Expansion on hold
Recent world events may have delayed expansion plans for Indian hotel group Taj, but the hunger for an international presence remains undiminished. Jenny Webster reports.
Like many other hotel companies, Taj Hotels, Resorts and Palaces had been eyeing the international market for some time. The homework had been done, the research had been carried out, the results were conclusive. There was, decided the Taj bosses, a clear opportunity to expand the brand outside of the group's native India and capture a share of a lucrative market from discerning travellers in both the corporate and leisure sectors.
A strategy was formed, and Bernard de Villéle, whose background includes the Berkeley and the Lanesborough in London, was appointed vice-president, business development and operations, to lead that strategy and seek suitable locations for expansion.
Everything was going according to plan until 11 September, the day of the terrorist attacks on the World Trade Center, a day when priorities changed. "The immediate focus was to help people wherever we could, and find accommodation for those who were stranded," says de Villéle. "Longer-term plans get put into perspective when something like this happens."
De Villéle is also general manager of the Taj's two London properties, the luxury suites and apartments at 51 Buckingham Gate and the adjacent Crowne Plaza London St James hotel, owned and operated by Taj, but run under licence from Six Continents Hotels (formerly Bass). At the time of the disaster, Six Continents Hotels chairman and chief executive Tom Oliver issued clear instructions that everyone involved with the company was to help wherever possible and not take commercial advantage of the situation in any way.
Road to recovery
The road to recovery may be slow. Like many other general managers in London, de Villéle has had to reforecast for the period from this month until the end of the year, and estimates that revenue may be down by £250,000 per month over the period. Occupancies that should be running at 88% are down to 51%. Although this is a blow to the top line, de Villéle believes that his losses will not be as high as those of others in London who rely on the high-spending US market for as much as 65% of their business and may be losing as much as £1m per month.
"We have a strong base, and in moments of crisis it helps," reflects de Villéle. "When the sun shines, I would prefer to have more Americans, but getting this business is hard and not always wise. For the time being, we will take a very conservative view on the top line and a very hard look at costs."
Despite this gloomy background, Taj bosses in India are confident that business will pick up in the early part of next year and that plans for international development can gradually resurface. Krishna Kumar, managing director of the Indian Hotels Company Ltd (IHCL), the parent of the Taj group, says that the long-term strategy remains. "We had a plan," he says, "and, despite everything that's happened, we have not forgotten the bigger picture."
The bigger picture involves a chain of boutique or, as Kumar prefers to call them, "personalised" hotels outside India in key cities around the world. The general style of the properties will be similar to 51 Buckingham Gate, a mixture of apartments and suites all offering a 24-hour service and full butler service. The number 51 has been registered as a trademark and could end up being the name which the Taj group chooses for its new style of properties, although this has not yet been decided.
The overall aim is to secure two properties in the USA within a year and one in Europe. Kumar says that this will probably be achieved by finding an existing property of about 150 rooms, closing it, and renovating it to 130 rooms and 20 apartments. This blend of rooms and apartments is a critical one as it offers business flexibility. "We are starting to realise the impact of a hotel made of apartments," says Kumar. As an example of this, he cites a number of enquiries in the past three weeks at 51 Buckingham Gate from US financial institutions considering the relocation of their executives for one, two or three months.
The style of the hotels will be a blend of the mystique of India with a modern feel, a hybrid that Kumar calls an "infusion". He says: "It will take the best of India, such as service and heritage, but deliver them for a contemporary audience." Partners who can provide a quality food operation will also be sought in much the same way as the London model. For 51 Buckingham Gate and the Crowne Plaza, Taj works with the Bank Group of Restaurants alongside Quilon, Taj's own brand and a Bombay Brasserie spinoff. "We are not talking about a curry house, but a new expression of the best of Indian cuisine with a modern touch," says Kumar.
Despite recent events, the USA remains a key part of the development strategy. Key cities to be targeted are New York, Chicago, Boston, Washington, San Francisco, Los Angeles and Miami. Until 1999, Taj owned and operated the Lexington in New York, now the Radisson, but sold it because it did not fit into the long-term strategy. Last year, Kumar made his mark felt on the US hotel scene through aggressive bidding for the Carlyle in New York. He lost out at the eleventh hour to Los Angeles-based Martiz-Wolff, which has a stake in Rosewood Hotels & Resorts, as a consortium of Indian banks struggled to secure financing. Nonetheless, this foray into a complex deal positioned IHCL as a serious player in the competitive US market. To drive further expansion, IHCL plans to create a holding company, Taj USA, with stakes taken by strategic investors. The company would then serve as a vehicle for acquisition, through a mixture of equity and debt.
Way forward
Expansion could also come from the acquisition of a smaller chain. Earlier this year Taj made it known that it was interested in the Raffles hotels, a group that eventually bought Swissôtel. Kumar says that such deals will eventually show the way forward, in the same way that Mandarin Oriental developed a presence in the USA through the acquisition of the Raffael Group.
What is important is that the first new properties in the chain of personalised hotels will be fully owned and will prominently feature the Taj name, as they do in India. "We will consider operating more properties under licence or expanding as a management company, but this is the second stage of our evolution," says Kumar. "For the time being, we want to get the Taj name out there."
In the longer term, the group plans to have a property in the Caribbean, and then operations in European cities such as Zurich, Berlin, Paris and Madrid.
Taj Group
Taj Hotels, Resorts and Palaces
Worldwide properties: 56 hotels in south Asia; additional properties in London, Dubai, Oman, Yemen, Nepal and Zambia
Key competitors: Mandarin Oriental, Oberoi Group (India), Hyatt Hotels & Resorts
UK properties
Crowne Plaza London St James Hotel. Owned and operated by Taj Group; run under licence from Six Continents Hotels; 342 rooms
51 Buckingham Gate
Tel: 020 7769 7766
Fax: 020 7828 5909
Web site: www.51-buckinghamgate.co.uk
82 suites and apartments; awarded RAC Gold Ribbon, 2001
Sample prices: studios, £195; apartment, £725; apartment sleeping up to 12 people, £3,100 (rented for an average of £2,800 a day for six weeks during August)
UK business make-up
USA 30%; UK 30%; Europe 20%; India/Asia/rest of world 20%
