Taj in Boston
The Economic Times — January 6, 2007

Next week, Boston's famous Ritz-Carlton hotel will come under new management and will be renamed Taj Boston. The purchase of the hotel in Boston by Indian Hotels for $170 million, late last year, at first sight is just one among many big-ticket acquisitions by Indian companies. This acquisition is unusual because of the complex brand transition that is under way. The deal involves only the Boston property, not the brand.

Heralding the impending change, the hotel's website says that the Ritz-Carlton of Boston is "no longer accepting reservations for arrivals after 11 January, 2007", after which it will no longer operate as a Ritz-Carlton hotel. Indian Hotels thus has a considerable challenge on its hands, given the history associated with this Boston hotel. It has had some practice - the iconic Pierre on New York's Fifth Avenue and the Blue Sydney, retain their original names but also carry alongside the phrase, 'A Taj hotel'.

The Boston hotel, located next to the famous Boston Public Garden, is the oldest to carry the Ritz Carlton brand and has been operational since 1927. It was the first hotel in the US to offer private baths in guest rooms. It was also the template, in terms of services, for all Ritz-Carlton hotels world-wide. Despite this rich history, the property has seen quite a few changes in ownership.

The Ritz-Carlton Hotel Company, acquired the right to use that particular brand name when it bought the Boston hotel and Ritz-Carlton brand in 1982. Subsequently Millennium Partners, a private equity firm, acquired the hotel for $122 million in 1999, from Marriot, which had by then acquired the Ritz Carlton Company and the brand. Since it spent a further $50 million in renovation, the $170 million price paid by Indian Hotels essentially covered costs.

Academic studies indicate that a brand adds significantly to the value of a hotel property and also the revenue per room. In this case since the Ritz-Carlton brand - among the top four ultraluxury hotel chains world-wide - is being replaced by the Taj brand, a relatively unknown brand in western markets, branding seems to have played little role in the valuation. Indian Hotels' operational performance in running the erstwhile Ritz-Carlton of Boston will determine the ranking the Taj brand attains in advanced markets.