ITC: Fortune in hotels

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ITC is set to add 25 more hotels under the Fortune brand in the next year or year and a half. “These are at different stages of development,” says ITC Executive Vice-president (hotels) Pawan Verma. The tobacco to paper, FMCG and hotels major runs 34 Fortune hotels at the moment through a web of sub-brands like Select, Park, Inn and Resort.

This is a part of ITC’s plan to expand the Fortune footprint by “20 to 25 hotels every year,” according to Verma. To meet this target, ITC would sign no less than seven alliances each year. The latest hotel under the brand, the 84-room Fortune Inn Haveli in Gandhinagar, Gujarat, for instance, is an alliance. The alliance partners have to spend anything between Rs 20 lakh and Rs 50 lakh per room to meet the ITC standards. Gandhinagar Hotels, the partner for this hotel, for example, invested around Rs 20 crore to refurbish the property and has seen a rise in room tariff. Fortune’s various sub-brands help ITC straddle different price segments in the same city as well as allow it move into lower-tiered cities.

Hotels were hit hard during the recent downturn when visitors cut their travel plans. The terror attacks on Mumbai in November 2008 compounded the problem. Occupancy in hotels dropped 50 per cent, according to analysts. Travellers began to downtrade. Because of that, some business went to mid-level brands such as Fortune. Still, the company had to apply the brakes on its expansion plans. “While we had been growing the Fortune brand at 25 per cent in terms of the number of hotels being readied, last year it fell down to less than 10 per cent,” says Verma.” Even so, ITC was able to put nine Fortune hotels on the ground.

Alliances are a good way to hedge the risks. ITC earns a fee for from the owner of the property for lending its name and running the hotel. The fee usually is a portion of the revenue earned. ITC does not need to invest in anything but advertising and servicing the hotels.

Meanwhile, competing brands such as Taj Vivanta and Gateway too have set targets for the next one and a half years. Owned by Indian Hotels Company Ltd (IHCL), which also owns the Taj marqee, these brands fit in the same range as Fortune. Ten Vivanta and five Gateway properties are slated to come up by 2011. Among the two, there are 23 operating properties. The new ones by IHCL would be a mix of both owned as well as managed hotels.

Set up in 1995, Fortune Hotels caters to the mid-priced segment in business and leisure stops. The 34 operating hotels have 4,777 rooms and are present in 44 locations. In the next three to four months, Fortune Select Excalibur in Gurgaon and Fortune Select Loudon in Kolkata will open. While contributing less than 20 per cent to ITC’s total revenue from hotels, Fortune comprises nearly 30 per cent of its 115 hotels. The brand could ultimately lead to ITC’s own properties as well. Plans are afoot to own two properties under the Fortune brand at Bangalore and Coimbatore in the next two years.