IHCL exits three Gateway branded hotels

Tata Group's hospitality venture Indian Hotels Co Ltd (IHCL) has exited management of three hotels under the Gateway brand in Raipur, Khajuraho and Hubli.

The move is in line with the new brand architecture, announced in February, to create a single identity 'Taj' across all hotel categories of the company. The architecture is the brainchild of Rakesh Sarna, who resigned as managing director and chief executive officer, IHCL last week.

DNA Money had first reported in February 2017 about IHCL's pullout from Gateway Hotel Raipur and plans to exit a few more

This development, industry sources had told DNA Money, will lead to discomfort among hotel asset owners as Taj branded properties will create a mist-match in expectations for customers in certain locations.

The Indian hospitality chain, which reported a 55% year-on-year decline in net profit at Rs 31 crore for the quarter ended March 2017, confirmed the exits in a late evening BSE filing last Friday. "The company exited from three Gateway Hotels in Khajuraho, Hubli and Raipur during the year as these were no longer of strategic importance to business," IHCL said in a statement.

Sarna, in an earlier interaction with DNA Money, was certain about transitioning all the hotels under the Vivanta by Taj (35 hotels) and The Gateway (28 hotels) brands in the new structure.

However, the three exits under The Gateway are a clear indication what could possibly be in store. The Taj group that has set a December 2017 deadline to migrate all the Vivanta and Gateway properties to Taj branded hotels. Interestingly, the total number of hotels in the IHCL portfolio is already down from 101 (in February 2017) to 98 hotels (as per www.tajhotels.com) in 62 locations across India.

The company opened five hotels across Taj, Gateway, Taj Safari and Ginger brands in fiscal 2017.

"New hotel openings in the current include hotels under the Taj brand at Andamans (75 rooms), Rishikesh (79 rooms), Shimla (95 rooms), Tirupati (102 rooms), and seven hotels (520 keys) under the Ginger brand, the company said in its filing.

As for Sarna who resigned upon completion of his three-year tenure, the IHCL board has asked him to stay for a few more months. "The Board respects his decision (to resign) and has requested him to continue till September 2017," said IHCL chairman N Chandrasekaran in a statement.

On the possibilities of IHCL getting another expat to replace Sarna, industry experts said it was not necessary. "Many Indians are doing well in hospitality globally. It also depends on what the Taj group wants to achieve and their focus areas. The hospitality chain might have strong contenders within or could look at someone from other Tata group companies. Besides, executives from other Indian and foreign hotel chains could be approached for the position as well," said a hospitality industry expert requesting not to be quoted.

...& ANALYSIS

• The move is in line with the new brand architecture, announced in February, to create a single identity ‘Taj’
   
• This development may create mismatch in expectations for customers in certain locations