Taj ties up with Shangri-La in bid to expand global footprint
Taj Hotels and Resorts, a luxury hospitality chain run by Indian Hotels Company Ltd (IHCL), has formed a marketing alliance with Hong Kong-based hotel chain Shangri-La Hotels and Resorts in a bid to increase its footprint and global customer-base, while reducing operational expenses.
The move, the first of its kind in the Indian hospitality industry, comes at a time when several global hotel companies are consolidating. After it acquired Starwood Hotels and Resorts in September, Marriott International, with 18,000 rooms, has overtaken Taj Hotels to become India’s largest hotel chain in terms of number of rooms.
At present, IHCL runs around 100 hotels with more than 13,505 rooms in the premium segment under the brands Taj, Vivanta and Gateway. Of the total, 15 hotels are located outside the country.
In the first phase of the alliance, Taj and Shangri-La will integrate their loyalty progammes, which have a combined membership of six million customers worldwide. While the Indian firm has around one million loyal customers, Shangri-La, with around 100 hotels across the world, has about five million.
Members can earn and redeem loyalty points in any of the 200 premium hotels owned by the firms across 27 countries.
Through this partnership, Indian Hotels expects to target a significant portion of customers in markets such as China and West Asia. It also plans to attract customers from Singapore, Hong Kong, Bangkok and Vietnam, where Taj does not have a presence.
“Our presence in India is very good, but the international footprint is not as big as some of the other companies. So , the main idea of doing this kind of alliance was to find the like-minded brand who shares the same service philosophies and which can actually help us double the footprint of our locations,” said Chinmai Sharma, chief revenue officer of Taj Resorts and Palaces.
Sharma said revenue contribution from its loyalty programme has increased by 50% over the past year. In December 2015, the company revamped its Taj Inner Circle loyalty programme in a bid to increase its customer base.
The alliance with Shangri-La is also aimed at reducing the cost of customer acquisition as well as advertising and marketing spend.
IHCL has been looking for ways to bring down its debt of over Rs4,000 crore through various restructuring exercises. In the past one year, the company has also been aggressively strengthening its digital platforms in a bid to reduce its operational expenses.
“Through loyalty programmes, we are ring-fencing people who visit our hotels often so that they continuously use them as acquiring new customers is obviously more expensive. The alliance will help expose members to more brands and hotels. We are expecting an incremental lift in occupancy and less dependency on other expensive channels,” he said.
In the second phase, both the companies are also looking at integrating their sales and distribution network across the world, including cross-selling hotel rooms on each other’s sales platforms, particularly websites and call centres. “We are looking at the deeper integration depending on the success of the first phase. Second step is the larger brand integration and almost act as if we are sister companies. What both sides are thinking is the synergy of distribution in terms of sales and distribution. Another area which we will find synergy are the sales force,” Sharma said, adding that the companies may look at combining sales forces in certain parts of the world like North America.
The Hong Kong-based firm’s presence in India is limited to two hotels located in New Delhi and Bengaluru.
“Besides similar value and philosophies with Taj, we have minimum overlaps. Also both have equally established loyalty programmes... This partnership is something we feel its industry’s first. It’s something we are confident that with the two brands it can make this partnership benefit our customers and also for the industry as well,” said Ng Wee Kee, vice-president (loyalty and partner marketing) Shangri-La Hotels and Resorts.
Hotel experts said partnerships between two iconic hotel brands with such a large scale presence is significant for the Indian hotel industry. So far, alliances between independent hotels have been mainly formed through third parties like the Global Hotel Alliance.
“It’s absolutely a symbiotic relationship that they are getting into. Most of the hotel brands are in the asset-light model where they are not really investing in properties itself but only bringing in their resources, systems, processes and marketing might. This partnership is actually taking a step further where you are providing your marketing support to each other without putting much but except for the brands without any capital going into it,” said Gulam Zia, executive director (advisory, retail and hospitality), Knight Frank India, a property consultant.