‘New revenue streams are high-margin businesses’
4 min read 24 Mar 2022, 01:44 AM ISTTourism, hospitality and airlines were destroyed in this pandemic. But it’s not just the sector. It is losing millions of jobs, says Puneet Chhatwal, MD & CEO, IHCL.
PremiumNEW DELHI : Indian Hotels Co. Ltd (IHCL), which owns the Taj group of hotels, announced a framework to drive its sustainability and social impact measures under Paathya on Tuesday. The framework includes long-term goals such as eliminating single-use plastic across all its hotels, re-using wastewater, skill-building and employability for the marginalized, Puneet Chhatwal, managing director and chief executive of IHCL, said in an interview. Chhatwal also spoke on the impact of the pandemic, measures taken by the company to mitigate its effect and tourism in India. Edited excerpts:
You were re-elected as president of the Hotel Association of India. What has the body achieved?
The one thing we have definitely achieved in the last few years is that everybody now sympathizes with the sector. Tourism, hospitality and airlines were destroyed in this pandemic. But it’s not just the sector getting destroyed. It is losing millions of jobs. The attention that we have got in the last two years is equal to the attention of the previous 40 years. There may not be tangible things that the industry received, but the voice has been heard or has come across.
What measures did you take to mitigate the impact of the pandemic?
During covid, we launched six new brands and 12 new campaigns. One of those is Qmin, our food delivery service, offering dishes from signature restaurants of the Taj. This was launched in June 2020. Then we had this thought and started the idea of Ama (amã Stays & Trails) our homestays, which was taken to a different level, the speed at which we have added them, there is almost a portfolio of 75 homestays. We also launched Anuka, a QSR brand under TajSATS and artisanal chocolates called Asa. We also launched the Qmin shop.
We launched a microbrewery called Seven Rivers Brewing Co. in Bangalore. So, these are all new brands and new businesses which are all very successful. The second microbrewery is opening in late April or early May. Plus, we had a very famous brand called House of Nomad in Taj Lands End Bandra. This brand, along with alcohol firm Diageo and Seven Rivers with AB InBev, as one large outlet with a beer garden in between, is coming up at the Taj Holiday Village in Goa which will launch in six weeks.
Will alternative revenue streams be a long-term play for Taj?
Alternative revenue streams become very large when your revenue becomes very small. When revenue goes back, they become small again. The question is will we be able to scale up these businesses, so they become more than a double-digit contributor to the total revenue? For us, it is very important.
Because these are all incremental revenues, based on only incremental cost, that means we had the space; we had the kitchen, we were paying the electricity bills, we are paying the property tax. So, it is only the variable cost of delivery. So, the margin in these new businesses is more than 50%. The margin in the traditional businesses is much lower—is less than half of that. So, the more this percentage increases, the more healthy and robust is the financial outlook for the industry, which means more Paathya and more we are able to make a difference.
What is Paathya, and can you tell us the philosophy behind it?
The philosophy is to do a 360-degree initiative in taking the leadership position of changing the mindset and contributing to the industry, the planet and basically doing the right thing. It’s CSR and charity; the whole thing begins at home. I very proudly say I have helped this hotel remove unnecessary sets of towels.
During this pandemic, the world has learned lessons. You wash more, which means it’s not friendly to the environment. Not only that, when you wash more, products deteriorate faster. The people folding and putting these excess products also need those few extra minutes. You can multiply this by almost 500 rooms. Paathya means every step must be logical. It is a journey focused on environmental stewardship, social responsibility, excellence in governance, preserving heritage, value chain transformation, and sustainable growth.
Will the surge in domestic tourism be a sustained source of income for hotels?
During the pandemic, we saw in the news and on television how roads towards places like Himachal were blocked…Chandigarh onwards to Shimla, Kalka…This behaviour of people is not going away.
People will drive much like what happened in the Western world and in the US when people used to drive long distances with their families. This trend is going to stay.
Did you sign new hotels during the pandemic?
We signed more hotels than anyone else, and we opened more. So now, when the markets are coming back, and we will see the growth or the numbers, they will make us look better in Q3. In Q3, we very clearly outperformed the rest of the companies, whether through these new businesses, new innovations or new projects under management contracts.
Are you focusing more on the asset-light model?
Our “asset-light" model for new growth, coupled with the “asset-heavy" model of the past, are very well positioned because the “asset-heavy" brings in the volatility when the market comes back into full swing. And asset-light gives you that percentage increase in the margins. So that’s the little science behind it. We had launched ‘Aspiration 2022’ in February 2018. In this, we had said we would increase our margins by 800 basis points and have a balanced portfolio of 50-50 (50% owned and 50% managed hotels) and add 15 hotels to the pipeline every year. Till covid came, we achieved 80% of those goals in 50% of the time.
