‘Our push is premium; a budget brand just food for thought’: Anil Chadha, Managing Director, ITC Hotels

At 250 hotels and 22,000 rooms by 2031, what will ITC Hotels look like economically? Your managed portfolio will grow from 8,600 to 15,000 keys by then, which makes it about two-third of total assets.

It’s been a wonderful journey since last January. Today we are at a 40:60 ratio of owned and managed assets, which we aspire to take to 33:67 in five years. We signed 87 hotels in the past three years, and opened more than 29 hotels in the last two years. For our own portfolio we are at 5,700 keys today, which we have to take to 7,500 keys. Of this, 900 are already signed. In the managed portfolio, we have to go from 8,600 to 15,000 keys, which is 1,200-1,300 keys a year, and we are completely on track to achieve this target.

What proportion of revenue do you expect management fees to contribute by then?

We earned a management fee of Rs 135 crore in FY25, and had set a target to make it 2.5x in three-five years. So we are targeting maybe around Rs 350 crore.

Among these 250 hotels, which brands will you focus on and for which geographies. What about expansion abroad after Colombo and Nepal? You have talked about Middle-East and proximal markets. What about Europe, US and south-east Asia?

I’ll be happy to venture there, but only when we have something in hand. There could definitely be more hotels in all three proximal markets of Sri Lanka, Nepal and Dubai. We are talking to various people, but things are still in preliminary stages. For Dubai, we are in the final stages to negotiate a good hotel. The domestic growth will come from Storii, Welcome and Fortune brands. It is important to go to new locations, to expand your flag. Currently we are entering Kerala. We have expanded well in the past few years in Himachal Pradesh and are now looking at Madhya Pradesh. We’ve already opened one hotel in Bihar and signed two more. Next we are trying to get an entry into Northeast. I don’t think a hotel chain really is choosing where you don’t want to be. Wherever air traffic is increasing, that’s the best place to be in. As the country increases its infrastructure, a lot of hotspots will emerge. Those will be our targets.

Asset-right vs asset-light. What determines when ITC Hotels will actually own a hotel rather than merely managing it? You recently acquired a Welcomhotel in Ahmedabad, converting a managed property into an owned one. What return threshold must an owned hotel clear? Are you looking at more acquisitions?

The asset right path is one of our pillars. Where we find a good piece of land, we are buying it. We have our own land in Yashobhoomi, which is a fantastic location for a hotel. We have bought a good property in Kerala. Ahmedabad is a good market to be in. We already have ITC Narmada and a Fortune Hotel, and plan to get some more hotels there.

As for threshold, it must be the right valuation. It’s not that you’ve got money in the bank and you must spend it. We are a young company, and post demerger, we have made three big acquisitions already.

Now that ITC Hotels is an independent listed company, how has your approach to capital allocation changed?

We are going to incur 10-12% of the cumulative revenue towards capital allocation.

We have also announced a dividend of 20-22% of the profit after tax. Other than that we will continue to scout for value creating acquisitions.

What we are targeting is premiumisation. Currently, we are at 40-42%, but we are targeting 50-55% premiumisation of our portfolio, which will give us more fee per key and better realisation.

There is a major push for tier-2 cities, especially with your Welcom portfolio. What is your strategy for this market? You have hotels in locations like Hoshiarpur and Jalandhar. Just how deep inside India do you want to go?

A lot of growth is coming up in smaller cities, as people have huge spending power there. Plus, how many more land parcels can you get in metros? People want to be associated with the right brands. Businesses in small cities want quality accommodation for their clients, and we are filling that gap.

But even in tier-2, 3 cities, your offerings are not budget, which is a focus area for the industry. What is your answer to this vertical, where branded rooms are available for less than Rs 5,000 a night?

It’s not that you only need to make budget hotels, or we can say Indians are finding the cheapest hotel to stay in. The domestic demand is rather strong and we are seeing that people are seeking experiences they are ready to pay for. And we didn’t talk about this today, we have been talking about this forever. Today, for some of our Storii hotels, average rates can go up to Rs 20,000 a night, but people are ready to pay as long as the hotel is absolutely fabulous.

As for a purely budget brand, Fortune captures that space somewhat. But for a hotel costing less than Rs 5,000, it’s food for thought.

What do you think of the pricing strategy for hotel room rates in India?

Indian hospitality I think has never been paid the right price. If we compare ourselves with other countries, our luxe levels are very, very good. The hospitality, service, room sizes, breakfast, the entire warmth is very good.

In terms of the dollar, we are still not caught up on prices as compared to places like Dubai or Singapore.

Can technology and AI actually take costs out of a hotel or reduce employees without damaging luxury service?

Technology will enable growth, but it is not that tomorrow you will put a machine and reduce two people. It will make decisions faster and efficient. For example, our customer relation tool can analyse every guest’s habits based on data, based on which the hotel provides customised service. But a luxury hotel can certainly not put ten robots out to serve drinks. People pay for bespoke experiences that are warm and personal. And, in luxury, you should never cut costs.

Is Epiq focused on religious tourism? You have two in Puri and Tirupati.

Epiq, our new brand, will cover the upper upscale space. We have already signed three hotels, of which one is our own. It is not a religious brand, and the locations just so happened. However, we are focused heavily on religious tourism. Today we have 875 keys operational in religious sites, with another 1,400 signed. We are seeing a 3x growth in places like Amritsar, Katra, Tirupati, Haridwar, Puri, Prayagraj, Rishikesh, Bodh Gaya. We just signed a 100-plus key hotel in Salasar, which reportedly has the country’s biggest Hanuman temple.

A brand for the Gen Z is missing. Storii is boutique, but is there any dedicated segment for the youth in the pipeline?

I think the youth are experiencing all kinds of hotels and are changing the entire picture. We are seeing that the gap between weekday and weekend occupancy has reduced, even in business hotels. Staycations are popular, and youth today are willing to spend on luxuries. Our Storii brand is very popular among the Gen Z. At the same time, about 25% of tables at the decades-old Bukhara restaurant are filled with the young. So we feel we don’t need a brand just for the youth.

Mementos seems to have been put on hold as there has been no recent expansion after Jaipur and Udaipur?

Mementos are in the super luxury space. It costs a lot of money to build a hotel like that. So, they will be few of those. But our target has always been to open one Mementos a year. There are two at the moment in the pipeline — Siliguri and Rishikesh. But it will not be a numbers game.

All flagship ITC hotels are massive in size and scale. But they all go back to when the company was under the ITC conglomerate. Do you think as an independent company you will still look at similar sized hotels?

When ITC Maurya happened, it was a large property, but Delhi needed a 400-500 room kind of a hotel. And when you look at Grand Chola in Chennai, I think it was a very bullish decision. Chennai did not have too many keys in the luxury segment then, but somebody saw it rightly that the city was growing and there may not be enough land parcels tomorrow to cater to those needs. That is exactly what happened.

As for the future, if there’s an opportunity tomorrow, why not? We will not be shy in case something good comes up, but we always look for a value-additive acquisition, which gives us the confidence of adding to our EBITDA levels and margins.

You have recently launched gelato brand Yura. Any more such brands in the pipeline?

We have also launched a premium mithai boutique called Ritvah. These are brands we have just launched in Chennai to test the waters. There’s a good demand for Diwali sweets, and the brand can be available online pan-India.