‘The good part is that the travel space is growing’
ITC Hotels, a 100-property chain, brought revenue of ~1,342 crore to the conglomerate in FY17, through the smallest of its business divisions. DIPAK HAKSAR, chief executive of the division, speaks to Ajay Modi. Edited excerpts:
We have seen improvement in (your) hotel occupancy and rates but are these good enough for sustained growth?
We do believe the third and fourth quarters will be more buoyant, the better numbers on account of more leisure and corporate travel. We hope to see some better growth in the MICE (meetings, incentives, conferences, exhibitions) segment of the business. Going forward, we should see gradual improvement in both average rates and the volumes.
What are the challenges for the hotel business?
The 28 per cent GST (goods and services tax) on tariffs (rates) will dampen the demand, as it increases consumer spending. It makes us less competitive. Even the restaurant tax, at 18 per cent inside hotels, compared to a five per cent rate for standalone restaurants, puts us at a disadvantage. These are some of the challenges. We have been raising these issues through various forums; there is a scope for rationalisation.
Hotels contribute less than three per cent to ITC’s revenue. What is the scope there to become a bigger category?
We are growing. As the market and economy expands, we are coming up with many new hotels. I do believe the numbers will only keep expanding and the share will grow. While other divisions are also growing, we have a place. We have just opened a WelcomHotel in Coimbatore and one each is coming up in Amritsar and Bhubaneswar.
We are working on signing for more destinations. ITC Kohinoor will open next year in Hyderabad. There is some tapering in the luxury segment but in the mid to upper scale, there is demand and people are coming up with projects.
A company presentation claims ITC is a leader in profitability in the hotels business.
We are leaders if you look at the past six-seven years. We have done extremely well, compared to peers in the industry. The hotel business had profit before tax of ~111 crore in FY17, on revenue of ~1,324 crore.
What model do you follow? Are the hotels owned or franchisee?
We have both. We have our hotels that we built and manage. Through our Fortune and Welcom brands, we adopt an asset-light strategy and manage properties. The WelcomHotel brand is growing. We have just signed an agreement for a hotel in Chail (Himachal). We will look for properties in Dharamsala, and more resort and tourist destinations are happening.
How important are online travel companies for ITC? Is there an effort to make consumers book directly?
All channels of distribution are important but the online platforms are certainly growing at a much faster pace. The objective of each channel is to drive the consumer to your brand. If the consumer connects directly with me, I am able to give a certain value which is not possible otherwise. That business also comes to us at a lesser cost to other channels, as you don’t need to pay a lot more. There is this constant tug that goes on. How do you make your brand.com more popular? Still, all channels have to co-exist. People will use different channels at different times. We do negotiate to pay a rationalised commission to these channels. The good part is that the travel space is growing and there is new demand.