Skift Take
As more people in India are seeking upscale living options that blend luxury with convenience, IHCL is leveraging its strong brand and hospitality expertise, to step into this space to meet these evolving demands.
The Indian Hotels Company Limited (IHCL) is diving into the branded residences market with its first Taj Branded Residences in Chennai.
“This is a very lucrative market segment in India, with over INR 220 billion ($2.6 billion) in market value today and showing double-digit growth year-on-year. This helps IHCL diversify its revenue streams and leverage the strong brand equity of Taj,” said Puneet Chhatwal, managing director, CEO, and executive director of IHCL, during an earnings call on Friday.
The Taj Branded Residences in Chennai will feature 123 residences and a hotel with 235 rooms spread over 23 floors.
This marks IHCL’s first venture into the branded residences market, although it has experience with long stays through Taj Wellington Mews. “We get a brand fee because the Taj name is used in the sale of the flats, and we’ll be providing services to the apartment owners when the property is up and running,” Chhatwal explained. Residents would get to enjoy facilities such as a gym, pool, restaurants, and housekeeping services provided by IHCL.
Chhatwal indicated that IHCL is exploring more opportunities in this space, noting a growing trend for branded residences in India. The company is considering projects in at least eight cities across the country.
The Reimagined Gateway Launch
IHCL is also gearing up to launch its reimagined Gateway brand this quarter. “Gateway will be a full-service hotel offering in the upscale and upper upscale segment. The brand rollout will start with 15 hotels, and we aim to scale it to 100 hotels by 2030,” Chhatwal announced.
In the first quarter of fiscal 2025, IHCL signed 16 hotels and opened 6. “With 224 hotels operational and more than 100 hotels in our pipeline, we have crossed the milestone of 325-plus hotels portfolio,” he said.
This fiscal IHCL targets to open 25 hotels. Having opened a hotel in Patna this week, this takes the total number of open hotels to 7. “We now have 18 hotels more to open till March 31,” the IHCL boss said.
Headwinds and Tailwinds
Chhatwal addressed the multiple challenges faced by the Indian hospitality sector in the first quarter, including election-related disruptions, a severe heatwave, and fewer wedding dates. Despite these hurdles, IHCL managed to achieve revenue per available room (RevPAR) well above the industry average, he said.
“These headwinds were temporary, and the long-term structural tailwinds for the sector are still intact. India’s strong GDP growth, combined with a favorable demographic dividend, is driving higher disposable incomes and increasing travel affinity,” Chhatwal said. He expects a boost to the meetings, incentives, conferences, and events sector with the opening of new convention centers like the Bharat Mandapam and the upcoming second airports in Delhi and Mumbai.
However, Chhatwal noted that the demand-supply mismatch is likely to persist in the coming years. “Industry experts expect a 10% growth in demand versus a muted 6% growth in supply,” he said.
Strong Financial Performance
- In the first quarter of fiscal 2025, IHCL registered its ninth consecutive quarter of record performance, with enterprise revenue surpassing INR 30 billion ($360 million), growing 7% year-on-year.
- IHCL’s RevPAR outperformed industry averages due to strong brand equity and customer trust, contributing to a 12% increase in profit after tax to INR 2.5 billion ($30 million).
- IHCL’s management fee grew by 17% year-on-year due to its capital-light strategy, emphasizing growth through management rather than ownership.
- The company remains optimistic about continuing its momentum, projecting a double-digit growth for the financial year.
- IHCL also continues to benefit from the Tata Neu Loyalty Program with 5.5 million members so far. Chhatwal said 37% of its enterprise level revenue was generated by loyalty customers in the quarter ending June 30, 2024.
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