Indian Hotels' only Taj brand plan delayed

Is the top management at Indian Hotels Co Ltd (IHCL) rethinking its former chief executive officer and managing director Rakesh Sarna's decision to migrate all 'Vivanta' and 'Gateway' branded hotels to a single identity 'Taj'?

The Tata Group's hospitality firm IHCL, which owns and operates hotels under the 'Taj Hotels Palaces Resorts Safaris' banner, has already overshot its December 2017 deadline for transitioning all the 58 hotels under Vivanta (31 hotels) and Gateway (27 hotels) brands to Taj.

The hospitality chain continues to prominently display Vivanta and Gateway brands on its website as well as includes them in the company description note in its communications.

IHCL did not comment on DNA Money queries seeking clarity on the delay and rethink of their mono-brand strategy.

Sarna, the brain behind this alignment of brand architecture and a confidante of ousted Tata Sons chairman Cyrus Mistry, resigned from IHCL three months (in May 2017) after finalising the luxury-focused mono-brand strategy for the hospitality chain.

In August 2017, Deutsche Hospitality's chief executive Puneet Chhatwal was brought on board IHCL as MD and CEO to replace Sarna, who continued (on request of the IHCL Board) to hold the office till September 30, 2017.

And as is the case with every new CEO who joins the company, the executive will come with his understanding of the hospitality industry and the ways/ means/ strategies he would like to put to work and grow the company's business under his leadership.

Industry experts are of the view that Chhatwal has a very good understanding of brands and marketing strategies. Besides, experts said, he will not blindly follow whatever has happened in the past and will definitely review the decisions taken by his predecessor.

"I'm sure he's done his homework on the brand alignment exercise, the why's and how's of whether to keep the Vivanta and Gateway brands or discontinue them all together," said an expert requesting not to be quoted.

Industry experts said Chhatwal may look to retain the Vivanta and Gateway brands and also consider adding another brand to the existing bouquet of offerings. "While Sarna had defocused from expanding out of India, Chhatwal may also reconsider that move and leverage his overseas exposure to build Taj presence in the international markets," said another top executive from a leading consultancy.

Sarna's decision of migrating to a single brand strategy playing in the luxury segment only was a bold one. But it wasn't really a practical one considering there were quite a few hotels in the IHCL portfolio that didn't really fit into brand Taj's luxury positioning.

"Accordingly, hotels not meeting Taj quality standards will either have invest in upgrading the asset and its offerings or go out of the IHCL network altogether. The latter case would mean a considerable decline in IHCL's visibility in the market," experts said, adding that conversions (from one brand to another) as a strategy to expand footprint and reach in the market is already gaining a lot of traction in the Indian hospitality industry.

While there have been some instances of migration like the Vivanta hotels in Gurgaon and Bekal becoming Taj branded hotels, the company also witnessed a clutch of Gateway branded hotels in Khajuraho, Hubli, Raipur and Rawalkot Jaisalmer exiting the network. The total number of hotels is down from 101 hotels last year to 99 hotels at present. The company also opened a hotel in Amritsar under the banner Taj Swarna.

The multi-brand approach adopted by IHCL was the need of the hour back then as competition from Indian and global hospitality chains was getting very intensive. While the premium and luxury hotels were facing own challenges, it was the business, mid-market and budget hotels segment that showed (and continue to even today) promising business and growth potential.

It was for this very reason that IHCL felt it necessary then to design a new brand architecture to tap new opportunities. The structure currently followed by Taj group of hotels was put together by brand consulting and design firm Landor Associates in the early 2000s during the tenure of Raymond N Bickson who was MD and CEO of IHCL for 12 years between 2003 and 2015.

The idea, as advised by Landor, was to move away from a mono-brand structure to a sun-and-planets model. The roadmap for the future stressed on reserving the Taj brand for the luxury segment only while also creating distinct sub-brands to tap the other viable market segments.

Accordingly, this led to the creation of two additional brands – The Gateway Hotel (launched in 2008) and Vivanta by Taj (launched in 2010). Another brand 'IndiOne' introduced in 2003 as smart, basic hotels was later rechristened as Ginger.

Basically, a four-brand strategy was put in place by Landor with Taj as the top-tier luxury brand, Vivanta by Taj – a full-service upscale brand endorsed by Taj, The Gateway Hotels & Resorts – a mid-market business travel brand and Ginger – an economy / budget brand having no connection with the Taj name and operated by a separate subsidiary of IHCL called Roots Corporation Ltd (RCL).

"At that time, the Indian hospitality industry was witnessing intensive competition as a result of which it was necessary to protect the luxury positioning of brand Taj," said a former Taj group executive. "Also, the economy was doing very well throwing many newer and attractive opportunities, including the mid-market and budget segments. One couldn't really ignore these segments and put money on the table saying we are not going to address them. That's how Gateway, Vivanta and Ginger were born," the executive said, requesting not to be quoted.

It now remains to be seen what approach will the new leadership under Chhatwal take to build and strengthen IHCL's equity in the market not just in India but across the globe.

MULTIPLE IDENTITIES

• IHCL may look to retain the Vivanta and Gateway brands, according to sources
   
• It may also consider adding another brand to the existing bouquet of offerings
   
• He may also leverage his overseas exposure to build Taj presence in the international markets