Explore the 119-year legacy of the Tata Group Hotels Company

IHCL :IHCL (Indian Hotels Company Limited), synonymous with excellent hospitality services, boasts a history of over 119 years. From the iconic Taj Mahal Palace to the vibrant Vivanta Hotel, IHCL has curated a journey of unforgettable experiences across India and beyond.

IHCL stock has outperformed the market over the past five years, registering stellar returns of over 300%. The company has the highest market capitalization in the hotel industry. In this article, we dig deep into the company’s business and explore its journey, portfolio division, finances, and plans.

INDIAN HOTEL COMPANY LIMITED.

business overview

Founded by Jamsetji Tata in 1903, IHCL has gone through decades of change, evolving from a single hotel in Bombay into a global hotel giant. Today, IHCL stands as one of India’s leading hotel companies, operating over 263 hotels across 100+ destinations in 10 countries. Our diverse portfolio includes iconic brands such as Taj, Vivanta, Ginger and SeleQtions and caters to the needs of a wide range of travelers, from luxury seekers to budget-conscious explorers.

Each brand in the IHCL family has a unique story representing a different aspect of Indian hospitality. The Taj reflects grandeur and tradition, Vivanta embraces youthful vitality, Ginger offers smart comfort and SeleQtions presents a curated boutique experience. Taj Hotels, considered the world’s most powerful hotel brand, contributes the majority of the company’s revenue, around 72%.

IHCL’s Portfolio Segmentation and Revenue Contribution

foreign: The company’s EBITDA accounts for approximately three-quarters of IHCL’s EBITDA. Taj Hotels has grown significantly from 41 hotels to now 81 hotels. This contributes around 70% to IHCL’s corporate revenue.

ginger: The growth potential of the hotel brand is very high through optimizing operating and management costs with a city/location clustering strategy for growth. Ginger achieved peak sales of over ₹300 crores with an EBITDA margin of 39%.

choice and life: The hotel has grown steadily mainly through management contracts, contributing about 16% of IHCL’s total sales.

IHCL – Finance

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

The company recorded revenue of Rs 5949 crores, up 85.24%. This was driven by strong domestic demand and changing consumer behavior, according to a company report. EBITDA increased 246.96% year-over-year due to increased RevPAR, improved productivity, improved asset management and portfolio premiumization. The company recorded a profit of Rs 100 crore after tax due to improved revenue, improved profitability and lower finance costs.

The company’s ROCE stood at 12.96%, driven by increased sales and profits. The company’s ROE also improved significantly from 4.44% in FY22 to 12.92% in FY23. The company’s debt ratio is ‘0’ as it has had no debt at all for the past two years. IHCL’s stock price has also shown an upward trend in recent years. From April 2020, i.e. during the COVID-19 era, when it hit a low of Rs 67.25, it has now fallen to Rs 451.70. The stock has delivered a huge return of around 220.74% over the past five years.

IHCL RevPar: Definition and Importance

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

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

IHCL’s performance across markets is better than pre-Covid. Hotel occupancy levels are higher and ARR is much higher across sectors, resulting in improved flow and conversion rates. IHCL grew by 82.88% from Rs 3,457 in FY22 to 6,322 in FY23, indicating excellent revenue generation efficiency of the company.

Growth in tourism – a factor in the growth of IHCL?

India’s tourism industry has witnessed a remarkable resurgence in 2022-23, with a significant increase in domestic and international tourist arrivals. This upward trend has directly translated into a robust growth trajectory for the Indian hotel sector, boosting occupancy, revenue generation and overall expansion plans.

According to the Ministry of Tourism, domestic tourist visits surged 57% year-on-year, driven by pent-up demand for travel within India. Additionally, foreign tourist arrivals rebounded by 68%, driven by favorable exchange rates, relaxed visa policies and India’s diverse tourism offerings. Collectively, these factors have contributed to increased hotel occupancy rates, setting the stage for growth in the hotel sector.

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

IHCL has the largest cap in the industry, followed by EIH and Chalet. The company has built its market dominance in the services industry through significant differences in market capitalization among its peers.

What will the future hold?

IHCL has several plans for the future, starting with expansion, innovation and sustainability. IHCL plans to have 300 hotels by 2025. This broad business focuses on key growth markets such as India, South Asia and the Middle East and serves diverse traveler segments through a range of iconic brands.

IHCL is actively embracing the innovative power of fintech. Contactless payments, AI-powered chatbots, and dynamic pricing are just a few ways companies are streamlining operations and improving customer experience. Blockchain technology and sustainable finance models are also being explored, demonstrating IHCL’s commitment to innovation and responsible business practices.

IHCL has been actively adopting sustainable practices. From adopting eco-friendly practices at its hotels to supporting local communities, the company is committed to minimizing its environmental impact and maximizing its positive social impact.

A focus on responsible tourism ensures a future where luxury and environmental consciousness coexist. Although IHCL’s future is optimistic, it faces several challenges. Efficiently managing rapid expansion, diversifying services to meet changing traveler preferences, and navigating a dynamic market environment are essential considerations.

However, with a strong brand portfolio, strong financial position and commitment to innovation, IHCL is well-positioned to overcome these obstacles and emerge stronger.

conclusion

In conclusion, Indian Hotels Company Limited (IHCL) stands as a beacon of hospitality, boasting an incredible 119-year legacy that has made it a global giant. From the iconic Taj Mahal Palace to the vibrant Vivanta Hotel, IHCL has intricately woven unforgettable experiences with an unwavering commitment to excellence.

Robust revenue growth, surge in EBITDA and significant improvement in key financial ratios highlight IHCL’s impressive financial strength. The stock’s outstanding performance, with a respectable return of 220.74% over the past five years, further demonstrates investors’ confidence in the company’s trajectory.

Although there are challenges such as managing rapid expansion and product diversification, IHCL’s strong brand portfolio, strong financial position and unwavering commitment to innovation are advantageous in overcoming these obstacles.

As IHCL continues to lead the way in the hotel industry, its future journey promises a harmonious blend of luxury, innovation and environmental consciousness. Was this article helpful? What do you think about the company’s prospects? Let us know your thoughts in the comments section below!

Written by Akshita Malu

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