Rohit Khosla, IHCL’s EVP-Ops for North, West and East India, explains how his CEO’s “most iconic and most profitable” mantra translates on the ground and how the drive for profitability cannot ever be at the cost of the famed Taj service culture
HOTELIERS HAVE TRADITIONALLY seen themselves as innkeepers. Now, it’s time, according to Rohit Khosla, IHCL’s Executive Vice President-Operations for North, West and East India, for them to became “businessmen innkeepers” -- as caring of their guests as they are of the topline.
Explaining how IHCL CEO and Managing Director Puneet Chhatwal’s “most iconic and most profitable” mantra is to be interpreted, Khosla said it envisages continuing with the service culture that has become synonymous with the Taj while at the same time adding the “dimension of profitability”. Even as they delight their guests, Taj general managers, in the new dispensation, have to keep an eagle eye on the returns on investment.
Chhatwal’s mandate is to lift the margin by 2 per cent a year between 2018-19 to 2021-22, or 8 per cent in all, of which 4 per cent will be contributed by the topline (revenue growth) and the remaining 4 per cent by cost efficiencies. The other target is to achieve a 50:50 balance between owned and managed hotels.
Khosla now heads 55 hotels -- 30 managed and 25 owned, including three SeleQtions hotels: The Ambassador, President and Blue Diamond -- with 6,800 rooms and 14,000 employees. In 2022, his portfolio will swell to 80 hotels, 40 of them managed. “The right mix of owned and managed hotels is important both for our earnings and to protect ourselves against market risks,” Khosla said, consulting a tightly printed Excel sheet, which travels with him in his inside pocket, crowded with numbers he needs to remember and quote.
“People call this an asset light model, I call it asset right.” Speaking at the magnificently refurbished lobby of the Taj Palace in New Delhi, where he began his association with the Taj brand as the hotel’s executive assistant manager, the much- travelled hotelier who has worked in Yemen, Maldives and Sri Lanka, and is fluent in Arabic, simplified the hierarchy of IHCL hotels for the readers of BW Hotelier.
Apart from the 100 per cent owned hotels, there are the subsidiaries, which are 51 per cent owned by IHCL, entitling the company to a profit share and management fee; then there are the 50:50 joint ventures such as Taj Asia Limited and Taj Safaris; and finally, there are the partner hotels, where the IHCL shareholding is less than 50 per cent, and the company gets paid dividend as well as a management fee. The management fee is never more than 8 per cent of the topline, Khosla pointed out.
Backing Chhatwal’s statement that a fast-growing company provides greater opportunities for its stars to become bigger stars, Khosla said, pointing to the growth paths embedded in IHCL’s strategy: “The larger part of our key staff in new hotels are from the existing staff.” But how does the IHCL leadership zero in on a property -- as in the case of the recently acquired Taj Agra -- and decide that it can become a part of a company with deep historical roots and an evolved ethos? “First, the location has to make sense and it must fill a gap in the market, and then the culture of the new hotel must also be in sync with our ethos. We therefore look for location fit, market fit and culture fit,” Khosla explained.
The big project that Khosla has on his desk is there vamp of the iconic Taj Mahal Hotel on Man singh Road, New Delhi, without shutting down the establishment. “We need to upgrade very carefully. We need to build on the hotel’s positioning, not confuse it,” Khosla said. “We are aware that in our competition set the rooms are bigger. We are addressing the issue.” At Taj View, Agra, which is now a SeleQtions hotel after being a long-time landmark in the city of the Taj Mahal, another major renovation effort is underway. Khosla said it will lead to a reduction in the number of rooms and ensure that “all suites are Taj-facing”.
Spelling out IHCL’s expansion philosophy, Khosla said: “Each hotel must have a strong sense of place. There’s no place for cookie-cutter hotels.” IHCL hotels must reflect the culture and ethos of their locations, but “they must also remain relevant to the needs of the market”. This is particularly true of restaurants, because, as Khosla pointed out, “standalone restaurants have evolved”. Fortunately for the company, IHCL has a universe of restaurants that continue to be relevant and can easily travel to other locations. “Golden Dragon and Thai Pavilion have travelled. Many more can do so,” he said. Taking a broader view of the market forces at work, Khosla struck a positive note: “After a long down cycle, we see signs of recovery. The growth in demand has finally surpassed the expansion of supply.” He was referring to the long cycle of construction spurred by the last growth phase in the hospitality sector, which led to a frenetic accretion of hotel rooms across categories and geographies. Of course, there’s plenty of room for growth, for, as an industry, we are still in the nascent stage, so we have a long way to go. Explaining why IHCL was expanding its leisure portfolio, he said the brand had reached “close to saturation point in business destinations”. Conversely, although foreign tourist arrivals in hotels have not shown any growth, there’s been a “huge surge in domestic tourism -- it’s a market that is growing year after year”. Many of the leisure destinations also double as MICE magnets.
As part of its expansion into the leisure segment, IHCL has opened its second hotel in Udaipur – Taj Aravalli Resort & Spa -- after renewing its contract with the historic Lake Palace. Situated at the foothills of the picturesque Aravalli mountain range, it is a 92-room resort spread across 27 acres of landscaped gardens. Elsewhere, in Himachal Pradesh, the company has opened its first mountain resort -- Taj Theog Resort & Spa in Shimla -- nestled amidst thick cedar forests and spread over five acres, offering dramatic views of the mighty Himalayas.
IHCL’s next forays into the leisure market will take place in Darjeeling and Gangtok. The North East is also very much on the company’s radar after Guwahati “did so well for us”. And so are Tier-II cities. Khosla, though, is cautious about the opportunities they open up for a hospitality company such as IHCL. “Some rock from the start, such as Vadodara and Nashik; some take time,” Khosla said. With so much on their plate, no senior IHCL executive can now afford to take it easy. The last 20 months have seen the company being driven on fifth gear and Khosla is very much in command of the change that has been unleashed across the swath of India he is in charge of.
This article was published in BW hotelier issue dated '' with cover story titled 'The Renovation and Outdoor issue'
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