Cashing in on opportunities

The industry is on an upward growth path and according to G Indira K Reddy, managing director, Taj GVK, both the hospitality sector and the government should capitalise on this potential. By Gayatri Vijaykumar

G Indira K Reddy Managing director Taj GVK

Rated among the best properties in India, Taj Krishna, the flagship property of Taj GVK has been declared a member of "The Leading Hotels of the World." In the years to come, Taj GVK aims to spread its branches across the country and become a strong and vibrant player in the sector. According to G Indira K Reddy, managing director, Taj GVK, the company has a dominant presence in Hyderabad and aims at having a presence in all the key metros and leisure locations with an offering of international quality products and high service standards.

Focus India

Considering the bright prospects of the tourism sector, the Taj GVK's vision is to double its turnover every five years. According to Reddy, in the short term, the company's vision is to touch a turnover of Rs 500 crore by 2010-11, and in the long run to reach a turnover of Rs 2000 crore by 2020. In addition, she adds that the company has plans for a multi-location inventory base covering all the major metros.

Taj GVK also plans to consolidate a dominant position in Hyderabad by doubling the inventory over the next few years. Says Reddy, "We plan to expand inventory in existing hotels and launch a new hotel in Begumpet by the end of 2009. We also plan to launch Ginger Hotels brand in Hyderabad to cover the fast growing budget segment."

The company also plans to diversify its location base by launching hotels in other metros and other locations with potential demand. "The company will be launching 'Taj Mount Road' hotel in Chennai sometime this month. We are also looking for suitable opportunities in Bangalore, Jaipur, Kodaikanal and Amristar," explains Reddy. Taj GVK aims to cater to the increasing business travel and leisure demand by offering high quality products in key locations. "We aim to set up resorts in popular tourist locations to cater to the growing leisure demand in a growing economy with rising disposable income," states Reddy.

Way ahead

Reddy feels that despite concerns over increasing inventory, the long term story of the sector is still intact. According to her, demand in key metros is growing at 10 to15 per cent per annum and suppliers are struggling to keep pace in key locations. However, she adds that regulatory concerns, high land prices, soaring construction costs and high interest costs are slowing down the pace of inventory addition with only a fraction of the announced plans materialising if at all on time.

As in the case of most industries, the future would see a lot more automation in the operational areas. The industry would witness increased bookings over the internet. "We would witness a seamless ERP environment both at the back end and the front end. There will be a lot more entertainment options in a Wi fi environment. Interactive television would emerge in the future and all this would lead to improved communication," explains Reddy.

Attrition rates in the hospitality industry are a cause for major concern at present, however Reddy believes that this could stabilise over a period of five years as more supply is ensured by mushrooming hospitality training centres. "This segment has attracted many career-oriented students and will benefit the sector as a whole. Also the sector will aim to rationalise man power by opting for multi- tasking, automation and sharing support facilities in the coming years," Reddy adds. According to her, the industry would require fully trained manpower to meet the requirements of the sector.

Reddy also feels that the demand-supply position in the hospitality sector has a lot of catching up to do on the supply side in the years to come. "To put the issue in the right perspective, India has around one lakh hotel rooms, which is equivalent to the number of rooms in Manhattan city only. On the other hand, China has an inventory of 10 lakh hotel rooms," explains Reddy. She feels that high occupancies with

stable ARR's as adjusted for inflations is the likely scenario in the coming years. Any blips, if at all, will be of short term nature with sharp rebounds says Reddy. "With strong economic growth driving the India story, rising domestic demands, increasing foreign visitors and rising disposable incomes, the industry can grow at 10 to 15 percent per annum over the next few years," predicts Reddy.

Reddy believes

Reddy believes that the inventory across all categories will be increased at a Compound Annual Growth Rate (CAGR) of 15 per cent per annum. "We will see a growing phenomenon of modern trendy hotels of international standards with sufficient inventory across all categories meeting customer requirement. There would be dynamic food and beverage options in line with changing customer needs," she says. In addition, Reddy foresees an increasing revenue percentage on other services such as spa, gym, entertainment and events. Hence it would be necessary to maintain high service standards in a competitive environment.

As in the case of any sector, government involvement and support is essential. Reddy suggests that the government should support the sector by creating land banks in metros where cost is high, a PPP mode development. "The government should provide income tax benefits in line with infrastructure support. The state government should support the sector by way of favorable luxury tax, liquor tax and VAT policies," feels Reddy. She adds that Forex borrowings norms need to be amended to allow cost-effective credit for the sector. On the other hand, the hospitality sector should focus on ramping up inventories in areas of deficit, believes Reddy. "The industry should focus on heritage tourism and leisure locations to support the 'India Story' and the tourism sector as a whole," opines Reddy.

In addition to cater to the growing demand for human resources, catering colleges should be opened across the country. "For this, the sector should support and incubate the catering/hotel management institutes so as to develop adequate manpower for increased needs," says Reddy. n