One new hotel in almost every six weeks. That’s precisely what the Indian Hotels Company Ltd (IHCL) is currently looking at in an attempt to widen its domestic footprint. But the company is still keeping its fingers crossed when it comes to turnaround of its US operations. The market is looking up in the US. Occupancies are improving and there should be a turnaround in the next 18 months, Raymond Bickson, managing director and CEO of IHCL, tells DNA in an interview. Excerpts:
Why is it that the US operations continue to remain under pressure? When will the scene change?
The hit on the US operations has more to do with the timing. We got in during 2005-07 and in 2008 came the crash. We shut one hotel for renovation for 14 months, which cost $125 million. The acquisition in Boston was done with about $170 million. In San Francisco, we spent about $60 million in acquisition. All this costs the company.
Now, the market is rebounding, occupancies are growingthough not as robustly as in India or Asia. All the three markets in the US, including the east and the west coasts, are growing. It’s going to get better.
When do you see a turnaround?
We are focussed on turning the US biz around in the next 18 months.
What about other global assets?
They are doing very well. The London hotels are doing extremely well and the Olympics season will also add to growth.
What’s the local scene?
We have 123 hotels in all and this year, we will open our 100th in India. Over 80% of our business is corporate. However, during the third and fourth quarters, we saw a higher proportion of leisure travellers and the rates too tend to go high.
In an ideal situation, we would like to have 50:50 revenues in India and outside. Nine years back, we had 22% international. Today, it’s 33%. Though Americas and Europe are down, Asia is up. Over 65% of revenue is generated in foreign exchange. So it is assumed to be from tourists.
There has been talk about oversupply in hospitality...
The past 10 years have been a period of growth, so many new brands entered. For us at Indian Hotels and for Oberoi, Leela and other brands, the challenge is to keep the market share intact.Earlier, the fight was between us. Now, the competition is about the domestic brands versus foreign brands. It’s going to intensify..
The market in India has grown from about 62,000 rooms to 130,000 rooms in nine years. China has 1.8 million rooms and it’s building 600,000 more. In the US, there are 3.7 million rooms and they are building 400,000 more. What we have done in nine years is being done in three years by these guys. The country still runs about 60-65% occupancy across all brands and categories. The market has absorbed all the new rooms that were built over the period.
What’s the plan for the Vivanta? Vivanta hotels contribute about one-third of the total revenue. We have 23 Vivanta by Taj hotels right now. In the next 2-3 years, we will have about 50.
When do you see profit growth?
We have sixty more days for Q4 and it is yet to be seen if the high rates since December would be maintained during February and March. But so far, the season has been pretty good. We expected a turnaround this fiscal, but the domestic environment was not very favourable and the pick-up did not happen. 2012 should be much better.
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