Indian Hotels

Corporation
Limited
Taj Luxury Hotels and Palaces

NOVEMBER 25

SUBMITTED BY: GROUP 10

VINEETH VAITLA - 1811064
SHAMTA THAKKAR - 1811061
MADHURI - 1811069
SUBHANKAR SOHONI - 1811057
GOKUL - 1811049
SPANDAN - 1811050
CONTENTS
INDUSTRY OVERVIEW..........................................................................................3
INTRODUCTION.....................................................................................................3
1. INDIAN HOTELS COMPANY LIMITED[3]................................................3
2. PORTFOLIO.................................................................................................3
3. TIMELINE[7]..................................................................................................4
CURRENT STRATEGY...........................................................................................5
EVOLUTION OF STRATEGY.................................................................................6
RELEVANCE OF TAJ STRATEGY........................................................................7
RESOURCES AND CAPABILITIES.......................................................................7
VRIN TABLE..........................................................................................................11
VALUE CHAIN ANALYSIS...................................................................................13
FINANCIAL ANALYSIS........................................................................................15
REFERENCES........................................................................................................16

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INDUSTRY OVERVIEW
Tourism and Hospitality industry in India is emerging as one of the key drivers of growth in service
industry accounting for 7.5% of country’s GDP. It is expected to achieve a growth of 2.5 percent by
next year and increase its share in India’s GDP from Rs 15.24 trillion in 2017 to Rs 32.05 trillion in
2028. Foreign Tourist Arrivals (FTA) increased by 7.3% to 5.97 million. Tourism industry attracted
FDIs of US$ 11.39 billion creating potential for growth. It is also accounted for 8% of total
employment opportunities in 2017, providing employment for 41.6 million people and is expected to
increase 2% annum. [1] [2]

INTRODUCTION
1. INDIAN HOTELS COMPANY LIMITED [3]

Indian Hotels Company Limited (IHCL), also known as Taj Hotels, is a hospitality company offering
services through a portfolio of hotels, palaces, resorts, jungle safaris, spas and catering services. It was
incorporated in 1899 by Jamsetji Tata, founder of the Tata Group. With true Indian origin, IHCL is
South Asia’s largest hospitality focused venture. IHCL opened its first hotel, The Taj Mahal Palace on
16th December 1903, the grandest and most iconic hotel which even today serves as hallmark of Indian
Hospitality. Taj Group portfolio has 108 hotels across 63 locations in India, and 17 international hotels
across countries like Maldives, Malaysia, Australia, UK, US, Bhutan, Sri Lanka, Africa and Middle
East.
2. PORTFOLIO

IHCL through various brand offers hospitality services ranging from iconic luxury to upscale and
budget stopovers as well as in-flight catering. Some of IHCL brands are: [4][5][6]
 Taj Group
Taj Group is a chain of luxurious hotels for world’s most discerning travelers. With hotels ranging
across major cities and living palaces, it provides authentic experience and lasting memories for the
guests. Taj group has 49 hotels spanning across 50 destinations.
 SeleQtions
SeleQtions is a collection of hotels with distinct characteristics. Every property has a unique story;
either a historic lineage, design principle or just creative space providing amazing experience for
the experiential travelers.

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 Vivanta
Vivanta is a collection of business and leisure hotels. It provides a creative hospitality experience
for the new generation of travelers matching their work hard, play hard lifestyles.
 The Gateway
Gateway is chain of modern hotels with a collection of 27 hotels across 28 destinations. It is a mid-
segment hotel chain placed below Vivanta group.
 Ginger
Ginger is a chain of hotels catering midscale segment. It is created to cater to new Indians,
especially millennials and centennials.

3. TIMELINE [7]

Evolution of IHCL

CURRENT STRATEGY
In 2017, the Taj Group unveiled a new comprehensive business program called Aspiration 2022.[7]
The intent of this strategy is to maximize the shareholder value over the next five years in face of
tough competition in an evolving hospitality industry. The strategy aims to build on Taj’s legacy and

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further strengthen their position by operating best in class portfolio of brands in India and select
overseas destinations.

Aspiration 2022

The company’s focus will be on exploring new markets, expanding existing properties, monetizing
non-core assets, optimizing costs and simplifying the group structure to grow its bottom line.

Aspirations 2022 is based on a three-pronged strategy of re-structuring, re-engineering and re-

imagining the Company’s portfolio.

I. Restructure

The company wishes to maximize the value from the existing portfolio by exploiting economies of
scale and address the needs and aspirations of today’s traveler. A 3S Approach has been used to
operationalize this strategy:

a) Scale: Expand current properties. Example: Taj Bangalore increased its number of guest rooms
from 220 to 374 to increase their presence. [8]
b) Simplify: Removal of redundant and duplicated activities. Example: Simplification of check-in
and check-out process which is identified as a pain point.
c) Sell: Review and exit from hotels which have no future potential. Example: Taj Boston was sold
for US$ 125 million to reduce the company’s debt. [9]
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II. Re-Engineer
Taj Group aims to re-engineer their internal systems and processes so that they can broaden their
appeal to the younger travelers while keeping the existing customer base content. The firm aims to
leverage on technology to improve margins and create a performance-oriented work culture. A 3E
approach has been adopted to enable re-engineering strategy: (i) Expand through operational
excellence, (ii) Embrace technology, (iii) Engage workforce to ensure consistency.

III. Re-Imagine
Taj Group wants to re-imagine the brand equity and strengths to remain relevant in the high-growth
segments and expand its presence across growing mid-scale and economy categories. The firm aims to
bring this to life using a 3M Approach: (i) Maneuver- scale service offerings, (ii) Manage by making
divisions – leisure, business etc. (iii) Multiply the portfolio by increasing the number of hotels.

EVOLUTION OF STRATEGY
Until 1971, the Taj group had only one property – The Taj Mahal Palace hotel in Mumbai. In 1971, the
Taj Mahal Tower was added to the existing property in Mumbai. Rapid expansion continued into the
1990s with Taj buying the finest locations and setting up mid to high scale properties under “Taj”
brand name, and this caused some confusion among the customers as the service standards varied
greatly. At that point in time, the hotels were grouped into 3 categories: Taj Luxury, Leisure and
Business.

It was also a time when major international hospitality chains, like Starwood, Marriott and Hyatt, were
entering the Indian market and they had an entire portfolio of brands. Taj Group reorganized its 97
hotels across 10 countries into a new brand architecture. The hotel properties were now divided into
Taj Hotels and Palaces, Vivanta by Taj, Gateway hotels and Ginger.

The main challenge faced by the Taj Group is the competition from foreign players like the Accor
Group, IHG Group, AirBNB and OYO which also have started offering high end luxury
accommodation options. The other challenge faced by the high-end hospitality sector, is the evolving
needs of the millennial travelers who now seek personalized, unique travel experiences at reasonable
price points.

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 Competitive Landscape

Business Strategy Canvas

Key Partners Key Activities Value Customer Customer
Proposition Relationships Segments
 Suppliers  Hotels  Luxury  Loyalty and  Discerning
 Travel  Palaces  Unique engagement customers
Agents  Resorts and  Personalized  World
 Govt. –  IndiTravel authentic services travellers
Property - Jungle safaris experienc  Brand promise
leasing  Jiva Spa e to the  Strong sense of
 Service  Catering services guests place
Providers  Food and  Experien
Beverage – ce the
Authentic Taj-ness
Restraints
 Taj Khazana

Key Resources Channels

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  People Skills  Travel
 Prime and Magazines
strategic  Travel Agents
locations –  Digital Channels
Reinventing of – Multilingual
Royal palaces and Responsive
 Cultural Website
Sensitivity  24x7 reservation
 Brand Value and through own as
legacy of Tata well as third
party websites

Cost Structure Revenue Streams

 Acquiring prime locations and leasing fees  Premium room rents
e.g. INR 7Cr/month for Mansigh Hotel in  Ancillary services like spa, salon, Taj
Delhi [19] Khazana, F&B etc.
 Renovating palaces
 Maintaining multiple distribution channels
 Training programs for workforce

RELEVANCE OF TAJ STRATEGY

Taj Group faces two challenges to growth and has tried to counter them using their latest business plan,
Aspirations 2022.

i. Competition from international players and upstarts like AirBnB

As the international brands entered India, the Taj Group become one of the many luxury hotels
that the customers could avail. Taj Group wanted to differentiate based on its services and
experiences offered. The focus of Taj Group is now primarily on India and select international
destinations, with attention given to the local culture and heritage. By offering hotels across
different segments, Taj Group also aims to grow by leveraging on the expanding mid-segment
hospitality industry.
ii. Evolving needs of millennial travelers
The millennial travelers today are spending more than ever on holidays, hotels and new
experiences. The Taj Group plans to embrace technology to provide digitalized, hassle-free
service. They have also expanded into Taj Resorts and Safaris to offer unique travel experiences,
which go beyond a typical hotel, to their guests.

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 SWOT Analysis

RESOURCES AND CAPABILITIES

1. People/Workforce

Backbone of Taj’s success is their efficient workforce. Taj has taken numerous initiatives in past to
develop its current culture among its employees and at this point of transformational growth, they
further plan to enhance their performance-oriented culture. Taj has created an environment of trust
and accountability for its customers. The workforce is trained to be decision makers and enhance the
experience of their guests. This is also evident from the numerous bravery stories of Taj employees
during the 26/11 Mumbai attacks.
The candidates are evaluated on their values, integrity and cultural fit. These ethos’ are built through
training programmes like Targeted Selection, Leadership Development and cultural workshops on
emotional intelligence. The training model called ‘building bridges’ combines the heritages of Tata
and Taj both. The Taj-ness comes from the employees and it has been awarded as one of the best
places to work for in Hospitality Industry as per Business Today’s survey. [17]

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2. New Product Development & Innovation

Taj follows a broad level differentiation strategy, few examples are:

 Luxury concept hotels, SeleQtions

 Taj Safari brand to offer a luxury nature and wildlife experience
 Jiva spa, an award winning and unique range of Indian spa treatments

Deep knowledge of the Indian market gives Taj an advantage in launching services that will suit the
Indian market and bring an Indian-ness or Taj-ness to all its services. [18]

Jiva Spa

3. Sales and Marketing

 Global sales teams to manage sales and marketing across all their brands
 Experienced teams to maintain strong relationships with giant corporate houses, event
organizers, wedding planners, and travel agencies
 Close links with leading travel consortia
 Innovative customer as well as B2B marketing strategies
 24x7 reservation services for convenient booking experience
 Taj Inner circle - Loyalty programme to provide special benefits to its loyal customers with a
base of over 1.4 million members[10]

4. Pan India presence and Cultural Sensitivity

Taj Luxury hotel segment is the biggest player in its domain. It has established a strong foothold
across the country with properties at strategic locations. Some properties have ‘Taj Khazana’,
showcasing the artefacts and collectibles created by Indian craftsmen.
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There is also emphasis on glocalization, i.e. customizing cuisines and services based on the culture of
the location. They have successfully restored and are currently operating various original palace
properties to deliver authentic experiences to their guests.

Hotel Udaipur

5. Customer Service Philosophy

Taj has been a consistent performer in customer satisfaction. They have a good staff-to-room ratio of
1.75, which is required to for providing personalized services to the guests. The objective is to
provide a strong sense of place which they call Taj-ness to their guests. The service standards are
periodically updated to continue the innovation and brand promise associated.

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6. Strong Brand Equity - Combined values of Tata and Taj

Tata has built a loyal customer base across all its brands and being a subsidiary of this conglomerate,
similar loyalty and engagement is reflected in Taj Hotels as well. Taj has been able to weave Indian
heritage into its services and this sets them apart from other competitors in the market. This strong
brand equity will help them achieve Aspiration 2022. Taj is the first choice of customers and has
been rated higher than other hotel brands as per Gallup Brand Equity Track Survey 2017.[7]

7. Digitisation

IHCL has designed customized technology platforms across its product categories. This has also
helped them optimise their customer know-how. There has been a renewed focus on business
operations which makes them digitally competitive and streamlines their core operations making them
more efficient. They have launched multilingual websites and are using data analytics to understand
customer behaviour and convert viewers to customers. Taj.live[7] is a live radio stream on social media
platforms to with real time ‘guest listening’ capability. The customer engagement has increased from
85% to 95%[7].

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Resource Based View of the Firm

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VRIN ANALYSIS

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VALUE CHAIN ANALYSIS
Besides its portfolio of 108 hotels [11] including 17 hotels across international locations, the other areas
of business include Taj Air, a luxury private jet operation and Taj Yachts. Further, IHCL also operates
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in the airline catering services segment through Taj Sats Air Catering, a joint venture with Singapore
Airport Terminal Services. IHCL also offers end-to-end solutions for travel requirements across cities
and locations where the Taj Group has operations through its subsidiary, Inditravel.

We have analyzed the value chain of the hotels and hospitality industry to understand which part of the
value chain the Taj group operates in and any competitive advantage derived from the same.

On an analysis of IHCL’s business, we understand that it operates across the hotel industry value chain
and have elaborated on the same below: [12][13][15]

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 Research Service Production Service Provision Marketing
The Taj Group has The IHCL group has Service provision is IHCL has a
been consistently a dedicated team of managed internally. dedicated sales and
evolving it’s 4000+ employees 37% of IHM-A marketing teams
offerings with a looking into not just students interned across 13 locations,
diversification into management and with the Taj group in looking into brand
the mid-market strategy but also 2018 and 22% of building, promotions
segment through the day-to-day graduates were and sales efforts
Gateway and operations for its employed with the with international
Lemontree brands as hotels across India Taj Group in 2017. sales offices in
well as its foray into as well as in various locations.
air catering and overseas locations. IHCL has
travel solutions. launched a IHCL has entered
The company also programme across into
The company established the its hotels called strategic tie-ups with
pursues innovative Indian Institute of ‘Taj Brand other players
product ideas Hotel Management, Standards’ that for the promotion of
including luxury Aurangabad (‘IHM- identifies standard its properties.
serviced apartments A’) to create a centre operating procedures Currently IHCL has
which were first in hospitality to ensure marketing alliances
launched in Mumbai education in India. consistency in with
and then extended to guest experience. Raffles Hotels and
properties in Dubai Resorts, Shilla
and London and Jiva Hotels and
Spas. Resorts and CC
Africa. Further,
partnerships with
airlines have also
been undertaken for
cross promotions.

With increasing competition and changing tastes, the Taj Group remains relevant by leveraging on its
presence across the value chain. The Taj group announced its overarching strategy, ‘Tajness’ in 2016
aimed at attracting the millennial customer group through innovative offerings while also recreating
the ‘Maharaja’ experience through its differentiated offerings in the form of palaces and concept
hotels at unique locations. [14][16]

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FINANCIAL ANALYSIS
We have conducted a financial analysis of the IHCL group vis-à-vis two major competitors in the hotel
industry – East India Hotels Limited (‘EIH’) that operates the Oberoi/ Tridents chain of hotels and
Hotel Leela Venture Ltd (‘HLV’) that operates the Leela chain of hotels. Certain key metrics are
analyzed in the table below:
(Rs, FY18)
Taj group Oberoi/ Trident Leela
Operating profit (EBIT) 4,308.8 mn 2,876 mn 688.1 mn

Finance expenses 2690.4 mn 231.1 mn 836.7 mn

Effective Tax Rate 65.69% 32.34% -

Net Profit/ (Loss) 407.8 mn 1789.5 mn -232.2 mn

Total assets 93745.4 mn 40741.8 mn 45530.5 mn
Total equity 41811 mn 28827.9 mn 3841.9 mn
EBITDA margin 16.34% 18.96% 26.94%
Return on equity 3.01% 6.33% -9.01%
Debt equity ratio 0.56 2.18 8.31
Current ratio 0.88 1.01 0.46
Asset Turnover 0.46 0.41 0.15
Net income/ employee 179,452.05 442,255.68 -101,029
Financial leverage 3.38 1.14 -5.30

While IHCL i.e. the Taj group enjoys 17% of market share in India, the competitors analyzed here,
EIH i.e. Oberoi/ Trident and Leela i.e. HLV enjoy 8% and 5% market share respectively.
Return on Equity (‘ROE’)
 IHCL’s ROE at 3.01% is substantially lower than that of EIH at 6.33%, which could indicate
possibly inefficient operations.
 The same is also evidenced by IHCL’s low net income per employee compared with that of EIH.

Capital structure
 IHCL’s debt equity ratio at 0.56 can be modified considering the ideal debt-equity ratio of 2:1.
Using debt, IHCL could potentially generate more growth as the cost of debt in terms of interest
payments is lower than that of equity.

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 Further, it’s current ratio at 0.88 indicates that current assets may be insufficient to repay current
liabilities and should be stabilized at >1.
 The asset turnover at 0.46 indicates that the operating model is asset-heavy, and utilization of
assets could be optimized.

Effective tax rate

 The effective tax in the case of IHCL is 65.69% which is significantly higher than that of EIH at
32.34% and even the Maximum Marginal Tax Rate. While, the high tax rate could be on account of
a one-time payment of a disputed amount, IHCL can evaluate ways to optimize tax costs.

RECOMMENDATIONS
1. Preservation of the Taj brand – IHCL should reserve the Taj brand for the luxury segment only
and create distinct brands for other viable market segments.
2. Diversification – IHCL can consider diversifying its offerings into other segments to de-risk its
portfolio and consistently innovate to meet customer expectations. Viable segments could include
food and beverages by developing flagship restaurants at its properties, offering customized
concept holidays, luxury cruise lines, helicopter services for its properties, etc.
3. Debt funding – IHCL’s debt equity ratio at 0.56 is low particularly in comparison with
competitors including EIH which has a debt equity ratio of 2.19. IHCL can consider raising funds
through debt for future expansion, which could be cheaper than equity funding
4. Asset-light model – IHCL can support future expansion using an asset-light model in order to
optimize asset utilization and asset turnover. This includes joint ventures, management contracts
and leases.
5. Focus on business travelers – IHCL can renew focus on its city hotels like Vivanta instead of its
luxury hotels, as business travelers draw higher revenues and ensure greater occupancy. They
could upgrade their facilities and charge a premium for it. This could increase their revenue and
improve the brand image. The Oberoi and Vilas properties filled about 62.4% of their rooms at a
rate of Rs 15,206 in fiscal 2016. In comparison, The Leela, which matches The Oberoi in its idea
of luxury if not in scale, filled 62% at Rs 12,702 a room vs. 61% at Rs 12,208 last year.

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6. Loyalty programs - One major factor plaguing the hotel industry in India is the absence of brand
loyalty. IHCL has one million loyal customers but the competitors such as Mariott have around
110 million customers across the globe. We could fill that gap by combining the loyalty programs
of IHCL with different like-minded companies in order to increase the customer base and brand
visibility. This will decrease the cost of acquiring new customers. We could also tie with various
airlines to tap into their customer base.

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REFERENCES
1. https://www.ibef.org/industry/tourism-hospitality-india.aspx
2. https://www.ibef.org/industry/indian-tourism-and-hospitality-industry-analysis-presentation
3. https://www.theindianhotels.com/company/about-us/
4. https://www.theindianhotels.com/our-brands
5. https://en.wikipedia.org/wiki/Indian_Hotels_Company_Limited
6. http://www.tata.com/company/profileinside/Indian-Hotels
7. https://www.tajhotels.com/content/dam/thrp/financial-report/annual-reports/2017/The%20Indian
%20Hotels%20Company%20Limited%20(IHCL)%20Results/IHCL_Annual_Report-2017-18_
%20webfile.pdf
8. http://www.tata.com/company/releasesinside/indian-hotels-company-announces-a-major-
expansion-of-taj-bangalore
9. https://timesofindia.indiatimes.com/business/india-business/Indian-Hotels-sells-Taj-Boston-for-
125-million/articleshow/53188345
10. https://www.theindianhotels.com/development/competitive-strengths/
11. http://www.tata.com/company/profileinside/Indian-Hotels
12. http://tata.com/pdf/tata_review_may_10/review_building_brand.pdf
13. Marketing alliances - https://www.ibef.org/download/The_Indian_Hotels_Company.pdf
14. Strategy - https://landor.com/work/taj-group
15. IHM-A placements - https://www.ihmaurangabad.ac.in/placements/#graduate
16. https://economictimes.indiatimes.com/with-increasing-competition-changing-tastes-how-does-the-
taj-group-hope-to-remain-relevant/articleshow/53614409.cms
17. http://www.tata.com/ebook/tata_review_oct_2013/consolidated_tata_review_oct_2013.pdf
18. https://www.traveltrendstoday.in/news/hotel-and-resorts/item/4847-ihcl-discontinues-vivanta-by-
taj-and-gateway-brands-restructures-brand-architecture
19.https://economictimes.indiatimes.com/industry/services/hotels-/-restaurants/indian-hotels-needs-to-
beat-itc-to-claim-taj-mansingh/articleshow/65894147.cms

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