Rounding up FY25 with a net growth of 52% and 25% increase in Q4 net profit, IHCL CEO and MD Puneet Chhatwal talks with Ivinder Gill about yet another year of record performance, the brand’s ambitious growth strategy, and how new destinations are the next big thing. Edited excerpts:
Ending the fiscal with a record performance, do you think you have achieved a sweet spot between a capital light and capital heavy approach?
We can always do better. A sweet spot would be about 25% capital heavy and 75% light. Right now we are at 40% heavy and 60% light, which in itself is huge positive deviation from the 77% capital heavy assets seven years ago. In FY25 we signed 75 new hotels and opened 26, of which over 95% were capital light.
You aim to almost double the number of properties in the next five years to 700. Which categories and geographies is this growth coming from?
About 25% will come from conversions and consolidation, like we bought Tree of Life, and have got Claridges under our portfolio. About 50% of growth will come from new destinations, which will mostly follow the increase in number of airports, as every airport will need hotels and flight kitchens near it. Highways and upgraded railway stations are also future hotel hotspots. The rest 25% growth will come from the top 10 markets that will keep growing.
How much will this cost? Are you following a capital-light approach?
Yes, the strategy will be predominately capital-light, with select investments for strategic projects. Our capital allocation will have an outlay of up to Rs 5,000 crore over the next five years. We aim to expand our brandscape and double consolidated revenue with a 20% return on capital employed. We have also announced a dividend of 20% of PAT to shareholders.
In FY26, we will invest about Rs 1,200 crore for asset management, and hope to continue double-digit growth with 30 new hotel openings.
The Ginger portfolio in FY25 achieved revenue of Rs 675 crore with a strong EBITDAR margin of 43%. How is the brand going to take shape?
The portfolio is over a 100 hotels now at 103, straddling metros, small towns, pilgrimage sites and leisure hotspots. With this ability to penetrate wide and deep, Ginger is the growth engine for IHCL. I envisage a 500-1,000 room Ginger near New Delhi railway station, ideally on Minto Road if we can get the land. Our upcoming Ginger near Bengaluru airport with 325 rooms is the next big one, as is a 300-room property at Mopa airport in Goa and a 280-room one at Candolim, Goa.
What percentage of revenue is Ginger alone contributing to the company?
Right now it is 8-9%, but by the end of this fiscal itself this number should go up to 10%.
Is expansion at offbeat locations profitable? And are these new destinations a foresight of domestic consumption and its potential?
In a cricket match, not all balls are hit for a six. There are ones and twos too. Similarly, for us, all hotels cannot be huge money spinners. But we are on a mission of nation building too. So we are focusing on places like the Northeast, Daman, Diu, Lakshwadeep…
There is no supply yet for such locations. But we hope in some years, these will become very profitable. New markets were always there in India, but it is not easy for a brand to be present in these places. But thanks to the Tata Group’s standing, it is easy for us to build there, and create these destinations.
There is considerable buzz in the mid-level section with consolidation and acquisitions. How do you look at it?
The era of vacationing at mamaji’s house is over. People today are willing to spend and not just save. With the India growth story, per capita income is increasing and people don’t want cheap. The consumer mindset has changed, to mirror the West, and live in the moment. So hospitality is also changing accordingly. It’s an opportunity for us. For travel, people want to explore new destinations. Satellite cities are growing, fuelling demand for properties like Ginger and Gateway.
You have said Bandstand will be the next legacy carrier for IHCL. Is it the most expensive property for you yet?
Bandstand will be a sixer for not just the brand, but for the country too. It will be in the category of Marina Bay Sands in Singapore and Burj al Arab in Dubai. The day it opens, it will do a topline of Rs 1,000 crore. Whether it costs Rs 2,500 crore or more, will depend on cost of construction and time of completion. But in today’s value, renovating a property like Taj Lands End will also probably cost the same.
Abroad, you are set to open a second property in Europe this year. What about other geographies?
We will grow only with Taj brand outside India in key gateway cites. Today we have an international portfolio of 28 hotels, with 10 in the pipeline across markets of West Asia (Makkah, Riyadh, Bahrain and Ras Al Khaimah), Frankfurt, and Dhaka, Bhutan.