How is life? How is work? How is Taj?
Puneet Chhatwal: Life is full of care because that is the business we are in. But with our growth of brands and the growth of the portfolio, we have no time to stand and stare.
We have always met and discussed about demand and supply. Demand by your guests or customers and supply which is coming in the hospitality industry and you have always been making a case that there is more demand and less supply. But this is a service industry. How is the demand and supply of talent moving?
Puneet Chhatwal: It would be fair to say that the trajectory reverses because the demand for talent is much higher than the supply that is coming in, especially in light of COVID, when a lot of people left the tourism, hospitality, and aviation sectors and globally the sector suffered tremendously with never-ending queues at various international airports and also at basic services of housekeeping, etc, in general in the world, but a bit less in India because we have the demographic dividend and we have a fair balance between employment and unemployment.
So, being a relatively-faster skilled sector because people can be trained to do the work in hospitality within six months to one year, the suffering has been less. Now coming to the second part on Indian Hotels, as we were taking care of all of our associates during COVID, there were very few people who left us and a little bit of turnover is normal in this sector because of the nature of the business. So, we did have that, but not a disproportionate one because we did not furlough.
The term furlough was coined, I think, during COVID. We never furloughed any staff or let go of people. So, retaining people has worked out very well for us.
Finally, to meet the talent needs, we have come up with a series of programmes at all levels, starting at an apprenticeship level to a fast track to general manager, middle management, senior management and those programmes are helping us narrow that gap between the talent that is needed, the talent we have, and also to meet the unknown challenges of tomorrow that will come across because of the nature of the business.But good times continue. You are launching another property in Bekal and this is the second property there?
Puneet Chhatwal: Absolutely right. It is the second property after a very successful establishment of the Taj brand in Bekal over several years now. We have reimagined our Gateway brand, which we have kept in for good times and now that the good times are here, that was an important need that we were not servicing, that is in tier II, tier III, in resort locations, including in metro, an upscale full-service brand so we do not dilute the positioning of Taj and at the same time, we do not dilute the positioning of our upscale lifestyle which is Vivanta. Gateway fills in that gap very well. We start with Bekal but another four properties that have been renovated and have embraced the re-imagined Gateway design. All in all, we start today with five Gateway-branded hotels. Two more will come over the next three to four months, which are undergoing renovations and there are 10 more in the pipeline. All in all, we would have around 20 hotels within 18 to 24 months from now under the Gateway brand, which is the right way to start a brand and not just one, two, three hotels and after three-four years, we have a portfolio of five or seven. So, in two years, if we have 20 plus, yes, then gateway has arrived.
So, let me just break it for our viewers. There is Taj, which is a luxury hotel. There is Vivanta, there is Ginger, and Gateway is below Vivanta, but above Ginger. Can I put it this way?
Puneet Chhatwal: No, it is the same level as Vivanta, but Gateway will be full service, whereas Vivanta, the word which comes from the French word vive, which means to live, is more like a bon vivant, very lifestyle kind of brand, that is what it was when it started.
So, we had re-imagined Vivanta also, but way back in 2018, and took it where it rightfully belonged. And now we have re-imagined Gateway, so they are in similar price positioning, but it is the services that will be offered. A 500-people wedding will happen in a Gateway which. will be in tier II, tier III, and even tier IV cities. Vivanta would be focused on tier I and in metros.
Give us a sense as to what the expectation is, individual geographies or individual styles of hotels when it comes to your occupancy and ARR growth.
Puneet Chhatwal: We were able to deliver in Q1 despite it being an extremely difficult quarter in light of the heatwave and elections. Given the demand patterns being favourable for the sector, given that our not-for-like growth continues on a very strong pace, opening more than two hotels a month, the combination should help us achieve double-digit top-line growth for this financial year also. So, it is a combination of growth in the demand as well as coupling with the not-for-like growth that should help us keep delivering good results every quarter.
The festive season has started with Janmashtami and then Ganpati. Then Dussehra will come and Diwali and the happy holiday season. What is the booking situation?
Puneet Chhatwal: Business on the books is good. Some of the business shifted from Q1 to the rest of the year and that is also very much linked to the auspicious wedding dates. So, this first quarter, the wedding dates moved to July and that is why we ended up having a very good July for the sector in general and our hotels in particular. I think this trend is continuing and this year we have a few extra auspicious dates which should further boost the demand on the food and beverage side or in the wedding segment side.
As I said, the supply in the key metros is very limited in terms of new additions coming in. So, demand continues to be strong and we are witnessing that especially in Mumbai, Delhi, and Rajasthan, which are very important markets for us. Last year, we had the temporary boost of G20. If you take out the G-20 impact and the World Cup and other one-off events, what will happen this year would be fair to say that the sector is on a good track.
Though there is no G-20 or cricket World Cup this year, you are confident of double-digit growth. When you say that the addition in metros was less than what the demand is, I am assuming that you are also referring to business travel.Can I assume that India is growing and business travel is growing and there is no slowdown whatsoever at least in metros?
Puneet Chhatwal: Absolutely. Also, especially in recent months and in the recent weeks and in coming weeks, look at the amount of delegations that are coming to India because we have had the Brazilian delegation. We have the UAE delegation coming in. We had the Africa Summit very recently in Delhi. So, all these factors were missing because when you go into that kind of election period, then the business travel, which is related to the government business, almost kind of dries out and now that is coming back very strongly which is helping the demand on the business front.
Most of the summits are very much in line. I think a lot is happening and on Friday, we kickstart the Indian Association of Tour Operators in Bhopal. So, a lot of trade, travel associations are going full steam ahead with their events, including business houses, as I said like yourself and the government delegations coming in.
I do not see any reason to worry or to be concerned at this point say for any other unfortunate or unforeseen events like COVID that may come our way sometime in future.
A lot of Tata companies, like Tata Power and Tata Steel have decided to reorganise their subsidiaries. Indian Hotels also has some listed subsidiaries. Would they remain like this or eventually, will you tbe merging them?
Puneet Chhatwal: As a part of a group strategy, simplification of our businesses has been a mantra and we try to simplify wherever we can. So, we did do some of that work, but there is a lot more that needs to be done. At the same time, in the ethos of the group, we will always be extremely fair, transparent with all our partners, and there will be no one-sided approach. Anything that we do has to be consensus-driven and take care of all stakeholders, which is not the easiest way, but it is the most sustainable and long-term strategy any group with strong ethos and pathos can have.
In your last number, you spoke about new businesses growing at 20% plus. Will that rate continue and after Ama and entire re-imagination of Chambers, are there any new formats, that we should expect from Indian Hotels in the next two quarters?
Puneet Chhatwal: Absolutely, but I would not announce them before we have done. So, continue to expect innovation, and for our new businesses, expect a 35% plus growth, that is the guidance we have given. We are a bit ahead of that 35% as we speak, which will come through Ama and Ginger and Qmin and Chambers.
So, continue to expect good double-digit growth in our management fee income driven by our asset-light growth and the operating leverage through our own portfolio with initiatives that we are undertaking daily through our asset management activities. Operating leverage through the owned and margin expansion through the asset=light and new businesses and the re-imagined businesses will contribute from day one and we do not expect any of that to be a drain on our P&L going forward.
Taj is growing, margins are growing, room rates are growing. When will pricing power come back to us, the customers? When can we get discounts, when we can get command, when we can demand what we want in terms of rates?
Puneet Chhatwal: There is a direct correlation between the economy, the disposable income and the richness that is coming into our country. If we are going from number five to number three, things will only get in a balanced form for both customers as well as for the people who provide the service and also the demand as you had the speaker before me, mentioned that this sector is just at the starting point of getting the benefit when we get to India at 2047, the whole tourism story, the whole hospitality story, both on the domestic and the international front will be very different than you have seen it in the last 20 years.
We are at the beginning of a very consistent long-term growth in the sector. There will be from time to time some headwinds, but in all probability and with whatever we know, this sector is set to boom and contribute significantly to the economy of India.