India seeing golden era of development: ITC Hotels MD Anil Chadha

The hospitality giant has cash and cash equivalent of Rs 1,500 crore

Anil Chadha, managing director of ITC Hotels, which has been demerged from ITC, shares his thoughts on a wide range of issues with Ishita Ayan Dutt in a video interview as the company sets out to chart out an independent journey and debut on the bourses. Edited excerpts:

 

How will the demerger shape ITC Hotels’ growth strategy? 

We came into this business in 1975 and it took us a few years to realise that we want to be a major player in this particular business. The company has progressed well. 

There comes a time when you realise that the time is right to branch out on your own. We are entering that zone with a zero debt balance sheet. We have ITC retaining 40 per cent (equity). So the fundamentals are very strong, which will only help accelerate our growth and make a much more valuable contribution to the India story.

 

You have cash and its equivalent totalling Rs 1,500 crore. How will you deploy it? 

If any inorganic opportunities come our way, we could look at them. But it all depends on how the route takes us there.

 

For acquisition, will you look at the domestic or international market? 

We will focus mainly on the domestic market because India is one of the biggest consumer markets and a land where everybody wants to come and invest. If you look at the ROCE (return on capital employed) or Ebitda (earnings before interest, tax, depreciation and amortisation) margins available today in India, the industry is on a good cycle. 

India is still an under-penetrated country when it comes to a lot of locations. High disposable income, the rail and road network, the number of airports today — all these factors back the India growth story.

 

You plan to expand in proximal markets. The Ratnadipa is now up and running and you have the Fortune in Nepal. What’s the next stop in the international market? 

The Ratnadipa happened when we thought it was the right time to enter international waters. That is the time we started looking at Sri Lanka. The hotel has been beautifully received. 

Then we looked at Nepal, where the Fortune has come up. We just signed up the Welcomhotel, which is a 300-room property and will take a few years. We are getting some leads from Sri Lanka and Nepal at this point in time.

 

You have six brands in your portfolio now. Which one is going to drive growth? 

India’s growth story is really the wind beneath our wings. The nation is witnessing a golden era of development. So as the saying goes, a rising tide will lift all boats. 

If you look at all our brands, their swim lanes are very clearly defined. We straddle all segments of hospitality, whether it’s ITC Hotels or Mementos in the luxury space, the Welcomhotels between upper upscale to upscale, the Storii, which is experiential, and the Fortune in the midscale. So, there is a brand available depending on the need for the city. 

But the scale will come from the Welcomhotel, Storii and Fortune. When we look at a pipeline right now, this seems to be evenly distributed across all the three brands. 

The average rate in India has gone up and we believe we are able to get a price that we deserve.

 

You opened 28 hotels in the past 24 months. What is the pipeline like? 

We have about 4,400 keys and around 45 hotels in the pipeline. The vision we have set for ourselves is 200 hotels and 18,000 keys by 2030, spread across all brands with selective investment of our own also.

 

Has occupancy or average room rates peaked in India? 

There is headroom to grow on both sides. Tier-II and -III additions will only help take that further. If you look at all the established markets — Dubai, Singapore, Shanghai, or Hong Kong — travel on a weekday is purely business or corporate and during weekends it is leisure. I believe we are getting there.

 

How is the second half of the financial year panning out? 

Our third-quarter results are not out as yet, so I can speak of the first half. Last year was our best year. We delivered 12 per cent revenue growth and 13 per cent Ebitda growth. And it was against the backdrop of the G-20 of last year, which was a boom time. So it’s been a very good story. 

The second half traditionally is better than the first.

 

Arrivals of foreign tourists in India are yet to go back to pre-Covid levels. What needs to be done to get there? 

India has the ingredients to get people in. If Indians can go abroad (for a wedding), why can’t a wedding come to India?