ITC Hotels, the hospitality division of tobacco to FMCG conglomerate ITC, clocked revenues of over Rs14 billion last year. In the first half of FY19, the hotel business grew 16 per cent in revenue to Rs 7 billion. Dipak Haksar, chief executive, ITC Hotels and WelcomHotels, tells Ajay Modi that FY19 is going to be a year of strong growth, and tariffs are likely to see a substantial improvement in the fourth quarter. Edited excerpts:
How do you see FY19 for the domestic hospitality industry? Is growth in room rates following the occupancy?
The markets have shown growth, especially on the occupancy side. Demand has been stronger than the previous year. I think the corrections are taking place on the tariff side. We expect to see a stronger price correction in the last quarter of FY19. I call it correction because over the last many years, the industry has not been able to command a pricing power, even as costs have continued to go up. It is overdue. The industry could finish the year on a strong note.
What can support this price correction?
With demand getting better, there will be an increase. There is a normal increase around this time of the year as renewal of contracts with businesses also take place. So, a correction will happen. Things are looking up. If all goes well, this is going to be a great year for the sector.
Last year was a good for us. This year certainly looks very good. We have had two good additions in FY19: ITC Kohenur (Hyderabad) and ITC Grand Goa. Kohenur has assumed a market leadership in a very short span as far as price in concerned. In a span of thirty days of the handover, we were able to launch the hotel, which was Park Hyatt before. It is doing well. We expect a huge occupancy improvement in the last quarter.
What are the upcoming hotels for ITC?
In April 2019, we will be opening the 450-room ITC Royal Bengal in Kolkata. It is coming up in the same complex as ITC Sonar, which has 240 rooms. With almost 700 rooms, this is going be the biggest hotel complex in India. It will have large convention facilities, and should be a catalyst in bringing conventions and meetings, incentives, conferencing, exhibitions (MICE) business to Kolkata. We have another property coming up in Amritsar over a haveli that is being restored.
Once you create the necessary supplies and target certain segments, the demand will follow. If you look at the demand in each market, it shows India is growing. The improvement in infrastructure and connectivity increases the demand. It may take a while, but there is a correlation. Kolkata is going to be a very important gateway city for the eastern region, with increasing traffic from Bangladesh.
Is there a scope to expand presence in Delhi as well?
Delhi, as a market, is growing. We have four hotels in the National Capital Region. We will certainly look at the new opportunities coming up at Pragati Maidan and Dwarka.