STRATEGY: Expressions to take wing

How Indian Hotels is unlocking the potential of its non-hotel brands. SHALLY SETH MOHILE writes

After being cocooned for several years in the havens of the Taj at select locations, the Indian Hotel Company’s non-hotel brands in the retail, lifestyle, volume catering and food and beverage (F&B) segments are finally getting their wings. To lend a sharper focus to the non-hotel brands, two years ago, the hospitality arm of the Tata group that owns and operates the Taj, Vivanta and Ginger brand of hotels, regrouped them under an umbrella brand called Expressions.

As part of a larger strategy crafted by Puneet Chhatwal, managing director and chief executive, Indian Hotels Company Limited (IHCL) has adopted a two-prong strategy to unlock the potential of its existing brands by taking them to new destinations and introducing new formats in the food and beverages (F&B) space where it already boasts of 380 brands. “There is no one size that fits everything. We have to do a combination of things,” Chhatwal told reporters at company’s annual event last month. There is a lot more to IHCL than the Taj, a brand that has got all the attention all these years. “Taj does not need the support. In the meantime, some of the brands have become mature and we have decided to let them grow on their own," he said.

As part of re-imagining the F&B segment, IHCL has tied up with AB Inbev, the world’s leading brewery, for an industry first on-site chain of microbreweries. It has also partnered with globally acclaimed Italian restaurant chain, Paper Moon, and will open the first Paper Moon in India at Taj Fort Aguada Resort & Spa, Goa.

To be sure, there is a growing appetite for food business in India. According to CARE Ratings, the restaurant and food service industry is set to register growth of about 10.4 per cent CAGR for the next five years between 2018 and 2022 to reach ~5.5 trillion by 2022. It will be fed by a higher disposable income, favourable rising aspirations of the burgeoning middle class and growing urbanisation.

Nandivardhan Jain, chief executive at Noesis Capital, a hotel investment advisory firm says while most five-star luxury brands excel in managing hotels, they lack competitiveness when it comes to running restaurant chains. The revenue per square foot of a fine dining, high-end restaurant is double that of a restaurant in a five-star hotel, says Jain. ITC Hotel’s Peshawari is a rare example of a hotel restaurant doing exceedingly well and that shows earning high revenue and margins is very much doable, says Jain.

It is the same with the spas and salons or any other retail outlet the hotels might have. Their margins are very thin and far from their real potential. “These businesses can do much better, if the hotel companies start treating them separately as separate profit centres, have dedicated teams for marketing, distribution and other key functions,” Jain says.

Existing F&B brands that enjoy iconic status across the world are also being scaled up. For instance, Shamiana opened at Taj Jumeirah Lakes Towers in Dubai. The House of Ming will soon open at St James Court in London. Bombay Brasserie will be coming up at Vivanta Heathrow in London.

At present, F&B accounts for over 40 per cent in IHCL'S revenue. Of this, only 12 per cent comes from branded restaurants. This is set to grow under the new plan.

Meanwhile, The Chambers — Taj’s exclusive business club has also got a new look

and relaunched with enhanced features and benefits, including global membership and additional exclusive services and experiences. The Chambers at Taj Mahal Hotel, New Delhi, is being renovated extensively to become the flagship Chambers of IHCL. A new Chambers is coming up at Taj West End, Bangalore, and another in London, later this year.

The company’s in-flight volume catering business under the Tajsats brand is also set to spread its wings with the management working at reducing dependence on the aviation business. It got a new visual identity for Tajsats, which controls about 34 per cent of the airline catering business in India. Over the next couple of years, the IHCL is looking to have a presence in 15 airports in India and launch a new brand called Anuka under Tajsats. It will also invest in a central kitchenbased production model.

The strategy of paying greater emphasis on brands other than hotels will help IHCL company shield itself from the seasonality of the hotel business and beef up the overall margins, says an analyst at an equity firm. The success of Chhatwal's plan will hinge largely on execution, he says.