Puneet Chhatwal, Managing Director & Chief Executive Officer of IHCL, told Moneycontrol that the boost was the result of an expansionist strategy that was executed across all the group’s brands to play at the top of all its segments as well as new business ventures.
Indian Hotels Company Ltd., the Tata Group-owned operator of Taj hotels, said leisure travel helped the hospitality sector recover from the loss of business during the COVID-19 pandemic.
“Leisure across the globe and in the domestic markets has led the recovery in the sector which was demolished during COVID times,” Puneet Chhatwal, managing director and CEO of Indian Hotels, said in an interview with CNBC TV18.
Also Read: Air travel soars higher to 85% of 2019 level, revenue passenger kilometre up 49%
“The sector is back to pre-COVID 2019-20. We are almost at 130 percent plus on RevPAR (revenue per available room) recovery.”
Chhatwal said Indian Hotels has opened many hotels and “they are all in a kind of a settling down, stabilising phase,” mainly coming through rates, and “when the recovery is rate-driven, profitability increases.”
He added that the group opened 17 hotels in the calendar year and will open 17 more hotels in the financial year.
Also Read: Economic Survey 2023: Revival in tourism sector, but foreign arrivals below pre-Covid level
“A few of these hotels will be owned in the spirit of nation building as we’ve always done – putting Goa on the map, putting Andaman on the map, and now we’re going to do that with Lakshadweep, which is a very, very important project for both us and for the nation. We are also doing a combo hotel in Ekta Nagar near the Statue of Unity,” Chhatwal said.
Chhatwal said he was “fairly confident and optimistic” that they will start contributing more than 100 percent starting in Q1 and Q2 next year.
Indian Hotels had added more than 120 management contracts to its pipeline over the past four-five years, he said. Of these, 40 properties have been opened.
Also Read: Budget 2023: Expect sea of changes in tourism sector if proposals well executed, says FM Sitharaman
Post-COVID Recovery
The tourism sector is showing signs of revival after two years of Covid-induced challenges, the Economic Survey 2023, which was tabled in Parliament by Finance Minister Nirmala Sitharaman, said.
“The post-pandemic scenario of global tourism is gradually converging to the pre-pandemic one. With travel restrictions and health concerns subsiding, tourism has become a vital driver of a strong upswing in contact-intensive activity,” the survey said.
International tourist arrivals reached 63 percent of the pre-pandemic level in the first nine months of 2022, boosted by strong pent-up demand, improved confidence levels and the lifting of restrictions.
With occupancy levels at hotels in the country inching back to pre-pandemic levels and average room rates climbing, analysts said hotel stocks could gain further, after the re-open rallies of 2021 and 2022. Indian Hotels and Lemon Tree Hotels are the top picks in the hospitality sector, given their brand loyalty, robust pipeline, strong management and improving debt-to-equity ratio. Shares of Indian Hotels have gained 130 percent over the past three years.
Efficiency champion
Chhatwal said during the past three years, Indian Hotels has managed to reduce the employee-to-guest ratio to 15-20 percent. “The sector emerged as an efficiency champion. The sector operates 24×7 and 365 days, so you don’t have so much time to put every cost under the magnifying glass,” Chhatwal said.
The company reported an over fourfold year-on-year increase in consolidated net profit at Rs 383 crore for the quarter ended December 2022, a record high. Chhatwal said the margins achieved in the third quarter were both “maintainable and improvable.”
“The consolidated results include assets that we own outside of India, where these kinds of margins are very difficult to achieve. So a hotel in New York or a hotel in London or a hotel in San Francisco, Cape Town, they are still not back at even 100. So they’re at 90 percent or 92 percent of what they used to be in the 2019-20 period,” he said.
Steps taken in the Union Budget 2023Several measures to promote tourism on “mission mode” were announced in the Union Budget 2023. Finance Minister Nirmala Sitharaman said in an interview with Network18 on February 3 that she hopes to see a “sea of changes” in the tourism sector.
Speaking about the impact of the announcements made in the Budget vis-à-vis the tourism sector, the finance minister said: “If well executed and if the states and the Centre work together, I expect tourism to see a sea of change and inflow of both domestic and foreign tourists. This will help keep the economy active.”
The management expects domestic business to be healthy in FY24, driven by major events such as the G20 meetings and the ICC ODI World Cup cricket.
