Kolkata: Indian Hotels would be looking at "doing a Tetley in its business and pick up a small, high-quality, global chain at an affordable price, over and above the 16 international hotels it already owns", Tata Sons director R K Krishna Kumar said here today.

The acquisition was likely to be in source markets such as north America and Europe, with China a distinct possibility in the near future on account of growing inbound and outgoing traffic.

The acquisition would run parallel with a segmentation of the Taj brand owned by Indian Hotels. Taj Hotels would be super luxury hotels in metros and business centres, with a chain of Taj palaces at historical destinations above this brand and a series of Exotica resort hotels complementing the two. As part of the Taj restructuring, the company may migrate some of the lesser hotels from the Taj stable to the group’s Gateway brand.

The Tata hotel chain has become as efficient as the best comparable hotel chains in the world through a long process of internal re-engineering and the time had come to move forward from there.
Krishna Kumar indicated that the acquisition of a small chain would depend not so much on the cost as on the cash flows from operations and the ability of the cash flow to support the acquisition price.

The cost of acquisition would be less important than the operating ratios of the target company. For Indian Hotels, it would mark a major departure from two prevailing practices. The company has developed a penchant for acquiring standalone hotels. It had also been more interested in managing properties owned by others rather than complete ownership propositions.

Krishna Kumar sought to highlight the efficiencies achieved by Indian Hotels by pointing out that despite a disastrous 2001-02, the food and beverages business actually made more money than last year and accounted for about half of total revenues. "The chain has shifted from mere physical growth to quality growth and survived the downturn in much better shape than its peers", he said.

Predicting a turnaround for the hospitality industry in the October-March half of this fiscal, Krishnakumar said room occupancies were already up but rates were flat. This was in part because the group was concentrated in markets round the Indian Ocean.