Indian Hotels to have presence in key international gateway cities

Pradeep Rane
10 October 2003

The company has also initiated a number of steps to significantly improve its EVA (economic value added) and it is expecting its EVA to be positive in three-four years. This will be achieved by repositioning the Taj brand and migrating up the value chain.

The balance sheet will be restructured to reduce its financial leverage on a consolidated basis by selling under-performing properties, idle properties, sale-and-lease back of properties and tapping the growth option via management contracts, a senior official told at a conference organised by ICICI Securities in the US.

It will also reduce the number of subsidiary companies to 40 and sell idle and under-performing assets for a targeted Rs 500 million. One of its objectives as part of a McKinsey-based plan is to improve the bottomline by Rs 120 million, of which Rs70 million will accrue in FY04. More sources for improving the bottomline have been identified, and this will result in potential savings of Rs 300 million, the report said.

Also, the outlook for the industry is positive. The concerns over SARS gone and end of the war in Iraq have led to a sharp upturn of business. Tourist arrivals in January-July 2003 have shown a 13-per cent growth in arrivals over the previous year. Occupancy levels in hotels are up significantly in all major metros.

Strong growth in occupancy is also driven by a rise in business travellers due to the growing economic activity in India. The country''s emergence as a global sourcing base for software, business processes, research and development and increasing competitiveness of manufacturing are making it a favoured business destination.

The current travel trend indicates a faster rise in business travel over leisure. Corporate travellers continue to be the largest segment in key metro markets. The recovery in occupancy of key metros is at a faster pace than that of leisure destinations. Importantly, there is no major supply in key metros with the exception of north Mumbai.