The Indian Hotels Company Limited (IHCL) will be relaunching its budget brand, Ginger, in the next few weeks, a move that follows its switchback to multi-brands in February.
Ginger, already a leading affordable hotel brand in India, would be given a new design and identity, and in its new phase could be a limited service, premium economy or a junior mid-scale hotel, said IHCL’s managing director and CEO, Puneet Chhatwal, during a Q&A moderated by this author at the South-east Asia Hotel Investors Summit in Bangkok on Tuesday. He believed the relaunch would help scale Ginger rapidly in the local market.
Scale is one of four reasons Chhatwal reversed a move made by his predecessor, Rakesh Sarna, early last year to concentrate everything under a single brand, Taj Hotels, Palaces, Resorts and Safaris.
When asked why he brought back the upper upscale Vivanta and the upscale Gateway, Chhatwal, who took up the IHCL mantle last November, said: “Scale cannot come only from luxury, and if you don’t have scale, you become irrelevant – even in your own home market. The growth, as per all studies, as per STR, is coming in the upscale and economy segments. Over and above that, we are present in all the luxury destinations – at least within the Indian sub-continent – with not one but multiple assets, so that would have meant the demise of growth.”
He added a one-size-fits-all approach does not work in a heterogeneous country like India, where there are “a lot of important secondary, tertiary and semi-tertiary markets and they can’t all afford to have luxury hotels like Taj”.
Third, margins are higher in limited service, which requires less resources. “So some of these brands help you drive margins and if your margins are higher, you’re less volatile, you’re a stronger company on the stock exchange, which we are,” he said.
Last but not least it’s about IHCL’s ‘honour’ culture. “You can’t just tell an owner with whom you’ve entered into an agreement for 20 years – ‘listen, now we have changed our strategy and we will do only one brand, thank you very much’ – I mean, there’s a legal obligation, there is a moral obligation, there is a collaboration obligation,” he said.
Chhatwal said the decision to revert to multi-brand was made by the entire management leadership, and that his predecessor must have had some reasons at the time to pursue the single-brand strategy. “At this cycle we’re in, we’re getting a little bit of tailwind; it makes sense to expand than contract,” he said.
When asked if his priority was to defend IHCL’s leadership in India or expand its international footprint, Chhatwal was clear the company would do the former but at the same time expand globally “slowly and carefully”, and in commercial capitals that have a strong connection with the Indian diaspora, citing cities such as Toronto, Manchester, Birmingham, Bangkok, Singapore and Kuala Lumpur as examples.
On hotel chain consolidation, he does not believe that legacy Taj will be acquired, though never say never. “Anything can happen anywhere in the world, but I do believe that Taj has a very special place in the hearts of the Tata Group. This was the second or third company that was launched and the story was, Mr (Jamsetji) Tata was refused entry into a hotel because he was not British (common across British India at the time). And that’s when he acquired Taj (Mahal Palace Mumbai in 1903) and named the company Indian Hotels Company Limited.
“I think there is culture, pride, legacy, sense of belonging. It’s a very strong name, one of the exceptions within the group that does not have a Tata name to it. So there must be some reasons for it,” said Chhatwal.
What about ICHL acquiring instead, in order to build scale? A source told TTG Asia that ICHL is in talks about an acquisition, but Chhatwal was only able to say: “We will always evaluate opportunities…”
During the session, Chhatwal also gave his take on the USPs Taj has when competing with the big boys for projects; on the fate of smaller hotel groups; on the need for smaller chains to collaborate, such as with the Taj and Shangri-La alliance; on how he’s taking the best of American, European and Asian styles of management into IHCL; on how IHCL builds loyal staff – watch the video here.