The Indian Hotels Company Limited (IHCL)

 

·       
Introduction:

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The Indian hotel company limited and its subsidiaries,
popularly known as Taj Hotels is an international chain of hotels which are
founded by Jamsetji Tata in 1903 (Almost 115 years ago). Taj hotels are one of
Asia’s largest and finest group of hotels having 108 properties at around 63
locations worldwide. Tata opened their very first property, The Taj Mahal
Palace, in Mumbai (then Bombay) in 1903.

 

IHCL strives to offer an unrivalled fusion of warm Indian
hospitality, authentic grand experience, modern luxury and world class service.
It provides the perfect mix of luxury, hospitality, experience and
satisfaction. IHCL, not only caters to the top notch people but also expands
their preview to middle class, business, travel, wanderlust, exotic and
destination travellers. This is one of the reasons what make them so big.

Since its inception the Taj hotels group
started organising its hotels into different brands, in a market segmentation
strategy which can cover major chuck of market in hospatility sector. These
segments are such:

1.    
Taj Luxury – It includes oldest and
most prestigious hotels of Taj. Properties like business destinations,
landmarks, palaces, resort and forest are part of this segment.

2.    
Taj Exotica – Taj branded resort and
spa properties.

3.    
Taj Safaris – Based on the eco –
tourism sustainability in hospitality industry this segment has been created
which includes properties like national park, wildlife safari etc.

4.    
Vivanta – Tata
needed contemporary luxury hotel to serve high class people separately for
which they have created a segment called “Vivanta by Taj” which has vacation
and business destinations.

5.    
The Gateway
Hotels & Resorts – To gain the added
advantage over its rivals Tata needed to target middle class as well, for which
they have “The Gateway Hotels and Resorts”. This segment is positioned just
below “Vivanta by Taj” and includes properties of business and vacation
destination like Vivanta.

6.    
Ginger – For those with small pockets
and those who want most economic living.

BUSINESS STRUCTURE

 

 

 

 

Owned Hotels

 

 

·        
GST effect on IHCL:

 

GST
has been the hottest and talked about topic till now and everybody is biting
their nails on this one. GST has become a household term for hotel industry as
well as for IHCL. But, most of the player in hospitality industry are really
confused about whether it’s a boom or a bane for the industry. GST came up as a
“One Nation One Tax” regime and have eliminated indirect taxes like service
tax, value added tax (VAT), entertainment tax etc. and blanket all of these
taxes in one tax i.e. Goods and Service Tax. The proposed GST has a four-tiered
structure of 5%, 12%, 18% and 28%, but the hotel industry has been pegged into
18% rate. In response to this The Hotel and Restaurant Association of Western
India believes that 5% is more benefitting.

 

Since,
GST was implemented on 1ST July, 2017, we would have to wait to see its
effect on books of companies. But, by scrutinizing the rates of the different
items which falls under purview of GST, we can estimate its impact of
Hospitality sector.

 

For
instance, many of the basic and unpacked goods like wheat, rice, flour, curd,
milk, honey etc. shifted from 2.5% – 6% tax to 0% tax. Also, packed milk,
vegetables, fruits, spices, sugar, sweetmeats etc. got from 7% to 5% tax rate. But,
the highest falls was witness in Mineral water, sugar confectionary and LPG
which shifter from 21 – 28% to 18% tax rate. All of these combined will make drastic
change in the profits of hospitality industry.

 

All
these instances shows that GST will work in favour of hotels just like IHCL. To
understand it better, here’s an example of effect of GST on IHCL:

 

Basic Room (Ginger Hotels)

Before GST

After GST

Room Tariff

3893

3893

luxury charge on stay charges ( 10% as per
Maharashtra)

390

Service tax @ 9%

350

GST @ 18 %

700

Total

4633

4593

Room with Complimentary Breakfast (Gateway Hotels)

Before GST

After GST

Room Tariff

5706

5706

Complimentary breakfast

500

500

Luxury charge on stay charges ( 10% as per
Maharashtra)

570

Service tax @ 9%

520

VAT @ 14.5% on food

70

GST @ 18%

1027

Total

6866

6733

Luxury with Complimentary Breakfast (Vivanta by Taj)

Before GST

After GST

Room Tariff

8000

8000

Complimentary breakfast

2500

2500

Luxury Charge on stay charges ( 10% as per
Maharashtra)

800

Service tax @ 
9%

720

VAT

363

GST @ 28%

2940

Total

12383

13440

 

 

 The above illustration shows us that most of
the categories in the hotels rooms will attract less taxes than those which was
prevailing before GST. With GST in power, both, customer and host (The hotel
owners) will get benefit. Hotels will have to pay less tax to the government
which will led to reduction in billing amount of the customers. Therefore, it’s
a win-win situation, the only one loosing here is government.