Puneet Chhatwal: bringing it all back home12 July 2018
Appointed MD and CEO of Indian Hotels Company Limited in August last year, Puneet Chhatwal has embarked upon an ambitious development strategy that promises to grow the group at an unprecedented rate. He talks to Phin Foster about the significance of returning to India after almost three decades overseas, the evolving nature of the country’s hospitality landscape, and encouraging an unprecedented degree of transparency and openness in his efforts to engender change.
It is somewhat counterintuitive that, in the age of globalisation, consumers are beginning to demand authenticity and individuality like never before. A homogeneous international landscape means that identity, standing for something other than scale, becomes a major selling point. Values and traditions are integral; one must have a story to tell. Puneet Chhatwal has long acknowledged this paradox – an appreciation perhaps best reflected in the rebranding of Steigenberger Hotel Group into Deutsche Hospitality during his 2012–17 tenure as CEO, aligning the hotel operator with the strengths and characteristics of Brand Germany while, simultaneously, establishing Deutsche as a truly international hotel operator.
Then, in August last year, Chhatwal suddenly had a pretty good narrative of his own to share. From Homer to Hollywood, few plot devices have proved more evocative than that of the returning hero; a protagonist forged in adversity abroad, coming home to claim his destiny.
This interpretation might seem a little hyperbolic to the rather more selfpossessed hotel executive, but the 54- year-old’s appointment as MD and CEO of Indian Hotels Company Limited (IHCL), owners of the luxury Taj brand, carried an air of the romantic epic. After 28 years away, establishing himself as one of European hospitality’s most recognisable and influential personalities, Chhatwal was coming back to lead India’s most iconic hotel operator.
A new chapter
In fiction, this would be the story’s happy denouement, but, for the central character, it’s only the start of what could prove to be the most exciting chapter to date. The move was not inevitable, he insists, and there’s no other job he would have come back for, but a confluence of events made it the right offer at the right time. Chhatwal’s mother had entered her 80s and, with her children living overseas, he felt “a son’s obligation” to come home. Furthermore, he was at a place professionally where a change of scene made increasing sense.
“As a first-generation immigrant, your heart says ‘go’ and your mind says ‘stay’,” he says of weighing up the decision. “I spoke to the new chairman [of Tata Sons, IHCL’s holding company, Natarajan Chandrasekaran] and was hugely impressed, but I also felt I’d done what I’d set out to achieve at Deutsche. Those five years had been extremely tough, a lot of work, and that takes its toll. We had come out the other side and, while I could have carried on for a few years, it felt like a good time to move on.”
Chhatwal is not the same man who emigrated, but nor is the country he left behind. One wonders whether he would have needed to travel abroad to further his career had he been making the same decision in 21st-century India.
“I would not be capable of doing this job without those experiences,” the CEO insists. “At Rezidor, learning from Kurt [Ritter]; in Germany, establishing and refining brands, the corporate culture, leading change. I now know I can do all these things because I’ve done them before, it’s just a question of figuring out what’s practical in terms of making it work here.”
This idea of adapting and fusing cultures is nothing new for Chhatwal. As CDO of Rezidor, he was instrumental in rapidly expanding the group’s portfolio through positioning it in the vanguard of European operators pursing an asset-light development model hitherto associated with the other side of the Atlantic. Upon arrival at Deutsche, he demanded an end to Teutonic humility and a willingness to articulate and embrace ambition. It is an approach that demands a lot from colleagues and the business as a whole, but also strives to recognise and use existing and inherent strengths.
“Fusing that American marketing culture with European management,” Chhatwal agrees of his track record. “That will continue, but the Indian element comes with that real emotional connection that we can deliver: the tradition, the service, the experience. In the West, because of declining margins, you’re continuing to see operators cut, cut and cut. Here, that is not the case.”
Within a company context, Chhatwal defines celebrating this emotional quality as preserving the group’s “Tajness”, but, upon arrival as CEO, he found that people within the group had become overly dependent upon the allure of the Taj moniker, potentially diluting its strength in the process. The national identity proclaimed by IHCL had served as a reference point during Steigenberger’s rebranding, he confides, “then I got here, and discovered nobody was using it”.
“It felt as though nobody had thought of capturing [IHCL’s] full potential,” he continues. “Brand ego had become personal ego; everything was ‘Taj-Something’, or ‘Something-by-Taj’. We had brands that weren’t being used because everything had to relate back to the name. That’s where I saw real opportunity.”
Opportunity is being harnessed through a bold change in direction, reversing the previous strategy of exclusively focusing on the luxury market and, instead, pursuing significant multibrand growth.
Such a reversal is often interpreted as a dictatorial move by a new leader wishing to establish dominance, but the manner in which the decision was reached is, in fact, indicative of Chhatwal’s background in European boardrooms, particularly the more collective, team-orientated leadership style synonymous with German corporates.
In November, his first month in the role, the new CEO took his top 35 people to Goa for the first in a series of leadership forums. The conversations and debates arising from these meetings would come to form Aspiration 2022, IHCL’s strategy to restructure, re-engineer and reimagine its portfolio, and, in doing so, increase operating profit margins by 8% over the next five years.
Strategy and culture meets are ongoing, with Chhatwal insistent that all stakeholders come to take ownership of the new direction. This extends to developers, owners and even suppliers, who were invited to attend the group’s annual business conference in April, something the CEO says is unprecedented in terms of how these relationships are managed on the subcontinent. “A risk, but it paid off,” he believes. “Creating real openness and transparency is a major cultural shift.”
While the Indian hotel market is maturing, Chhatwal believes that a disproportionate level of focus remains at the high-end. Even in a country creating as many new high-net-worth individuals as India, luxury is not sufficiently scalable. Taj is already the market leader in this space, operating a mix of city hotels, resorts and safaris, and, while domestic opportunities remain for growing the portfolio and increasing margins, it will not be the dominant driver of growth in the coming years.
“There’s only so far you can take things,” the CEO believes. “With the exception of Pune, we’re already present in every important city – in many cases with multiple hotels.
“They’re all fantastic properties, but how much further can you go? Enter a secondary or tertiary market, building at the cost and grandeur the brand demands, you’re not going to get the rates that level of outlay necessitates. Besides, such a heterogeneous country demands a multibrand approach.”
Upper upscale Vivanta has lost its ‘by Taj’ suffix and will target India’s top 40 cities and key resort destinations. It accounts for a little over a quarter of today’s inventory, but a number of IHCL’s Gateway properties, an upscale brand that currently makes up 14% of the portfolio, will be retagged. Chhatwal has also created SeleQtions, a soft-branded collection.
Some properties elsewhere in the portfolio will be moved into this grouping, but it also provides IHCL with a new avenue for pursing growth in the upscale space. On the day of our interview, Chhatwal and his team have just won the bid for the 33-year lease contract to operate Delhi’s 85-room Connaught as a SeleQtions property, though he also sees significant opportunity for franchising.
The CEO acknowledges that that model is still in its relative infancy in India, but points to the speed with which the franchising market took hold in Europe as a promising precedent. Chhatwal became synonymous with asset-light development in Europe, particularly during his time at Rezidor, and it is an approach that marks a pillar of his restructuring strategy.
“Companies in emerging markets come from the approach of owner-operator,” he explains. “The majority of our portfolio is owned, but that cannot be the model moving forward; it slows you down.”
Simplifying the company holding structure will involve exiting a number of joint ventures and divesting itself of held assets – as well as hotels, Chhatwal reveals that the group has more than 100 Mumbai apartments on its books, for example. IHCL also holds a number of land banks that the CEO hopes to unlock through partnerships with capital investors.
“In many cases the right to build already exists,” he says. “We haven’t used it because we have been so Taj-focused. Not every piece of land lends itself to a full-service luxury property, but there are certainly opportunities in other segments.”
The most significant of these is in the midscale, which will be doing a lot of the heavy lifting. IHCL’s brand providing the muscle is Ginger, which currently has 45 operating hotels, but Chhatwal foresees getting into the multiple hundreds.
The branding has been refreshed and JOI-Design hired to create a new design template – a process not dissimilar to Deutsche’s recruitment of Matteo Thun to rethink IntercityHotel’s design identity.
This is all taking the brand in the direction of what the CEO calls “lean luxury” and he believes 70% of the portfolio will carry the new standards within the next 18 months.
“There is a growing appreciation that a hotel does not necessarily have to be fivestar in order to deliver certain qualities and standards,” Chhatwal explains.
“We’ve seen a lot of specialised management companies emerge in the wake of that shift and this is a segment where I see significant growth.”
Known for pursuing growth in fastgrowing economies while working out of boardrooms in Brussels and Frankfurt, there is an element of poacher turned gamekeeper to Chhatwal now plying his trade in Mumbai. During the course of an hour-long conversation, he rarely switches his focus from the domestic, but over 15% of IHCL’s itinerary is overseas.
Keys to success
It’s a balance he expects to remain roughly the same as the portfolio grows from 17,000 to 25,000 keys, suggesting not insignificant international activity. In April, Taj announced its first Saudi Arabian property, and the Middle East and South East Asia are significant areas of focus, though Chhatwal insists he needs to get strategy fully embedded before casting his eyes too far afield.
“I haven’t really pushed the international angle yet because we’re still getting our house in order,” he explains. “In Europe, we’re looking for institutional investors, for fantastic Taj properties like [London’s] Buckingham Gate or St James’ Court, or the Bombay Brasseries that we have there. We could do that in Munich, Berlin, Frankfurt, Hamburg, Zurich.
“We are also looking for partners in locations with a strong Indian diaspora; cities like Toronto, Chicago, LA and Washington in North America, or Birmingham and Manchester in the UK. These could be very good for us as brand awareness is already so strong.”
But, for now at least, Chhatwal’s commitment lies more squarely with bringing elements of the West to IHCL than vice versa, rethinking systems and processes through the unique perspective gleaned through decades spent overseas.
“In Europe, I always identified as being Indo-German; I took the best of India with me and used it,” he says. “Now I have returned, and it’s a question of keeping and building upon the best of Europe. Whatever doesn’t work here I’ve hopefully left behind.”
Time will tell what those characteristics are, but, if previous instalments of this story have taught us anything about Chhatwal, he will not lose sight of the significance and power of staying true to one’s values, strengths and identity.