The Indian Hotels Company said that it was making progress towards its 2022 target of having half its portfolio fee-based.
The results came as Hotel Leelaventures’ deal with Brookfield Asset Management was paused by the Securities and Exchange Board of India after objections from two minority shareholders.
In a call to analysts, Puneet Chhatwal, MD & CEO, IHCL said: “For Indian hospitality, demand growth has been outpacing supply. There has been a sustained revpar growth and an average rate growth of 2.9% and an occupancy growth of 80 basis points. However, on the low side, the year saw the outbreak of Nipah virus, Kerala and Karnataka floods, a depreciation in the rupee and a turmoil in the airline industry.”
The company outpaced the wider market in the full year, with revpar up 6%. It reported 10% revenue growth to INR4,600 crores and Ebitda up 25%.
IHCL signed 22 new contracts in the full year and added another four signings in April. Chhatwal said: “Some of these signings are iconic assets, both within India as well as in international markets like Dubai or London Heathrow.”
Of the signings, 18 were management contracts and four were operating leases. Following the signings, the CEO said that the group had increased its management contracts from 32% to 40% of the portfolio, taking it closer to its 2022 target of 50% fee-based business and 50% leased or owned.
Last year saw five new openings, with the company forecasting that it would open a hotel per month in this financial year.
Last month saw the company launch of a new collection brand, SeleQtions, with 12 sites. Chhatwal said: “SeleQtions will allow IHCL to cater to a broader audience of travellers who prefer staying in hotels with a distinctive character. SeleQtions also includes hotels that have a slice of history, defining location or a differentiated theme. We believe the brand has immense potential to grow.”
The company has also moved into homestays, with Ama Trails & Stays, a group of heritage bungalows, guesthouses and homestays at unique locations across the country. The company signed a management contract for nine bungalows with Tata Coffee in Coorg and Chikmagalur and is adding two of its own bungalows in Goa by mid next year under the Ama umbrella. The flag hopes to expand to 100 sites by 2020.
Chhatwal told Hotel Analyst: “We didn’t have to invest, we had these properties available. We can add our operational expertise as well as sales & distribution and branding & marketing and we think this will help optimise the sales and profitability of the business. We’re not adding staff, we’re not adding cost. It’s optimising the structure we have and utilising it to a higher extent. I don’t think we are there to compete with Airbnb and the others in the peer-to-peer segment, it just happened as a result of the group chairman’s three S strategy: scaling, simplifying and synergising.”
The results came as Brookfield Asset Management’s attempts to buy four hotel assets from Hotel Leelaventures was paused by the Securities and Exchange Board of India after two minority shareholders objected to the deal. ITC, which has a 7.92% stake in Leela, and another minority investor, Life Insurance Corporation of India, accused the company of “oppression and mismanagement” and claimed that the deal was against the company’s and shareholders’ interests.
In April nearly 86% of shareholders voted in favour of the resolution with institutional and non-institutional shareholders supporting it by over 70%.
Sebi said: “While these representations are being examined by Sebi, in view of the paucity of time involved and in the interest of investors in securities, you are advised to ensure that none of the transactions proposed in the postal ballot notice dated March 18, 2019 are acted upon till further directions from Sebi,”
Brookfield Asset Management was to acquire four Leela hotels in Delhi, Bengaluru, Chennai and Udaipur as well as the Leela brand and a property in Agra, paying INR3,950 (EUR51m).
Brookfield Asset Management was not the first company to have looked at Leela – Minor International was also thought to have shown an interest and Blackstone Group has been linked to the company since 2007.
HA Perspective [by Katherine Doggrell]: The Indian Hotels Company under Chhatwal is rapidly modelling itself after the other global operators, having shaken off its debt and now expanding its brands into more asset-light territories. Indeed, into other territories entirely, including homestays, with the help of its parent Tata Group, illustrating the delights of being part of a large conglomerate, something the likes of Marriott International cannot lean on. Further synergies are expected.
For now, the benefits of the additional brands were being seen in the growth of the loyalty programme, and the CEO telling analysts that promoting the group’s own website had meant more direct bookings, a handy-to-have, as the rapid pace of new openings was likely to mean a hit as the properties stabilised.
Meanwhile at Leela, where attempts to emerge like a butterfly from the debt chrysalis were proving tougher, someone close to the situation told us: “In India, it’s not over until the fat lady sings”.