A Look into the 119-Year Legacy of the Tata Group Hotel Company


IHCL :The Indian Hotels Company Limited (IHCL), synonymous with hospitality excellence, boasts a legacy stretching back over 119 years. From the iconic Taj Mahal Palace to vibrant Vivanta hotels, IHCL has woven a journey of unforgettable experiences across India and beyond. 

The IHCL stock has given a stellar return of over 300% in the last five years showcasing exceptional performance in the market. The company has the highest market capitalization in the hospitality industry. In this article, we delve deep into the company’s business, exploring its journey, portfolio breakup, financials, and plans. 

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The Indian Hotels Company Limited

Business Overview

Founded in 1903 by Jamsetji Tata, IHCL has traversed decades of change, evolving from a single hotel in Bombay to a global hospitality giant. Today, IHCL stands tall as one of India’s leading hospitality companies, operating over 263 hotels across 100+ destinations in 10 countries. Its diverse portfolio encompasses iconic brands like Taj, Vivanta, Ginger, and SeleQtions, catering to a spectrum of travellers, from luxury seekers to budget-conscious explorers.

Each brand within the IHCL family holds a unique story, representing different facets of Indian hospitality. The Taj reflects grandeur and tradition, Vivanta embraces youthful vibrancy, Ginger offers smart comfort, and SeleQtions showcases curated boutique experiences. Taj Hotels, remarked as the world’s strongest hotel brand, contributes to the majority of the Enterprise revenue of about 72%. 

Portfolio breakup and revenue contribution of IHCL

Taj’s: The company’s EBITDA contributes to about ¾ of IHCL’s EBITDA. Taj hotels have seen massive growth, from 41 hotels to now 81. It contributes about 70% to the enterprise revenue of IHCL.

Ginger: With the strategy of city/place clustering for growth to optimize operations and management cost, the hotel brand has shown a good growth potential. Ginger has achieved its highest turnover surpassing ₹300 crores with an EBITDA margin of 39%. 

SeleQtions & Vivanta: The hotels have been growing steadily mainly through managed contracts and contributes to around 16% in the total revenue of IHCL.                                                                                                             

Hotel Brands Revenue contribution (in cr) % of total revenue Number of hotels
Taj ₹ 8000 72.72% 100
SeleQtions & Vivanta ₹ 1800 16.36% 78
Ginger ₹ 360 3.27% 85

IHCL – Financials

IHCL has demonstrated consistent financial performance over the years, with a focus on debt reduction and profitability. The company recently announced its vision of reaching 300 hotels by 2025, showcasing its ambitious growth plans. This expansion, coupled with strategic investments in technology and sustainability, paints a promising picture for IHCL’s future.

The company recorded revenue of Rs 5949 crores, an increase of 85.24%. As per the company’s reports, this was driven by strong domestic demand and changing consumer behavior. EBITDA grew 246.96% y-o-y on account of higher RevPAR, improved productivity, better asset management, and portfolio premiumization. The company recorded a profit after tax of Rs 1003 crores, on account of improved revenue, profitability, and lower finance costs.

The ROCE of the company stood at 12.96% driven by higher revenue and profit. The ROE of the company has also shown a massive improvement, from being (4.44%) in FY22 to 12.92% in FY23. The company’s debt-to-equity ratio stands at zero as the company had zero debt for the past two years. The share price of IHCL has also seen an increasing trend in the last few years. From hitting its low of Rs 67.25 in April 2020 i.e. during the covid era, to now at Rs 451.70. The stock has given a massive return of about 220.74% in the last 5 years.

IHCL - FinancialsIHCL - Financials

IHCL RevPar: what it is and its importance

RevPAR, or Revenue Per Available Room, is a key performance metric in the hospitality industry used to evaluate a hotel’s financial performance. It is calculated by multiplying the average daily room rate (ADR) by the hotel’s occupancy rate. 

This is an important metric in the hospitality industry as it helps in tracking performance and offers a better comparison with peers. The importance of RevPAR lies in its ability to provide a comprehensive view of a hotel’s revenue generation efficiency, taking into account both room rates and occupancy levels

IHCL's Performance IHCL's Performance

IHCL’s performance across markets is better than it was before COVID. Hotel occupancy levels across segments are greater, and ARRs are much higher, resulting in better flow-through and conversion. IHCL saw an increase of 82.88% from Rs 3,457 in FY22 to 6,322 in FY23 indicating an exceptional revenue-generating efficiency of the company.

Growth of the Tourism Industry – A contributor to the rise of IHCL?

The Indian tourism industry has witnessed a remarkable resurgence in 2022-23, characterized by a significant increase in both domestic and international tourist arrivals. This upswing has directly translated into a robust growth trajectory for the Indian hospitality sector, propelling occupancy rates, revenue generation, and expansion plans across the landscape.

According to the ministry of tourism, Domestic tourist visits surged by 57% compared to the previous year, fueled by pent-up demand for travel within India. Additionally, foreign tourist arrivals rebounded by 68%, driven by favourable exchange rates, relaxed visa policies, and India’s diverse tourism offerings. These factors have collectively contributed to an increase in occupancy rates in the hotels, setting the stage for hospitality sector growth.

Hotel occupancy rates have soared beyond pre-pandemic levels in many regions, exceeding industry expectations. This surge has resulted in a 38% increase in hospitality industry revenue for 2022-23 compared to the previous year, painting a picture of robust financial recovery and sustained growth.

Metric Market cap (in cr) P/E ROCE
IHCL ₹ 64,159.51 58.31 12.58
Peers Market cap (in cr) P/E ROCE
EIH 16,981.75 37.12 15.61%
Chalet Hotels 14,499.81 63.19 9.22%
Lemon tree hotel 10,136.83 77.96 10.13%
Peer comparison: competition the company faces

IHCL holds the largest cap in the industry followed by EIH and Chalet. The company has created a market dominance in the Hospitality industry with a significant difference in the market capitalization between its peers.

What does the future hold?

IHCL has several plans for the future starting with expansion, innovation, and sustainability. IHCL plans on reaching 300 hotels by 2025. This expansive drive focuses on key growth markets like India, South Asia, and the Middle East, catering to diverse traveller segments through its bouquet of iconic brands.

IHCL is actively embracing the transformative power of fintech. Contactless payments, AI-powered chatbots, and dynamic pricing are just a few ways the company is streamlining operations and enhancing guest experiences. Blockchain technology and sustainable financing models are also being explored, showcasing IHCL’s commitment to innovation and responsible business practices.

IHCL has been a keen adopter of sustainable practices. From adopting eco-friendly practices in hotels to supporting local communities, the company is committed to minimizing its environmental footprint and maximizing positive social impact. 

This focus on responsible tourism ensures a future where luxury and environmental consciousness go hand-in-hand. While IHCL’s future looks optimistic, it faces certain challenges. Managing rapid expansion efficiently, diversifying offerings to cater to changing traveler preferences, and navigating a dynamic market landscape are essential considerations. 

However, with its robust brand portfolio, strong financial standing, and commitment to innovation, IHCL is well-positioned to overcome these hurdles and emerge even stronger.

Conclusion

In conclusion, The Indian Hotels Company Limited (IHCL) stands as a beacon of hospitality, boasting a remarkable 119-year legacy that has seen it evolve into a global giant. From its iconic Taj Mahal Palace to the vibrant Vivanta hotels, IHCL has intricately woven a tapestry of unforgettable experiences, showcasing an unwavering commitment to excellence.

The robust growth in revenue, a surge in EBITDA, and a substantial improvement in key financial ratios underscore IHCL’s impressive financial health. The stellar performance of the stock, with a substantial return of 220.74% in the last five years, further attests to investor confidence in the company’s trajectory.

While challenges such as managing rapid expansion and diversifying offerings exist, IHCL’s robust brand portfolio, strong financial standing, and unwavering commitment to innovation position it favourably to overcome these hurdles. 

As IHCL continues to stand tall in the hospitality sector, its future journey promises a harmonious blend of luxury, innovation, and environmental consciousness. Was this article informative? What are your thoughts on the company’s prospects? Do let us know your views below in the comment section!

Written by Akshita Maloo

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