Making It Big

  After the inception of Taj Asia, I went to Sri Lanka and the Maldives for strategic planning. We held serious negotiations with the banks that had financed the Sri Lankan hotel for restructuring of the loan.

  ‘If we cannot keep this hotel afloat, you can never recover your money,’ I told the bankers. ‘I’m ready for the refinancing of the project. You have to exempt the interest and a part of the principal.’

  My partners and I did not have to try too hard to convince the banks. This marked my first successful step towards fulfilling the promises I had made to the Taj Group. Krishna Kumar was very impressed.

  I then started to discuss ways to restructure the hotels in the Maldives. I proposed a plan to transform both the hotels into landmarks on the island nation. ‘Let’s reconstruct the hotels in such a way that a room that now fetches only $80 a night could fetch $500,’ I said. ‘This could be a prelude to the Taj Exotica brand you are planning there.’

  Though all the leading global hospitality chains, including Four Seasons and Intercontinental, were present in the Maldives at the time, only one hotel matched our concept of Exotica—the Soneva Fushi, operated by a company called Six Senses. Sonu Shivdasani, a businessman from London, and his wife Eva, had leased an island in the Maldives for their personal use. Later, they decided to develop a high-end resort on it. The resort was an instant hit! It became so popular that it became the costliest resort in the country, overshadowing all its competitors.

  ‘If we want to run a hotel in the Maldives, we should stop competing with the Hilton and Sheraton. Soneva Fushi, Four Seasons, Aman, and the Intercontinental should be the benchmarks for our brand,’ I told Krishna Kumar.

  A man with a keen understanding of the concept of brand, Krishna Kumar could instantly relate to my idea. He accepted it.

  He at once telephoned an interior decoration company from California, which was working on renovating the Taj in Mumbai, and asked them to propose a master plan for conversion of the Taj Lagoon into a high-end resort.

  Today, Taj Exotica Resort and Spa (the erstwhile Lagoon) is among the three best hotels in the Maldives. A suite in the hotel, which once cost only $90 a night, can now fetch up to $900. After its revamp, the Taj Coral Reef—operated under Taj’s Vivanta brand—fetches around $500 a night.

  This is my first success story at the international level. After setting its Maldives properties on the rails, Taj Asia turned to Malaysia and Thailand.

  We entered into a management contract with a resort called Rebak Island, a 390-acre property, and built the Taj Rebak Marina Resort on it. It is one of the ninety-nine small islands off Malaysia called Langkawi, a fifteen-minute ride by ferry from the Langkawi port.

  Once the hotels promoted and managed by Taj Asia became popular, we received many proposals from around the world for management of hotels. Krishna Kumar would forward the proposals to me as soon as he received them. I would conduct a field study to determine the financial feasibility of the project. He would trust me to such an extent that my judgement on any new proposal would be the final judgement of the entire group. A proposal submitted by the Carlyle Hotel of New York was rejected solely on my discretion.

  Once Krishna Kumar offered a very good deal to me. I still rue my failure to grab it.

  He told me, ‘We’re buying the Land’s End hotel in Bandra, Mumbai. You should join us as an equal partner.’ ICICI Bank had extended a huge loan for that property, and now wanted the Taj to take it over without touching the loan. The Taj was about to take over the hotel at a negligible price. But I could not see that. I insisted on a 50 per cent partnership in the management, which they refused.

  Sometimes you become penny wise and pound foolish if you do not properly calculate the benefits to be made in the future from a project. Taj wanted to include me in the Land’s End hotel project, overlooking its own policy not to forge partnerships with any party in India. However, I was obsessed with the petty issue of partnership in the management. At that time, the hotel cost less than Rs 50 crore (in Indian currency). Today it is valued at around Rs 1500 crore.

  I badly regret having lost two projects in my life—the Butwal Power Company and Land’s End hotel.

  The Taj Group was expanding rapidly. It was also coming up with new strategies to establish itself as a world-class hotel management company. As part of that goal, it brought in Raymond Bickson, a towering personality in the international hotel sector, as its managing director. It was from his time at the helm that Taj started to categorize its hotels according to the quality of the properties and their location.

  I am talking about the year 2003.

  In the changed context, the Taj Group’s priority was no longer limited to Taj Asia. They started to focus on worldwide growth and expansion. I began to feel that Taj Asia would not grow significantly, and felt that my aim of expanding Taj Asia across the globe was not going to be accomplished.

  This occurred to me for the first time when we were negotiating a deal in Mauritius.

  We were planning to develop new properties in Mauritius as part of our aim to establish the Exotica brand across the world. Rajiv Gujral and I travelled to Mauritius to conduct a feasibility study and chose a site for the proposed project. The son of the deputy prime minister of the country somehow got to know about the land deal. He approached his father-in-law with a proposition: ‘Taj Asia has chosen a plot of land at a particular place to set up a hotel. You should approach them and, if they are ready for a partnership, then I can assure you that that plot of land will be leased for the project at a very low price.’

  Mauritius has adopted a very good business model to woo investors. You do not have to buy land in that country, you simply lease it from the state. Now that his son’s in-laws were interested in the deal, the deputy prime minister was more than happy to offer a good deal to Taj.

  The father-in-law came to India and proposed to Taj that he would take care of the land deal and even invest in the hotel; at the same time, he would let Taj manage it. Taj had to neither invest in the hotel, nor share the management fees.

  The Taj Group was more than happy with the deal. But I was embittered. We had travelled such a long distance together and seen so many dreams come true, but now they were dumping me just because they got a more lucrative deal from somebody else.

  I felt that the new management of the Taj Group was not very interested in including us in their upcoming deals either. Things started to slow down. A project would take months for implementation. I would work day in and day out on a hotel, but Taj was in no hurry. They could not—or did not—want to keep pace with me.

  Taj must have had its reasons for treating us the way it did. By the end of the 1990s, it had set up a huge network of hotels in India. This network was not under our partnership. Even when Taj sealed the joint-venture deal with us, it was already running thirty-five hotels in India. Today they run over 110 in the country. Moreover, we were not the only partner Taj had. It had dozens of joint ventures with companies like ours. It would be wrong to expect the Taj Group to focus only on our partnership. If you look at it from Taj’s perspective, you can see that what it did with us was quite natural. But that does not change the fact that I felt sidelined. It was not a deliberate move on their part. We were just a small partner for them, considering the size of their operations. But this hardly went any way towards satisfying my hunger for success. This truth disappointed me the most.

  I thought it was now high time that I devised a new strategy rather than just cling to hotels and resorts affiliated to Taj. I needed to expand in a new direction on my own.

  This led to the next chapter of my drive to expand globally.

  14

  CG Hotels & Resorts

  200 hotels by 2020

  ‘When we think about high-end tourists in the hospitality industry, we should imagine those who lead a regal life. They live in a palace that costs millions of dollars and ride in cars that cost hundreds of thousands. And when they travel, they look for ho
tels that cost thousands of dollars per night.’

  Steve Fitzgerald, chief executive of Conservation Corporation of Africa (CCA), a leading ecotourism safari company, once said: ‘They have never roughed it out in their lives. We make them rough it out, and sell them experience. Tourism is all about selling experiences.’

  ‘What kind of experiences?’ I asked him when we met.

  ‘Trekking, mountaineering and rafting are popular in Nepal. These are components of a great experience,’ he said. ‘But that’s not enough to ensure sustainable business. You have to learn to keep it exciting for the tourists.’

  He pointed to a far-off hill from where some boulders would fall down from time to time. ‘We see numerous sights like that when we go on a trek,’ he added. ‘We can keep the tourists excited with the help of sights like that.’

  ‘How?’ I was asking him, as though I were a curious child.

  ‘Make that sight like a scene in a movie. Look excited. Pretend you’re a bit nervous. Point to the site of the landslide and say, “Oh, look at that falling boulder!” Tourists who are trudging uphill will stop for a moment to look in that direction. Then you start telling stories about landslides, how many landslides occur in Nepal each year, the damage they cause, the number of people killed. If someone was killed at that site, then don’t forget to tell that tale. Encourage them to take photographs of the place.

  ‘After you move on from there, stop at another point and, pointing to the ground, exclaim, “See! A cow has just left its sign here!” They’ll be at a loss for a moment. They’ll be thinking, “What crap is this idiot showing us?” Then you tell them about the importance of the cow in rural life. You tell them, “We revere the cow as a sacred being.” Many will be surprised and intrigued when you tell them that killing a cow carries a life sentence in Nepal, just like murder.’

  I was starting to get his point.

  ‘You can make each trip a learning experience. Draw their attention to the river that meanders on your left or right. Ask them to listen attentively to the songs of the birds. Tell them a story about a small village you pass on the way. Dance to the tune of local folk music. This is how you win the tourists’ hearts.’

  He gave me an example from CCA.

  ‘Our lodge is among the most expensive in Africa. But we don’t even have electricity. Early in the morning, we gather our guests at a spot in the lodge and tell them. “Now we will teach you how to make toast in a place where there is no electricity or a proper stove.” We take them inside the kitchen, hand them loaves of bread and teach them to make toast on a coal-fired oven. Those millionaires and billionaires are excited to be making their own toast like that, and they don’t mind paying ten to twelve times more at our lodge than they would at other hotels with better facilities.

  ‘It’s not that we can’t bring electricity to our lodge. And our staff certainly know how to make toast. But our guests find the way we do things more exciting. They feel that they are really in the middle of the jungle. This is what I call selling experience with excitement.’

  I was highly impressed with Fitzgerald’s mantra.

  There is tough competition among the big hospitality companies to woo top-notch tourists. These tourists make at least one overseas trip a year. They usually fly in their own private planes. Most important, they are not afraid to spend big money. At first, this kind of tourist would only visit a handful of countries in the Americas and Europe. Companies like CCA have drawn them to Africa.

  As I was exploring options to expand my business internationally, I proposed to Steve that we jointly start an inbound travel company in the Asian market.

  An inbound travel company brings tourists from across the world into selected countries and then hands them over to local hotels. I wanted to make the best use of CCA’s global network. If we could draw their high-class tourists to the Asian market, we would benefit a lot. We already had the expertise to manage hotels and implement travel packages.

  Steve was interested.

  Cinnovation and CCA signed an understanding to explore the possibility of a joint venture. We started to look at possible wildlife destinations in Asia.

  I wanted to first explore that possibility in Nepal, so I brought Steve and other senior officials of CCA to tour the conservation areas. My detractors spread rumours that I was planning to take over all the conservation areas in the country! Even experts in the field opposed me without bothering to know the truth. They could not see how tourism would benefit if CCA made Nepal one of its destinations.

  CCA decided not to come to Nepal. They thought it was too hard to put the required infrastructure in place. The government was uncooperative too.

  We then looked at India. CCA liked some of the forest areas in the state of Madhya Pradesh. I put forward a proposal for wildlife tourism in the state to the chief minister Shree Digvijay Singh. He not only welcomed the proposal but also asked his tourism minister to take us around the state’s national parks in a government chopper. However, we had a tough time convincing the state administration about our plans. The rules were so stringent that it was next to impossible to develop wildlife tourism if we were to follow them. We took some officials from the forest ministry on four trips to South Africa at our expense to show them how wildlife tourism operates. We took them on jungle safaris and showed them how the lodges operated. The African model finally convinced them that our plans could work.

  1 November 2006. Bandhavgarh National Park.

  The first lodge we opened in partnership with CCA and Taj was Mahua Kothi in Bandhavgarh National Park. As per the terms of our deal, CCA brought the tourists in using its global network. This was our first experience in operating and managing a jungle lodge. The Taj India Safaris package became popular.

  After the success of Mahua Kothi, we started Baghvan lodge in Pench National Park. Though not as famous as the other national parks, Pench was a great destination for jungle safaris. At the time of writing this book, we are planning to include air travel in the jungle safari package. India Safari and Tours, in association with Federal Air, are planning to manage the tourist flow to our wildlife resorts.

  I proposed to the CCA that we expand our partnership to other Asian countries too, though not in the wildlife sector. It is very difficult to run a wildlife tourism business in most Asian countries as the conservation areas are owned by the state. As an alternative, I wanted to sell Asia as a cultural destination. I saw tremendous potential for eco-cultural tourism in China, Myanmar, Laos, Cambodia and Vietnam.

  The promoter of the CCA, Mark Getty, rejected my proposal outright.

  ‘Asia is not our baby,’ he said. ‘Non-wildlife is not our baby.’

  Around that time, an old friend of mine, Mark Edleson, was planning to launch hotels under a new brand called Alila. He has more than thirty years of experience in the fields of finance, real estate and tourism in South East Asia. He is associated with many successful hotels and tourism enterprises. He was the founder of the Nusa Pacific Group that operates high-end hotels in Indonesia, and also a founding partner of GHM Indonesia, which runs many boutique hotels. He is also a founder partner of Mandara Spa, one of the world’s leading spa brands, besides being a partner in the Aman Group.

  He was about to use three or four properties he had bought from Aman to launch his new brand in Indonesia when a series of bomb blasts rocked Bali. These dealt a serious blow to the tourism industry in Indonesia and to Edleson’s fledgling brand, Alila.

  I discussed the changing priorities of the Taj Group, CCA and Cinnovation with Mark.

  ‘You’re trying to promote your Alila brand, but a brand can’t grow only with management. You must be in a position to invest in it if needed. There are many promoters whose businesses are floundering for lack of investment, but with adequate funding, those hotels could pick up. You should include me as a strategic partner,’ I told Mark. ‘Let’s develop new areas in the hospitality business and take your brand and our company to new heights.’
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  I had long-standing ties with the other partners of the Alila Group. They accepted my proposal. For the first time, Cinnovation inked a partnership for a hotel chain brand. We acquired a 30 per cent stake in the Alila brand.

  We wanted to collaborate with Alila in four sectors: high-end boutique hotels, eco and cultural tourism, wellness resorts and business hotels. I could see a good market for medium and higher-medium business (budget) hotels in the emerging markets of the Indian subcontinent, Africa, the Middle East, ASEAN and China. The number of tourists across the world was rising, but the money they spent on hotels was steadily declining. Most of them were on the lookout for cheaper hotels that offered good facilities. It was my belief that boutique or luxury hotels would not expand as quickly as budget hotels, and I convinced Mark about this. We set up a separate company called Amitra Hospitality. Though we had sought an equal partnership in the company, Alila gave us only a near-equal stake of 49 per cent in it.

  They were also not very excited about opening business hotels. One day Mark told me bluntly, ‘This will distract us from our main purpose. Boutique hotels and wellness resorts are our speciality and we shouldn’t be going into areas beyond our expertise.’

  But my dream was not limited to these hotel categories alone.

  15

  Zinc: Our Own First Global Hotel Brand

  Edleson, my partner in Alila, had deputed a manager to assist me in developing my own business hotel brand. His name was Tim Halett.

  I sent Halett to Dubai to explore the markets in the Middle East. The hospitality industry was growing at an astounding pace in the Middle East at the time. We had also invested in the real estate sector there. My youngest son, Varun, was stationed in Dubai to look after our real estate enterprises. We had plans for the launch of our business hotel brand in the UAE, considering its geographical location, its rapid economic growth and expanding market.