Indian Hotels Eyes 33% Operating Margin By 2025
Indian Hotels has set itself a target of 33% operating margin by 2025, says Puneet Chhatwal, MD & CEO.
Tata Group-owned Indian Hotels Co. will not focus on expanding business and margins as the travel surged past pre-Covid levels after the pandemic-induced restrictions were withdrawn.
The company has set itself a target of 33% operating margin by 2025, Puneet Chhatwal, managing director and chief executive officer at Indian Hotels, said during an interaction with media. In 2018, it had targeted to reach 25% by 2022 but Covid didn’t help much, he said.
The pandemic restrictions in 2020-2021 hurt the tourism and hotels industry the most as people were confined to their homes. Travel has resumed with March crossing pre-Covid levels, and April and May saw significant growth over that, Chhatwal said.
In the last few quarters, Indian Hotels has seen margin inch up to close to 30%. “This gives us confidence to set ourselves an Ebitda margin of 33% by 2025 as part of Ahvaaan 2025.”
It’s new businesses the Ama homestay villas; Qmins, it’s culinary brand; and Ginger, affordable hotels will together account for 30% of the revenue by 2025, he said. The new businesses will have over 35% margin, said Chhatwal.
The group aims to scale up Ama to 100 by 2025, expand Qmins across 25 cities and take Ginger properties to 100 in the next three years, he said. And the plan is to have Qmins in all non-Taj properties, he said.
The company also aims to get more into management contracts.
About 60-70% of management contract fees flow through to bottom line, he said. The revenue from management fees plus new businesses Ginger and Qmins will help achieve the operating margin target, said Chhatwal.
In Mumbai, Indian Hotels is building a 370-room Ginger hotel, which it will sell and lease back. It also plans to start construction at Sea Rock near Taj Land’s End. This would be a combination of residences and hotel, he said, adding that the company is in talks with the municipal corporation for necessary approvals. The property is currently stuck in public interest litigation.
Indian Hotels had in 2019 tied up with GIC to acquire properties. That hasn’t taken off yet as the pandemic eroded value. The purpose was to acquire properties and manage them in an asset-light model, Chhatwal said. There are a few assets emerging through bankruptcy proceedings and the platform will consider them, he said.
Indian Hotels, however, will not buy any international properties, Chhatwal said, but will take up management contracts when opportunities arise. It plans to maintain 15% revenue share from international properties.