“Keep it simple, be profitable and stay relevant.” That’s the wisdom Puneet Chhatwal has gleaned over the course of an exceptional career stretching nearly three-and-a-half decades in the hospitality industry. And that’s the basis of the business philosophy that will guide the newly appointed managing director and chief executive of Indian Hotels Company.
A global professional who has been in leadership positions with hotel groups in Europe and North America, Mr Chhatwal headed Steigenberger Hotels, which is part of the Deutsche Hospitality group, prior to his appointment at Indian Hotels. In this interview with Christabelle Noronha, the Delhi native explains his priorities with the challenging responsibility of taking what is better known as the Taj Group to higher ground. Excerpts:
Right from when I started my career 34 years back, Indian Hotels was a prominent name in the industry. Our intent is to preserve the core of what the company is all about and ensure stability in progress. The core is what we have today and we can progress by taking Indian Hotels to the next level. You keep doing what you’ve been doing well, but you stop or tweak what has not worked well. We — by which I mean our 30-member leadership team — are not in favour of reinventing the enterprise.
I feel that to succeed internationally in any business, you need a blend of three things: an American style of marketing, the European way of management and the Asian emotional intelligence. For me, it’s not a transition but an opportunity to blend the American and European styles with Indian hospitality.
I think the role of any chief executive is to grow the company at all levels. In the hospitality context, it is not just adding dots on the map but growing the organisation in terms of business intelligence, digitalisation, process improvements and so forth.
The other point is that we have not been a profitable company for many years. We want Indian Hotels to be the most iconic hospitality company in the subcontinent and a profitable one too, with the highest market cap among those considered our peers. We want to achieve all of this while adhering to the Tata code of values and ethics.
Tajness is not something new. Tajness is our soul and it has several elements to it. It is the way we work; it is the way we have inculcated the Indian form of hospitality to welcome our guests. Tajness is also about our efforts in the community, the values we stand for, and the way we treat all our stakeholders. It is ingrained in the design of some of our assets and it is the reason why we stand apart as a company. I believe the Tajness aspect has been underutilised over the last few decades. With competition getting stiffer, there’s even more reason to communicate further about Tajness to create a key differentiator between us and others in the industry.
We will soon be announcing some systematic programmes centred on Tajness, especially in employee engagement, to attract more customers and achieve higher profitability. We want to create an employee magazine that celebrates the success stories of our people and motivates them to contribute their best to the organisation. Engaged employees provide better customer service and customer care. A high level of customer engagement creates return rates in all phases of the customer journey.
We have redefined Tajness as trust, awareness and joy and we will have a logo for it. ‘T’ stands for trust, of our guests, associates and all other stakeholders. ‘A’ is about awareness of what is happening around us and what we need to do as responsible members of Indian Hotels. To do something effectively, we must enjoy what we do; we must do it joyfully, and ‘J’ stands for that. Above the ‘J’ is a hexagon, which is part of the logo and will define our core values.
We are committed to reducing our debt. Towards this, we want to strike the right balance between the asset-heavy and asset-light approach, which we call the ‘SMART’ way of working. ‘S’ stands for strategic; we will invest in strategic projects that are brand enhancing. As a natural corollary, strategic would lead to ‘M’, which is margin enhancing. Our margins are very low today; we should be able to improve these around the principles of asset management, which is ‘A’. ‘R’ stands for strong, lasting and sustainable relationships. To do these four, we need to have continuous tracking — represented by ‘T’ — of our relationships, acquisitions and decisions.
We have a huge opportunity with Ginger since margins at this level of business are high because the fixed costs are low and the variable costs can be managed. We want to reposition Ginger in the mid-scale segment, with or without food and beverages, and have within each, a small meeting venue, a banquet hall and one restaurant that is done up tastefully.
Customers don’t care what the room size is in the value segment, and they don’t want to pay for a banquet hall if they are not using it. However, a key expectation is a seamless broadband experience and we are working towards providing that in all Ginger hotels. We need to make Ginger a bit more fun, by playing with colours, style of furniture, lighting, etc, and by having WiFi connectivity.
It would be inappropriate for me to comment, but I think we have a big opportunity to win if we are more inclusive than excluding. The idea to keep Ginger as a separate entity was right because it did not have high overhead costs; it should have been able to stand on its feet and remain agile. In practice, however, I think what we ignored is the strength of the people and the structure that Taj brings to the table. If we could marry the two efficiently, by combining certain functions like development and acquisition, then there is one unit doing key account management for different segments, Taj, Vivanta and Ginger. I think these are places where we can synergise and simplify; that would be in alignment with the New Year’s message of our Chairman Natarajan Chandrasekaran.
I will answer this question in two parts. Firstly, the hospitality industry, in general, has not been able to find an answer to this issue. In fact, online travel agencies (OTAs) charge significantly to provide business, but travel agents were around even at the time when I entered this industry. Travel agents who bring in business, like American Express or Carlson Wagonlit Travel, not only received long commission but also an overriding commission; they were big sources of revenue. The difference is that today this is offered in digitalised OTA form.
The other facet is about reach. Companies that want to put up their first hotel in New York, London, Frankfurt or Zurich can work with these OTAs without building their own structure. They can create what would technically be called a volume establishment. Hence, working with travel aggregators means having a much better range and more opportunity to grow. There has been a margin erosion due to OTAs, no doubt, but entry into new markets has also led to margin expansion. All in all, I see OTAs as an opportunity.
The answer is both yes and no. While Airbnb is not a direct threat, they have been able to capture what I would call latent demand, where people want affordable pricing during vacations but don’t want to stay at traditional hotels. I can give an example of my two children, both working in London. When they first moved to the city, the best rates I could get through my connections were higher than the apartment they could share on Airbnb.
Do we want to compete with Airbnb? The answer is a clear no. I wish the hotel industry in general had embraced the Airbnb model instead of allowing somebody else to come into that space. It could have been an opportunity for the industry to diversify, and that has been missed.
Food and beverages (F&B) is a very important part of the hospitality industry, especially in the Indian subcontinent. Besides, in Asia we can still make good margins on F&B in comparison with Europe or the United States, where this gets outsourced to specialised operators. The hotels mostly do breakfast themselves while their restaurants are largely being shut down.
In our luxury segment, F&B sometimes pulls in more than 50% of the revenue. Besides, we have been innovators in F&B, with exquisite dining places like Karavalli at the Gateway in Bengaluru, House of Ming at the Taj Mansingh in Delhi and Thai Pavilion at Vivanta by Taj President in Mumbai. We need to unlock the full potential of these brands.
One of the main challenges is how to keep driving margins in a people-intensive business where these margins are declining. The other is to protect and grow the Taj legacy of over 100 years.
By leveraging the ‘One Tata’ concept, we can do several things together. Alongside the ‘Taj Khazana’, a chain of luxury lifestyle stores in select Taj hotels, we can have Titan, Tanishq and other Tata brands share space in some of our iconic properties. Group companies can share knowledge, resources and technological inputs for the greater good of the group. For instance, to drive digitalisation and innovation in our properties, we could use Tata Consultancy Services rather than an outside company. Not that we haven’t been working together with different Tata companies, but now it’s about doing this more earnestly and taking it to the next level.
We are celebrating 150 years of the Tata group this year. If each Tata company comes up with one idea and if a third of those ideas are executed successfully, then through synergy and collaboration we have 30-50 new ideas, which would be a great opportunity for the Tata group in this special year.
I would say only three things: keep it simple, be profitable and stay relevant.