Indian Hotels is ramping up its mid-scale segment. The recent majority stake purchase in ANK Hotels and Pride Hospitality, bringing the 135-property portfolio of Clarks Hotel and Resorts to the company, effectively doubles its mid-scale segment.
According to Deven Choksey, Managing Director of DRChoksey FinServ, “the acquisition of the Clarks properties, as well as the acquisition of a property for a Ginger hotel at Kolkata airport, highlights the support and synergy from the Tata Group.”
As the company is investing about Rs 204 crore in the proposed transaction, it has big plans for the rebranding and distribution of the acquired hotels. But why is a company that operates over 150 five-star and upscale luxury hotels investing so much in the mid-scale segment?
But that’s not all. The answer lies in its Ginger brand, the primary mid-scale brand of the company.
The Ginger factor
Indian Hotels’ Ginger brand operates about 120 mid-scale hotels. The brand targets corporate travellers in economy class and complements its high-end brands like Taj and Vivanta.
In FY25, Ginger hotels outperformed the industry in both occupancy and revenue growth rate, motivating the company management to expand the mid-scale segment.
According to a Nuvama report, while the industry occupancy rate in FY25 was 57 per cent, Ginger hotels clocked a 71 per cent occupancy. Similarly, the brand posted a 9.4 per cent Revenue per Available Room CAGR (Compound Annual Growth Rate) of 9.4 per cent between FY18 and FY28, while for the industry, the same remained at 3.9 per cent.
Nuvama stated that Ginger’s unit economics are strong across diverse markets with EBITDAR margins ranging from 51 per cent to 55 per cent.
Deven Choksey added that, “The mid-market segment, particularly the ‘reimagined’ Ginger hotels, has shown strong profitability with EBITDAR margins of around 50%. By rebranding and leveraging its operational expertise and distribution network, IHCL can potentially improve the profitability of the acquired properties.”
Investing in Market ready properties
Indian Hotels management has a positive outlook on the expansion of the mid-scale market in India, and the expansion of the Ginger brand becomes the next logical step.
Puneet Chhatwal, Managing Director and CEO of IHCL, said, “The outlook for the sector remains buoyant as demand outpaces supply and India continues to be an underserved hospitality market, especially in the mid-market segment.”
Choksey added that the latest acquisition is largely based on a capital-light model of management contracts, which reduces the financial risk for IHCL and allows for rapid expansion. This strategy is consistent with IHCL’s broader business model, he added.
Upon acquisition of ANK Hotels and Pride Hospitality, Chhatwal added that IHCL’s leading presence in the midscale segment, with the successful transformation of Ginger. He said that this partnership doubles the brand’s portfolio, addressing the growing needs of the aspirational traveller.
Impact on IHCL’s Portfolio
This acquisition adds a large number of hotels to IHCL’s portfolio, with the vast majority being management contracts and a select few on operating leases. As per DRChoksey FinServ, “The integration of these properties will strengthen the Ginger brand, which focuses on the ‘lean luxe” segment.”
Indian Hotels’ broad-based expansion
In addition to the hotel acquisitions, IHCL has been actively expanding its other ventures, particularly in the food and beverage space.IHCL’s gourmet culinary and food delivery platform, Qmin, continues to be a focus area.
The company has also forged strategic alliances, such as with Tree of Life Resorts & Hotels, to expand its leisure offerings. The group’s ventures, such as BigBasket’s planned 10-minute food delivery service, indicate a broader push into the quick commerce and food delivery space as well.