Adopted an asset-right model, not asset-light: Top ITC Hotels exec

The demerger of the hotels business will allow ITC to strike the right balance between management contracts and own properties, Anil Chadha, divisional chief executive of ITC Hotels, has said.

In response to a question from Business Standard on whether the demerger offers an opportunity to build hotels, Chadha said ITC adopted an ‘asset-right’ model, which was not the same as an ‘asset-light’ model.

The cigarette-to-hotels major pivoted to an ‘asset-right’ model some years back after expanding the footprint of its hotels portfolio. Most of the large organised players moved to an asset-light model by then. More than 50 per cent of ITC’s room inventory today sits in the ‘managed’ portfolio. Overall, room inventory has also grown in the past few years.

“We have grown at a rapid pace over the past three years and our inventory is up by about 20 per cent since 2018-19 from over 10,000 keys to about 12,000 keys today,” Chadha said.

However, ITC’s proposed new hospitality company would also be well-funded to take care of any potential investment opportunity. 

Chadha said that the new company would have a strong, debt-free balance sheet, with marquee properties and good cash flows.

“It will also be funded for its capex requirements for the initial 2 or 3 years through liquid investments.”

Hence, this new company will have the flexibility to raise capital for potential investments either through its own resources or through debt, as required, he added.

Among its own properties in the home market, the company completed ITC Narmada in Ahmedabad in 2022, which according to reports, has done brisk business in the wake of the ICC Men’s Cricket World Cup.

Its first international property, ITC Ratnadipa, in Colombo, Sri Lanka, is said to be ‘progressing well’. It would have over 350 rooms, suites, and serviced apartments, large pillarless banqueting space, and bring ITC Hotels’ signature dining experiences to Colombo, Chadha said.

Post-Covid revival

The hospitality industry, which was in the throes of a crisis during the Covid-19 pandemic, has seen a tremendous bounce-back. In the July to September quarter (Q2FY24), ITC's hotel segment clocked a record high second quarter performance, with revenues up 20.5 per cent year-on-year (Y-o-Y) to Rs 675 crore and pre-tax profits 53 per cent to Rs 132.95 crore.

Post-pandemic, there was a clear increase in interest in exploring Indian destinations, Chadha said.

The future expansion, he said, would be fuelled by the opportunity residing in India’s booming domestic hospitality industry, which was poised for significant growth in the days to come, given the government’s thrust on creating a robust tourism infrastructure.

Season of optimism

The prestigious G-20 summit held in New Delhi was a shot in the arm for the brand Bharat and also for ITC Hotels, Chadha said. "This global event gave us an opportunity to showcase the best of Indian hospitality through destination and cuisine experiences.”

ITC Maurya hosted the president of the United States of America, Joe Biden, and the entire US delegation. The iconic property has a history of hosting US presidents, though – from Bill Clinton to George W Bush, Barack Obama, and Donald Trump.

More international events like the Cricket World Cup 2023 and the Miss World 2023 are being held in India, which reflects a huge positive sentiment, Chadha said.

 “The second half of the year typically has always been stronger with all the festivals coming up in addition to the auspicious dates for weddings. We expect this momentum to continue at our properties, especially leisure destinations,” he explained.

He noted that this was the first year post-pandemic to witness the revival of foreign tourists coming into the country, which was impacted from 2020 to 2022. “This also augurs well for the season.”