ITC Hotels makes its debut on the exchanges as a standalone entity. Earlier in January, ITC demerged its hotel business as a standalone entity in a 1:10 ratio. While ITC continues to hold a 40% stake in the new entity, the remaining 60% was distributed to shareholders. The move has been seen as an effort by the FMCG and tobacco major trying to unlock the value of the hotel business.
Given the favourable outlook for the hospitality sector, here is a quick look at how ITC Hotel’s business pans out –
ITC Hotels – Total hotels managed
Going by the latest available data (October 2024), ITC Hotels operates a portfolio of a total of 140 properties. This is a mix of owned and managed rooms and the current ratio of owned-to-managed rooms stands at 45:55. They have 6 different brands including
-ITC Hotels
-WelcomHeritage
-Mementos
-WelcomHotel
-Storii
-Fortune
The company clocked an occupancy rate of 69% in FY24 and its current portfolio comprises a total of 13,000 keys. Some of the key partnerships by ITC include a Global Distribution Agreement with Marriott.
ITC Hotels – Growth trajectory
The hotel business contributed 4.1% of ITC’s overall revenue in FY24, while EBIT contribution from the segment was 3%. The Average Room Rate (ARR) has increased to Rs 12,000 from Rs 7,900 in FY19, up 51.9% (CAGR growth of 8.7%).
According to Deven Choksey Research analysis, ITC Hotel’s “Revenue per Available Room (RevPAR) increased to Rs 8,200 in FY24 from Rs 5,200 in FY19, up 57.7% (CAGR growth: 9.5%).” The report further adds that “revenue composition for FY24 reveals that 52% came from room sales, 40% from food and beverage, with the remainder attributable to other revenue streams.”
ITC Hotels – Expansion plans
Going forward, ITC Hotels has plans to expand the portfolio to over 200 properties with more than 18,000 keys by 2030, with a shift in the owned-to-managed ratio declining to 35:65.” added Deven Chosey Research report. The company plans to add 5,000 additional rooms by 2030, with approximately 500 being company-owned. The rest would be under management contracts.
ITC Hotels- Strategy Pillars
According to ITC Hotel’s investor presentation in November 2024, the strategy pillars for the company are
-Equity: Focus on continued investment to enhance brand equity
-Asset Right: Target to achieve 2/3rd Managed portfolio share in the next 5 years
-Digital First: Smart revenue management, productivity and efficiency
-Capital Productivity: Augment new revenue streams and extreme cost and margin focus
-Employer of Choice: Strong talent pool and robust L&D programmes
ITC Hotels: Growth enablers
ITC Hotels has been betting big on its strong expansion plans. Apart, the other key growth drivers include a strong zero-debt balance sheet and cash generation to accelerate growth capital. Its investments are estimated to be 8-10% of revenue cumulatively and will be used for renovation, ongoing projects and new Greenfields properties. Value-accretive M&A is seen as another key growth driver going forward.