Meltdown may not slow expansion projects: Indian Hotels

Mumbai: Indian Hotels Co, a Tata Group firm that runs the chain of Taj Hotels, does expect a slowdown in room occupancy levels in the ensuing quarters in the wake of the global meltdown and liquidity crunch, but this will not slow down its capacity expansion projects.

The company said it was prepared to face any pressure on margins and occupancy in the coming months through a mix of pushing volumes and raising rates in the premium end of its business.

“We are committed to execute our growth agenda with many new hotels progressively coming into the market. Specifically in the current quarter, the Taj Group will commission its new 5-star hotels in Bangalore and Chennai,” Mr Raymond N. Bickson, Managing Director, said.

The company had taken up a Rs 1,300-crore expansion plan about two years ago, out of which Rs 800 crore has so far been spent. The remaining Rs 500 crore will be spent within the next two years or so. Mr Bickson said the projects being executed include a hotel in Varanasi and Ginger hotels in seven cities (with a total of 700 rooms), out of which the property in three cities have already been launched.

In the last quarter, the company had entered into management contracts for a luxury hotel each in Beijing and Hainan in China. While the Beijing hotel is likely to be commissioned by 2009-end, work on the Hainan project will commence early next year.

Replying to a question, Mr Bickson said the liquidity crunch had not impacted the company’s borrowing. “We have a current debt of Rs 1,400 crore in our books and our debt-equity ratio is 0.5 per cent,” he pointed out.

Admitting that there would be some pressure on demand in the remaining part of the fiscal, he pointed out that this period is generally a peak period for hospitality. “Usually, in the later half of the year, the demand (for hotels) out-paces supply. So this will provide some cushion,” he said, adding that new supplies in the hospitality market had been tight in the last few months.

The company has revised its room rates in early September, which will get “actualised” from this month. It has introduced a 10-15 per cent hike across its premium properties.

In response to another question, he said there was some down-trading in hospitality sector (customers opting for hotels of a lower grade) because of the liquidity crunch. “But as we straddle over the entire spectrum of the industry, from luxury class to economy hotels, we have a cushion,” he pointed out.