ITC Logo
Media Centre
Press Report

Land is the biggest constraint to growth
MINT - 18 Jul 2011

A guest at one of ITC Ltd’s luxury hotels once wrote in a feedback form that drinking water should be served in recyclable glass bottles and not in the usual ones made of synthetic polymers, most of which cannot be reused in any form.

Coming from her concern for the environment, the feedback ranks among the most striking suggestions ever received from a guest, says Nakul Anand, executive director, ITC, who looks after the company’s fast expanding hotel business.

It led ITC’s management to figure out ways of producing drinking water on its own, even if on a small scale for distribution in glass bottles only in the firm’s hotels, he says. In time, the company will decide whether to pursue a greater business opportunity in packaged drinking water, but it may not be long before plastic bottles disappear from ITC’s hotels.

Five years ago, Anand launched what he fondly calls the six-sigma route to perfection in ITC’s hotels, and from it emerged the concept of responsible luxury, which in some ways now sets standards “even for car makers”. Discerning hoteliers have always viewed this business as an art, says Anand. “But customers were changing, and the challenge was to marry art with science.” In an interview, Anand recalls the journey of the past five years that resulted in all of ITC’s eight luxury hotels receiving the recognitions from across the world for setting new standards in reducing carbon footprint. Edited excerpts:

I am sure these initiatives—such as 50% reduction in water consumption; own power generation from renewable sources; almost 100% recycling of solid waste—cost a lot of money. How do these translate into return for shareholders?

Before introducing these eco-easy service designs, the first question that we asked ourselves was whether we were compromising on luxury. At the end of the day, hoteliers sell sleep… The first task was to make sure that we didn’t reduce the pressure of water in our showers to cut down on water consumption.

Five years ago, when we adopted the six-sigma approach to improving operating efficiency, we decided to measure everything—from the lux level of lights in our rooms to the whiteness of our bed linen; from the pressure in our showers to the quality of air in our rooms. What can be measured can be managed and perfected. See, the back end of every hotel is pure technology; so everything is measurable. We took a close look at every service design, examining everything from power cables to air-conditioning systems to paints and glass used in our rooms. Because we took that approach, we now offer air as fresh as that in the lower Himalayas in our rooms.

Yes, of course, these things come at a cost—we spend 15-25% more on building our hotels. But we don’t mind that because even if these initiatives didn’t immediately translate into higher revenues, we know they would pay back on their own by way of long-term cost reduction. For instance, we generate 29.5 megawatt of wind power for captive consumption. Wind and solar combined, we generate on our own about 25% of the electricity we consume in our premium hotels. In the properties that we are currently constructing, we will be generating 100% of electricity needs from renewable sources such as wind and solar. These will lead to substantial cost savings.

In my view, these are game changers in the industry that guests, too, are beginning to recognize. Our responsible luxury campaign is catching on, and we are beginning to see an increased level of awareness among consumers. By blending elements of nature and by adopting distinct green practices, ITC’s luxury hotels have created a unique value proposition for discerning guests.

India’s hotel industry went through two years of decline until a muted recovery last year, ITC says in its latest annual report. From what does your company derive its confidence to stake $2 billion more in the hotel industry?

We are a company that has always been driven by long-term opportunities. Consider this: according to the latest available figures, only 5.58 million foreign tourists come to India every year. That’s only about 0.58% of people travelling across the world. That apart some 650 million Indians travel within the country. Demand for hotel rooms is bound to improve with time.

Our belief is that it will give us the confidence to expand so aggressively. Currently, there are some 38-40 hotels on the drawing board. This includes six-seven luxury properties currently under construction. We are expanding across all segments in which we are present, and even in cities where we already have hotels. For instance, in Kolkata, we are building a second hotel. In Bangalore, we are looking to build one more hotel.

Whereas earlier, you’d have only one hotel in a city, now you need to have more because these cities have expanded and demand for hotel rooms has increased manifold over the years.

What are the key challenges to growth?

In my view, land is the biggest constraint at this moment. Our hotel business has benefited immensely from ITC’s land bank, and we are continuing to expand in cities where we have land, for instance, in Hyderabad and Bangalore. In Kolkata, we had enough land adjacent to the ITC Sonar hotel, which enabled us to build a second hotel there; but securing land is becoming increasingly difficult.

The second biggest challenge is manpower. The tourism industry in India, in my view, is unable to attract enough talent.

If you are hobbled by the lack of land and manpower in India, why aren’t you looking to expand abroad?

We are driven by long-term opportunities. If there is an opportunity we will seize it, but it doesn’t make sense to pursue growth outside India as a strategy—premium properties abroad are extremely expensive.

Click here to know more about the Hotels Business