With new hotel brands, ITC checks in with 'house of brands' model

In recent weeks, ITC’s premium luxury play, the ITC Narmada in Ahmedabad, has gotten attention because of its environmentally progressive features and international certifications. But there’s more action happening behind the scenes within the hotel chain that is amongst a few to own most of its flagship and luxury properties.

Most large chains such as the Taj Group (IHCL), Marriott, Hyatt Hotel Corporation and Accor have adopted a strategy that includes a house-of-brands approach. IHCL has Ginger, amã Stays & Trails, Taj, SeleQtions and Vivanta; Marriott operates 16 brands In India including St Regis, JW Marriott, W, Ritz Carlton, Le Meridien, Westin, Courtyard by Marriott, Fairfield by Marriott, Four Points by Sheraton and others. Accor runs nine brands that include Raffles, Fairmont, Sofitel, Pullman and Novotel.

ITC did have management contracts for its Fortune and ITC Welcome brands, but owned all its luxury hotels such as ITC Maurya, ITC Grand Bharat, ITC Maratha, ITC Sonar, ITC Royal Bengal and others. In total, it has a group of about 115 hotels with a total of over 11,000 keys.

The shift with the company moving to the asset-light or “asset-right” model where it’s quicker to accelerate growth also reflects a new focus on a part of the business that is growing.

“Having recovered from the setback inflicted by the pandemic, with the economy back on track, and people travelling extensively for both business and pleasure or bleisure in the domestic market, reports suggest that the industry recorded a 339.3 per cent year-on-year RevPAR (revenue per available room) growth in Q2 FY22,” said Nakul Anand, executive director, ITC Ltd. “ITC’s hotels business is well placed to capitalise on this trend through the launch of more properties and services.”

That will happen with the company moving to smaller hotels with more distinct identities. To this end, ITC has launched two brands — Storii, in the boutique premium segment, offering immersive experiences, and Mementos, a collection of unique luxury properties across destinations.

“We adopted a model where incremental room additions are expected to accrue through management contracts,” Anil Chadha, divisional chief executive for ITC Hotels, explained. While ITC has had brands such as Fortune and ITC Welcomhotel, the new labels target a new consumer.

Storii will select hand-picked boutique properties, curated for the new-age traveller and consisting of intimate leisure properties in the premium segment, and will range from 20 to 50 keys. The hotels will be in exotic locales, rich with history, featuring unexplored beaches, jungles, valleys and deserts.

Mementos on the other hand will have all the luxury elements of an ITC hotel, but because of its inherent nature may not necessarily need a corporate club (Prive) or multiple restaurants. “The focus is on the uniqueness of the destination. The experience will have flavours of both luxury and local,” Chadha said.

“It is absolutely a ‘house of brands’ approach and each one is different from the other, there’s no confusion between the product and service offerings of each brand,” he added.

Is the hospitality business growing fast enough to accommodate this expansion?

“The pandemic did push price points down across the industry but it gave birth to new opportunities/segments, that of the ‘aspirational traveler’ who now finds luxury hotels more attractive and accessible — and affordable,” said Dietmar Kielnhofer, area VP and GM of Grand Hyatt Mumbai.

Cities such as Mumbai and the National Capital Region have seen double-digit rate growth, but other smaller markets continue to showcase slow paced and sustainable upward trajectory in rates and average occupancies. “India is yet to see the return of the global (international) traveller, but the weakened rupee is leading to ‘enhanced affordability’ for them and the inflation rates are making it a compelling case to get price corrections. Most importantly, with the worst behind us, pricing across all segments and sectors can only go one direction — upwards,” Kielnhofer added.

Managing different price points in hotels and developing a corresponding pricing structure is all about market segmentation, identifying the appropriate target customer, and offering a diversified product (different room classifications) and capitalising on it, he pointed out.

ITC Hotels, whose revenues are still small compared to the group’s tobacco and foods business, saw occupancy and average rates in the first quarter of 2022-23 grow over the same period in 2019-20. In Q1 FY23, the hotels division achieved a revenue of Rs 555 crore, a growth of around 40 per cent, making it the best quarter ever for the company’s hotels business. “That’s also been the case for profit (before tax) at Rs 112 crore compared to Rs 10 crore in 2019,” Chadha said.

A sector analyst said: “Occupancy is averaging 70 per cent in the last few months, up by about 5 per cent from 2019 when business was stable. Average rates have gone up to double digits and are contributing to the rise in revenue.”

The question, though, is: Has ITC been late to tap the luxury boutique and premium mid-range space? “The industry is very dynamic. It moves and changes fast so it’s never too late, but the thought was to build a pipeline of properties that had a distinct story and a boutique feel for which the demand is optimum right now as we see it,” Chadha said. “Younger consumers want an experiential getaway and the last two years, where no one could travel much, triggered a new set of demands.”

One Mementos property will open this year and one more next year. “ITC will most likely add one Mementos each year and at least a couple or more Storiis every year,” Chadha said. Rates for Mementos will be dictated by the market and are expected to be in line with luxury pricing, while Storii will straddle the premium segment space.

There will be two boutique properties under Storii in Goa and Dharamshala with 57 keys in total under management contracts. Three more boutique properties with an addition of 116 keys across three locations in Himachal Pradesh will be added by the end of 2023. Mementos will kick off in Udaipur by the end of the year and the first offering will be called Ekaaya. Another Mementos hotel is coming up in Jaipur by mid-2023 and will have 260 keys.

Can it work? “ITC’s strategy is in one part increasing the organised segment, which is good for the whole industry because going via the management contract route will boost branded hotels. If it leads to a listing that will be even better,” says Patu Keswani, Chairman of Lemon Tree Hotels.

ITC’s new additions

Storii

1. Curated boutique properties for the new-age traveller in the premium segment, ranging from 20 to 50 keys
2. The hotels will be in historic sites, featuring unexplored beaches, jungles, valleys and deserts
3. Two properties are coming up in Goa and Dharamshala with 57 keys under management contracts
4. Three more properties with an addition of 116 keys across three locations in Himachal Pradesh will be added by the end of 2023

Mementos

1. Will have all the luxury elements of an ITC hotel but without a corporate club (Prive) or multiple restaurants
2. Mementos will kick off in Udaipur by the end of the year and the first offering will be called Ekaaya
3.  Another Mementos hotel is coming up in Jaipur by mid-2023 and will have 260 keys