Raymond Bickson, managing director and chief executive officer of The Indian Hotels Co. Ltd (TIHCL), says the Taj has flanked itself well as competitors such as the Marriotts, Hyatts and Radissons of the world enter India. Speaking to Mint after unveiling the refurbished Taj to the media, Bickson says the chain has recovered well from the double whammy of 2008 terrorist attack and the economic downturn. Edited excerpts:
Hands full: Bickson says Taj has opened a new hotel every seven weeks for the last six years, and the chain has 50 projects on the design board and development stage. This year, the company plans to open 15 hotels. Abhijit Bhatlekar / Mint
It would have been very difficult to retain the heritage look of the hotel? The “Tajness” if we can borrow your phrase.
To keep the “Tajness”, it was extremely important when we designed and worked with the interior designers and architects to redo and restore the hotel... If you recall, Mr (Ratan) Tata, Mr (R.K.) Krishna Kumar and I were standing in the driveway when we opened the hotel after 21 days. Remember he (Tata) said that we will rebuild this hotel, stone by stone, brick by brick, and we will make it better than ever before. It charged all of us.
Remember, this is oldest company in the Tata group today. The original business of the group was textiles, which the group exited 30-40 years ago. We had 109 annual general meetings and we are going through the 110th year, while the group is 142 years old. So Taj is not only the heritage but the face of the Tata group. And before Jaguar and Nano came, the most luxurious brand that the company owned was the hotels. Also we were lucky that our chairman is an architect. Whenever we have a new building and when we want to add new designs, we have been always been fortunate to get his attention here.
In 2008, TIHCL faced two onslaughts, the terrorist attack and the economic downturn, but the company has kept itself very busy.
It was a double whammy. We have huge opportunities. We have managed assets well. We have folded up five hotels that didn’t fit. We had raised funds. We went in for a stock split. Actually, we have done a lot of good things.
If you look at our annual report in the last 40 years, the best ever year, for the global industry and for India, was 2007. Even in 2009, during the downturn, it was the fourth and fifth best earnings in 110 years of our existence. So, if one looks at the hotel companies in the West, we are doing extremely well. We are extremely bullish on what we see for the future. We have been growing both domestically and internationally.
Let us talk about the new projects on the anvil. TIHCL is on an overdrive, as if nothing happened.
At least 38% of the new hotel projects in India are Taj projects. Every seven weeks for the last six years we have consistently opened one new hotel. We have 50 projects on the design board and development stage. This year, we are opening 15 hotels, that’s without counting acquisitions. When I came in 2003, TIHCL had 61 hotels and 8,300 rooms. In 2010, we have 104 hotels and 15,500 rooms. If you consider the new projects, we’ll put 44 hotels and 12,000 rooms. That will be about 140 hotels and 38,000 rooms. We want to double our revenues to $2 billion (Rs.9,380 crore). In 2007, before the downturn, we had crossed $1.4 billion. We were India’s first billion-dollar hotel company.
Big names from the hospitality industry are entering India. How do you mitigate these risks of having a strong presence in India?
Because international hotels are entering India, we were forced to go overseas to protect market share. As these global brands come in, they come with their huge loyalty programmes. A person in San Francisco does not know who the Taj is. In India and South-East Asia people know the Taj. So, we went to San Francisco to protect our market share for the next 100 years. About 24% of the market in India is Taj. Some of the new projects are management contracts, a few are joint ventures and in some we have our own equity. In the Indian world and in the South-East Asian region, we are a 800 pound gorilla in that space. We want to keep it that way. We want to maintain our market share. The companies that come in—Four Seasons, Ritz-Carlton and Shangri-La, I don’t want them to chip away at our segments. Our hotels have to be No. 1 or No. 2 in the categories we are in. If it doesn’t make that grade then we’ll sell it or get rid of it. And we do every once in a while, like we did in Baramati, Seychelles and Mauritius.
TIHCL has a debt of about Rs.4600 crore. Are you over-leveraged? How’ll you fund the new projects?
Our funding requirement for the next three years would be around Rs.1,900 crore. With that, our debt to equity ratio would be 1:1. We are not highly leveraged. Taj GVK, Piem hotels (TIHCL’s subsidiaries) are done keeping in view how much their balance sheets can sustain. In San Francisco, Sydney we own the hotel properties. The idea is to grow. Bankers will give us money. We have assets that are not monetized. I can float Ginger (budget hotels) in two-to-three years. We haven’t because we want critical mass. We could have done 200 Ginger hotels in India. Right now we have only 30 Ginger hotels. But 30 hotels is much more than any other hotel group has done.
In India, we have different problems. We have to acquire land. We launched a new brand and 30 hotels in three years. If we deliver what we have promised, that itself is quite enough. That’s all organic growth. Tell me, how many can set up 30 hotels in such a short span?
TIHCL has a lot on its plate. But you’ve been silent on Orient-Express (the US hospitality chain that TIHCL tried to buy in 2007).
The only reason it is a challenge is that the market is down. And the stock is in a position that we cannot do anything. We bought for more. But we’ve been around for 100 years and we are prepared to wait for three years. Will that drastically change the position? I don’t think so. We’ve to have the comfort. Shareholders and analysts will come around to the view that we’re not a fly-by-night company. We’re one of the most respected business houses in India.
TIHCL has not made any major acquisition or made its presence felt in Europe or China, while you have been very active in the US, South-East Asia and Australia.
Europe is hard because the entry barriers over there are very high. In China, we have a presence in Beijing. The property is called the Temple of Heaven. It is a management contract. We are ready. It is a world heritage site. It is in a central business district. So the pressure is on the owner than on us. We have $3 billion in all our projects. Whether it is in Dubai or Doha where we have management contracts. We have no equity in those projects, but we can take loans on the management contracts.