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Corporate Report

Published on: Dec. 8, 2023, 12:34 p.m.
How THE Park redefined hospitality
  • THE Park Visakhapatnam on Beach Road

By Lancelot Joseph. Executive Editor, Business India

India’s hospitality sector is a vibrant landscape, dotted with establishments that cater to the myriad tastes and preferences of domestic and global travellers. The firm’s commitment is to create a diversified and all-encompassing offering.

That’s The Park Hotel advantage. The company operates a diverse range of 27 hotels, spanning from upscale to upper-midscale categories, encapsulating a total of 2,111 rooms with a pan-India presence. Over the last three years, the company has broadened its geographical footprint with the inauguration of 10 managed and leased hotels, augmenting its portfolio by an additional 499 rooms.

The hotel chain has a remarkable portfolio of brands, including THE Park, THE Park Collection, Zone by The Park, Zone Connect by The Park, and Stop by Zone.

“Our core brands are attributes of design driven by leading Indian and international designers, architecture, and food and beverage offerings. We operate individual hotels with distinctive characters and provide curated experiences for our guests. We have the ability to service a wide customer base as each of our hospitality brands cater to distinct price points and customer requirements,” says Priya Paul, chairperson, Apeejay Surrendra Park Hotels.

Iconic endeavours

THE Park Hotels has created iconic brands in the realms of food, beverage, and entertainment, as per industry sources. The portfolio boasts names such as Zen, Someplace Else, Tantra, Roxy, iBar, The Leather Bar, Pasha, Aqua, and Lotus. They showcase innovation, as highlighted by a series of prestigious awards.

Lotus received the ‘Best Pan Asian – Premium Food Delivery’ accolade at the Times Food & Nightlife Awards 2022. The company’s ventures also shine in the nightlife scene with Peace Bar and Pasha securing the ‘Best Lounge Bar and Best Night Club’ honours at the same awards ceremony.

Beyond these accolades, Park Hotels is noted for operating hotels that each possess a unique character, offering guests curated experiences that cater to a variety of price points and preferences. THE Park has boutique hotels that embody a design-forward philosophy, luxurious amenities; and are dedicated to guest comfort and personalised service.

In fact, on another level, THE Park Collection encapsulates the essence of small luxury properties situated in select travel destinations, targeting different segments of the hospitality market.

 Strategic expansion

With the strength of its brands, THE Park Hotels has, over the last 3 years, achieved a CAGR of 21.56 per cent. This is a result of expansion in launches of unique brands such as Zone by the Park in 2014 and Zone Connect by The Park in 2019. The company has strategically grown Zone by the Park across 11 cities, offering 612 rooms, and Zone Connect by The Park has established 234 rooms across four cities.

Over the long term, Park Hotels’ growth has been characterised by strategic location choices and thoughtful brand introductions. For example, Someplace Else, originally a celebrated bar brand from Kolkata, has now made its debut in Mumbai’s Jio World Drive, Bandra Kurla Complex. In keeping with its ethos of innovation, the company recently revamped The Shack in Vizag, launched the Beer Garden in Park Kolkata, and introduced The Tap Room at Aqua in Bangalore.

  • Paul:  anticipating a leap forward

    Paul: anticipating a leap forward

The Park Hotels’ strength is in selecting property locations with growth potential, as per industry sources. This skill stems from years of experience and a deep understanding of the Indian hospitality market and customer profiles. The company’s site-selection strategy is meticulous, considering accessibility, local economic trends, growth potential, demographics, socio-economic factors, and the requisite infrastructure.

This foresight in site identification has led to the establishment of hotels in key locations across India, including Pune, Darjeeling, Manali, Srinagar, and Patiala. Park Hotels ensures that most of its properties are situated in prime locations, offering easy access to key business hubs, commercial centres, and tourist attractions.

For instance, THE Park Kolkata is nestled on the iconic Park Street, a renowned dining and entertainment hub; THE Park New Delhi stands on Parliament Street, amidst the city’s bustling business and diplomatic quarters; and The Park Visakhapatnam is located on Beach Road, catering to business and leisure travellers alike.

With India’s urban landscape continually evolving, and currently home to five megacities – Mumbai, Delhi NCR, Bengaluru, Kolkata, and Chennai – the company is also poised to capitalise on the emergence of future megacities such as Ahmedabad and Hyderabad by 2030.

The company has owned hotels under the brand The Park in six of the seven mega cities. The Park Hotels focuses on an asset-light model to curate a diverse portfolio of high-quality hotels. Its legacy and extensive experience pave the way for successful management contracts, further expanding market presence.

Stellar financials

The company has consistently maintained high occupancy rates, competitive room pricing (revenue per available room or RevPAR) across its properties. In FY23, Park Hotels achieved average occupancy level of 91.55 per cent for its owned hotels. This figure shows the company’s deep-rooted expertise.

The secret to THE Park Hotels operations lies in customer management system. This system has seamless reservation and billing processes, enabling centralised control over the company’s extensive hotel network. The result? Optimised hotel occupancy rates!

THE Park Hotels strategic emphasis is on leveraging occupancy levels, average room rate (ARR), and RevPAR. With a robust balance sheet, The Park Hotels maintains healthy operating margins which underscores its financial strength.

The company’s diversified presence across various hotel categories affords it flexibility to offer tailored products and services to a specific target customer base. Acting as both hotel owner and asset manager, Park Hotels adeptly identifies focus markets and strategically targets properties for capital allocation, ensuring sustainable growth within its portfolio.

“Operating profit (EBITDA) margins of the company for FY23 are higher than the average margins for several listed companies,” says the Horwath HTL report. Consider this, THE Park Hotels reported an EBITDA of 33.7 per cent in FY23. 

Over the last three years, The Park Hotels has been consistently improving its average room revenue. In FY23, the firm’s ARR stood at Rs6,070 against Rs3,251 in FY21. Given the recovery in business travelling, The Park Hotels’ total income increased to Rs524 crore in FY23 as against Rs190.3 crore in FY21.

  • Dewan: seeking to expand opportunistically

    Dewan: seeking to expand opportunistically

Culinary delight too

The company’s food, beverage, and entertainment segment is not just an addition; it’s a cornerstone, bringing a stable and non-cyclical source of earnings that complements the traditional hotel business. This strategic element provides resilience against the seasonal fluxes that are characteristic of the hospitality industry.

THE Park is strategically positioned to capitalise on India’s demographic shift. This growth in the working-age population, which is expected to last until 2055, signals a rise in discretionary spending.

THE Park operates a total of 80 restaurants as of March 2023 which includes nightclubs, and bars, each offering a unique ambiance and culinary delight. From the traditional flavours at Aish and Saffron to the contemporary settings of Italia and 601, the company’s establishments offer both indoor and outdoor settings for events.

The Park New Delhi stands on Parliament Street, amidst the city’s bustling business and diplomatic quarters

As a result, sales of food and beverages together with wine and liquor constitute about 43.4 per cent of its revenues in FY23. Its food and beverage offerings provide a diversified and holistic offering to our customers and have since gained popularity with the local community and international customers. It has consistently maintained food and beverage ratio at above 40 per cent in the last 3 years which shows the strength of offering and the fact that it has been consistently able to attract fine dining patrons and provide a refined experience to customers.

Its restaurants, clubs, and bars not only cater to guests residing in hotels, but attract non-resident patrons owing to the quality of the food served, service and ambience. These capabilities and product offerings increase the resilience of the business model, and the sustained achievement of food and beverage business is a testament to the success of their differentiated food and beverage business strategy.

A legacy of taste

Known for its distinct presence, Flurys operates 70 outlets across India, diversifying its presence through kiosks, cafés, and full-scale restaurants. Flurys contributed 7.29 per cent of its total income for FY23.

Flurys has embraced an asset-light business model, and forward-thinking approach. This model which operates outlets on leased premises, allows for a diversified, resilient, and scalable framework. With 70 outlets to date, as reported in the Draft Red Herring Prospectus, Flurys is positioned to take advantage of the burgeoning Indian bakery market.

The growth trajectory is supported by several factors, including rising disposable incomes, heightened consumer awareness, and an increase in discretionary spending on dining out. Moreover, the proliferation of food-ordering platforms and the industry’s expansion into rural areas has widened its geographical reach. Trends towards premiumisation, lifestyle changes, and continuous product innovation will further propel growth in the coming years.

  • THE Park New Delhi stands on Parliament Street, amidst the city’s bustling business and diplomatic quarters

For its growth trajectory going forward, Apeejay Surrendra Park Hotels places a keen emphasis on the development of its existing land banks and the strategic allocation of capital. The company’s growth strategy includes an optimal mix of owned, leased/licenced hotels, and asset-light contracts, with a sharp focus on expanding its current portfolio. The firm is capitalising on land acquired at historical costs, while it aims to enhance capital efficiency and maximise returns.

An asset management strategy tailored to develop land with historically low costs ensures that THE Park Hotels can continue to appreciate asset value and optimise development costs per room. This strategy aligns with industry insights.

Park Hotels has a robust pipeline of development projects, including the expansion of hotels in Visakhapatnam and Navi Mumbai, and new constructions in Pune. Future plans are set to utilise land banks in Jaipur and Kolkata for additional hotels.

Complementing this is THE Park Hotels’ asset-light model. With 20 operational managed and leased hotels and 19 in development, it is poised to strengthen its existing brands.

This approach enables the company to earn management fees while minimising capital expenditure, ensuring a balance between growth and financial sustainability. In fact, Park Hotels will increase its keys compared to 2,111 keys as of present.

Evolving strategy

The company’s commitment to contemporary design infused with local cultural elements is evident across its portfolio. Continuous investment in the renovation and refurbishment of properties ensures the delivery of high-quality service and customer experiences. This is complemented by the revamping of food and beverage outlets.

The firm is also developing its portfolio brands and leveraging its business model, THE Park Hotels aims to increase market share and create more vibrant brands, while also deepening its distribution network and innovating its products and services.

The migration of the corporate data centre to a private cloud IaaS environment will drive cost-effectiveness, optimum uptime and scalable solutions for future business growth. Outsourcing non-core functions and managing utility usage judiciously further contribute to the company’s efficient operations, all while developing long-standing relationships with third-party suppliers and upgrading to energy-efficient technologies to reduce its carbon footprint.

This approach is not merely about expansion – it’s about creating a symphony of experiences that resonate deeply with guests.

  • Khosla: improving efficiencies

    Khosla: improving efficiencies

“The company will continue to improve our operational efficiencies by implementing holistic management plans for our hotels. Our strategies include rationalising sourcing costs, effective workforce management using technology to enhance productivity and drive occupancy and efficient energy management,” says Atul Khosla, Senior Vice President and chief financial officer.

Park Zone by The Park Kolkata

The economic landscape is ripe with potential, marked by rising individual incomes that promise to funnel greater discretionary spending into the sector. This is particularly true for the burgeoning Tier 2 and 3 markets, where the blend of affluence and aspiration meets the availability of high-quality hospitality options. Further demand is expected to outstrip the supply of hotel rooms across India and in several key markets.

“The hotel industry would likely to benefit from increased individual incomes, which can reasonably be expected to create additional discretionary spending, particularly as supply growth occurs in Tier 2 and 3 markets. Rapid growth in India’s hospitality industry is expected at an overall supply CAGR of 7.8 per cent from FY23-27, across all segments,” says the Horwath HTL Report. 

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