ITC Outlines Hotels Expansion Plan As It Bets On Travel Surge

ITC Ltd. has chalked out a plan to aggressively expand its hotels footprint in the next five years as leisure and business travel is expected to explode.

ITC Hotels Co., soon to be demerged from the parent and listed as a separate entity, expects a 50% jump in room inventory in the next five years.

The company has a robust pipeline of managed properties—35 hotels and 3,200 keys. It aims to add 25 more within the next 24 months, with plans for 300 rooms being explored. Currently, it has a total of 131 hotels and 12,000 rooms across 80 locations.

"Over (the) next five years, ITC aims to reach 200 hotels and 18,000 keys, of which two-third keys would be managed," Sanjiv Puri, chairperson and managing director of ITC, has said while addressing the company's investor day. The managed keys in the premium segment are expected to increase to 45% over the next five years compared to 30% as of date, he said.

Puri underscored that there is a huge opportunity for growth in terms of arrivals of foreign tourists, which is still below 85% of the pre-pandemic level.

The brand profile comprises ITC Hotels and Mementos in the luxury segment, Welcomhotel in the upper upscale, Stori in the boutique space, Fortune in the mid and upscale, and WelcomHeritage in the heritage space.

ITC also wants to scale up its food and beverage business. It has opened two restaurants in the last financial year and three are in the pipeline for current fiscal. Its F&B outlet, Avartana, is expected to "shortly open" in Mumbai and New Delhi.

ITC's aggressive lineup underscores the travel sector's strong upcycle, with demand outstripping supply as consumers' desire to spend on experiences overcome concerns about inflation and the economy.

Over fiscal 2016–23, the compound annual growth rate of supply stood at 5.5% and demand CAGR stood at 6.2%, ITC said in a presentation. The demand CAGR is expected to remain as high as 10.5% over fiscal 2024–27. The occupancy is expected to increase up to 70% by 2024–25.

In India, the room supply is a mere 0.15 million versus 5.4 million in the US, 4 million in China and 17 million in the world, according to the presentation.

After the Covid-19 pandemic, ITC's average room rate improved 24% versus 18% for compset between fiscals 2020 and 2022. Compset refers to group of hotels that are seen as direct competitors to one's own hotel. Revenue generated per available room rose 31% compared with 29% for compset during the same period.

"We believe growing per-capita income and urbanisation would aid hospitality-industry growth in the long run," Dolat Capital Research & Development said.

ITC is also diversifying its revenue streams in the hotel business. Sleeep Boutique is present across seven ITC hotels and offers luxury sleep merchandise. Gourmet Couch—a vertical that offers luxurious dining experience at home via ITC app, direct and e-commerce channels—is present across all ITC hotels. Club ITC is present across six ITC Hotels and it is a by invite-only programme.

ITC has continued to focus on capital efficiency through sweating existing assets. The asset-right strategy offers enough scope for growth as 20% of the inventory is still gestating and is less than five years old. The occupancy is 72% in case of gestated hotels, leading to significant headroom to drive revenue per available room, according to the company.