With the Indian hospitality industry projected to grow at a rate of 8.8% between 2007 and 2016, Ashok Khanna, managing director, IHHR Hospitality of the Ananda Group, which runs the Ista brand of hotels, is optimistic that the coming times will be better for the sector. In a chat with DNA Sobia Khan, he spoke about the current scenario, tax structure, occupancy levels and his company’s plans. Excerpts from the interview:
What are the challenges before the hospitality industry and when can we expect a pick-up?
We can sense that things are turning for the better; but are still guessing what the outcome might be. Internationally, inbound travel has been impacted to an extent. July and August have met projections. We are receiving queries on bookings but conversions are yet to reach 100%. The challenges are not just owing to the global situation, but also because India as a country has become uncompetitive in the hospitality perspective, owing to an unfriendly tax structure. There has been a distinct slowdown in foreign business travel which is the mainstay of all five-star hotels. As a result, we see lower occupancies across the industry which, in turn, has led to a decline in the average room rates.
Do you see consolidation happening in the industry? Are you looking to buy distress properties?
One hasn’t really seen much movement in that direction and I am not aware of any such distress sales either. I don’t really see much traction on the M&A front. As far as we are concerned, we have a very distinct brand identity so we need to be cautious about acquisitions making sure that any such property fits with the Ista brand. From where we see it right now, organic growth is the only route for us.
Do you expect any corrections in the published room rates? What is the state of room occupancies in your hotels?
There has already been a correction. Rates came down industry wide by around 12-15%. However, ‘Ista’ hotels in Bangalore, Hyderabad and Amritsar offer five-star luxury at attractive rates. We have been cautious about reducing it further. We bring flexibility by working with dynamic rate structures reflective of the demand-supply situation. Throughout the summer we were operating at 50% occupancy despite a tightening of global travel to Bangalore and Hyderabad. We expect a strong pick-up during winter.
What are your investment and expansion plans?
We have a two-level plan, a) expanding the chain with more properties b) expanding the capacity of our existing properties. We commissioned feasibility studies some months ago to identify lucrative markets. Out of the nine key cities identified, we have opened in Amritsar and are already at an advanced stage of the project in Pune. After these, Ahmedabad and Coimbatore are next.
Where do you place yourself amid big hoteliers such as Taj?
There are many segments in the market that need to be catered. We have captured that under-served market which needs world-class service without the frills and fancies that customers neither wish to use nor pay for. Going by our repeat-guest ratio, it is clearly evident the younger businessmen and corporates prefer to use our services.
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