston, the W Hotel in Sydney. The Hawaii born Bickson was reappointed as MD and CEO for five years in July last year, though in the renewed contract, his perks and salary were lowered to about `8.3 crore but his commission increased to `10.4 crore.

Two successive years of losses, a black mark over the failure to acquire the Orient Express luxury hotel, and a change at the top in the Taj Group with Cyrus Mistry replacing Tata late last year, may have contributed to Bickson’s exit.

His replacement, Rakesh K Sarna, 57, is an industry veteran from the highly successful Hyatt Hotels of the US.

Ahead of him lies the challenge of turning around the fortunes of the Taj, and taking its footprint to Europe, where it is largely absent.

Top Indian hotels weather the slowdown, high debt trips Taj