On addressing the mid-scale segment
Puneet Chhatwal: It is always good to be a bit ahead of the target so that you have no fear of the unknown that might come your way over the next four-five years. But more importantly, it is not just about the quantity, it is about the midscale segment being addressed by the custodian of Indian hospitality, that is, us and the midscale is becoming more and more important.
Obviously, luxury is luxury and the hallmark of luxury is the Taj. That stays the way it is, but going forward, if we look at three years, five years, seven years from now, the needs and wants of those 400-500 million people, one-third of India’s population using hospitality as one of the ways for business needs as well as leisure needs, we need to be at the forefront and Ginger takes charge with 250 plus hotels in that segment and why not, that is the mandate we have and we need to deliver on that.
In fact, talking about Ginger and the new brands also for Qmin, Amã Stays saw 27% year-on-year growth this quarter. But what is your broader strategy for these segments?
Puneet Chhatwal: Qmin has had a very good evolution. What started as a home delivery service at the peak of Covid found its home as a QSR complementing the Ginger brand which sits within our company in Roots Corporation. One being a root spice (Qmin) and the other being the root vegetable (Ginger), it just seems that everything fell in place in the same family and it is very successful. It has become even more popular than the Ginger Hotel.
So, Qmins are doing very well, maybe because it is also associated with very good memory during the covid times, and that has moved well. The homestay business is a very small business today but hopefully in three to five years it scales up to 1,000 plus. Today, we are at 300 homestays and once we have that scale, it will become very interesting, but very importantly Ginger is kind of forged ahead now and getting very close to a double-digit contribution to our top line which means 10% of our business.
Very few companies in any sector can say that something re-imagined and newly added could come to 10% of their core business which is in our hotel segment. So, we are very pleased with that and it is more crisis resilient because of a variable cost model and also it is very margin accretive. So, all in all very pleased with this development.
Also talking about development, something exciting is in terms of the acquisition as well. If you could talk to us about the rationale behind it as well.
Puneet Chhatwal: As for the rationale, as I said, one was to get scale, second was to get the management bandwidth of a young family which started this with very limited means and scaled it up to 135 hotels in one and another 20 in another one. So, it’s a portfolio of 155 properties with some interesting brands, the opportunity to rebrand, the majority of the portfolio into Ginger and at an affordable price because what they built was completely based on management contracts which some people call asset light and if we add some revenue share projects to it, I would call it, capital light business, absolutely in line with our strategy. It gives us an opportunity to rebrand the existing portfolio in the kind of markets we want to be and double the size of hotels in operation and double the size of the portfolio that we have, in hardly 12 to 18 months’ time. So, we are very pleased with that.
The hospitality sector has witnessed sustained demand momentum for the past three years. How do you view the consolidation given the particular outlook as well in that prism?
Puneet Chhatwal: Hospitality, aviation, and tourism are just going to rise in India and its contribution to GDP and its contribution to employment will grow. We are just at the beginning. All those who have looked at this sector as a cyclical sector were not wrong. If they continue to think that way will become wrong because yes, there is cyclicality in it, there is volatility in it, but demand in India is continuing to outpace supply and to get new supply in India is not that efficient from a time perspective. It takes much longer than we all think. With all the permissions, the construction, the weather constraints, getting existing hotels to become part of your portfolio is a very good way forward without neglecting the new construction.
So, we are building; we are going to open in less than six to eight weeks, the new Ginger in Ekta Nagar will come up in time for the Ekta Diwas. We have just acquired with the help of our group the property at the Kolkata Airport which will convert within the next 12-14 months to Ginger. On top of that, we are also building 300 rooms at the Mopa Airport. We will open next year at the Bangalore Airport. So, we will have a lot of billboard locations which will take the branding and the development charge for the Ginger brand.
Since I come from the city of Bengaluru, I am looking forward to that one the most.
Puneet Chhatwal: Absolutely. This is going to be the first combo hotel of India with 400 rooms under Vivanta and 350 under Ginger complementing the 400-room Taj that is already in operation at the airport. This will take our total to 1,200 rooms just at the Bangaluru Airport.
How important are international markets for your overall growth strategy and also which regions do you really look at in terms of the growth factor?
Puneet Chhatwal: Internationally, we are only looking at Southeast Asia and selective presence in Europe. In the first week of February we will open in Frankfurt, that is a hotel which has been undergoing renovation for the last two years and more or less we are coming to the finishing stage. We are opening two hotels in Bhutan in the next few months. And then, of course, others will follow, but our strategy for international is very much limited to the Taj brand in key gateway locations and markets. For the rest, the focus remains pan-India.
You have a planned capex of Rs 1,200 plus crore for FY26….
Puneet Chhatwal: This is for this year. Over the next four-five years, it will be anything between Rs 5,000 crore and Rs 7,000 crore.
