Indian Hotels Etches Out Expansion Plans

Indian Hotels Co. Ltd (IHCL), the owner of the Taj Group of Hotels, said it would seek to increase the number of hotels it is managing, or owns, by more than half to 127 by 2010. The firm had already announced that it will raise about Rs1,900 crore for the expansion through a rights issue.

Currently, almost 80% of the firm’s 83 hotels are in India, though it has recently made high-profile acquisitions of luxury hotels in Boston and San Francisco and already owns a number of other overseas properties. IHCL will pursue both management and ownership opportunities in its expansion drive, said IHCL managing director Raymond Bickson .

Amol Rao, a research analyst, with Financial Securities Ltd said IHCL would use the marquee properties it had acquired abroad to establish an international reputation, securing management contracts that yield higher profits than asset ownership. “By taking over showcase properties…it wants to create awareness. Once you get that kind of visibility in America and Europe, they invite you to manage your properties,” he added.

As a result, Rao said, IHCL would be able to achieve higher profitability in the long run. “What is the benefit for Indian Hotels? Without investing any capital, I am directly earning money (as a percentage of revenues and operating profit)…Indian Hotels’ profitability goes up,” said Rao.

In addition to adding to its luxury and budget brands in the domestic market, IHCL is looking at a expanding in several countries, including Egy-pt, Turkey, Singapore, South Korea, South Africa, China, Br-azil, and Russia, said Bickson.

IHCL looks to generate 33% of its revenues abroad by 2010, said Bickson. It currently generates 25% of its revenues from outside India. The firm is currently the largest listed hotel firm in India by revenues. Ajoy Misra, senior vice-president, sales and marketing, IHCL, said the firm expects to open a new budget hotel “every six-eight weeks.”