Taj Hotel chain plans to sell assets amid economic slowdown
The Tata Group's luxury hotel chain is looking to lighten itself by some assets amid an imminent drop in consumer spending due to the economic slowdown. Reportedly, Tata Group's hospitality arm, Indian Hotels Co. Ltd., which owns and operates Taj Hotels, is looking to sell off select budget inns in non-metro cities and lease them back. Here are more details.
Indian Hotels to sell assets to ensure management stays put
According to a Bloomberg report, as the economy hits a five-year low, Tata Group plans to sell its more budget hotels, such as the Ginger hotels, to cut costs and liabilities and ensure that the current management stays in place. Similarly, the conglomerate will also lighten itself of hotels that are parts of joint ventures or fall under associate companies, Business Insider reported.
No plans to put flagship properties under sale': IHCL CEO
Indian Hotels Managing Director and CEO Puneet Chhatwal told Bloomberg, "We are moving our focus to more management contracts rather than constructing hotels of our own." However, he added, "We have no plans to put our legacy and flagship properties under sale and lease back."
By March end, Indian Hotels had Rs. 2,000cr debt
Reportedly, as of March end, Indian Hotels' debt stood at Rs. 2,000 crore ($282 million). The figure is actually down from Rs. 3,100 crore ($436 million) in 2017. Additionally, Jet Airways India Ltd. going out of business also hit Indian Hotels hard, forcing the company to write-off dues. They have been decreasing debt by selling assets, such as apartments purchased for Tata Group's executives.
'We're pursuing an asset-light model': Indian Hotels spox
An Indian Hotels spokesperson is quoted by Business Insider as saying, "As part of our Aspiration 2022 business strategy we are pursuing an asset-light model." The spokesperson added, "In line with this we propose to sell and lease back some of our Ginger properties in non-metro towns. We will continue to operate these properties under a management contract after the proposed sale."
Indian Hotels to cut ownerships to 50% by 2022
According to Bloomberg, Indian Hotels hopes to bring down ownership of properties to 50% by 2022. Currently, the chain is at 70% ownership, Chhatwal said. Already, six Ginger hotel establishments and others, held by JVs and associates, are slated to be sold and taken back up on rent. Indian Hotels operates 151 hotels as of now, under brands such as Taj, SeleQtions, Vivanta, etc.
Tata Motors, Tata Steel also looking at a revamp
Reportedly, Indian Hotels isn't the only Tata Group vertical that's looking at an overhaul. Both Tata Motors Ltd., owner of Jaguar Land Rover, and Tata Steel Ltd. are revamping their portfolios in an attempt to upgrade their European operations.
