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4 Dec, 2006

Taj Hotels Acquires Ritz-Carlton in Boston

India’s Taj Hotels Resorts and Palaces continued a global expansion drive last month with a US$ 170 million acquisition of The Ritz-Carlton hotel in Boston, raising the company’s portfolio of hotels in India and abroad to 77.

The group, which entered Thailand earlier this year with the announcement of a luxury property in Phuket, has purchased the hotel from Millennium Partners, with the deal to be finalised on January 11, 2007, after which the property will be renamed the Taj Boston.

It will become the company’s second hotel property in the US. In 2005, Taj Hotels signed a lease agreement to operate and manage The Pierre, the landmark hotel on New York’s Fifth Avenue.

The Boston deal “reiterates our commitment to establishing a significant presence for the Taj Hotels Resorts and Palaces brand in key destinations across the globe,” said Mr. Raymond Bickson, Managing Director and CEO, Indian Hotels Company Ltd (IHCL), which operates Taj Hotels Resorts and Palaces.

Galileo Global Advisors, a New York-based firm, advised Taj in this transaction. David Gibbons, the new general manager, was most recently GM of the flagship Swissôtel The Drake on Park Avenue in New York City.

Both Bickson and Gibbons said hotel guests will notice few changes beyond the new name. The purchase will not result in any job losses or large-scale personnel changes, they said. The Taj Boston will honour all previous bookings for hotel rooms, restaurants and banquets.

Located next to the Boston Public Garden and the city’s premiere retail district, the Ritz-Carlton Boston completed a $50 million restoration and refurbishment plan in 2002.

Over the past year, Taj Hotels has announced four luxury projects: The Taj Exotica Resort, Spa and Golf (opening 2008) in Doha, Qatar; the Taj Exotica Resort & Spa (opening 2008) on the Palm Jumeirah Crescent in Dubai; the Taj Exotica Resort & Spa (opening 2009) in Phuket and a Taj Luxury Hotel (opening 2008) in Cape Town, South Africa.

Other recent additions in India include the Umaid Bhavan, Jodhpur, 26 rooms; Taj Chandigarh 152 rooms; Green Cove, Kovalam, 57 rooms; the Taj Langkawi, 104 rooms; and Gateway, Surat, 132 rooms.

The group already boasts resorts in Mauritius & Maldives, 51 Buckingham Gate in London, Blue in Woolloomooloo Bay, Sydney, and the Taj Palace in Dubai.

In a presentation to analysts about its results for the half year ending September 30, the company announced that its cash flow was being significantly buoyed by the growth in leisure and business traffic to India, increased domestic traffic within India and growth in management in fees from properties abroad.

The average room rate and revenue per available room across its major Indian metro cities grew by 25% to 40% in April to September. In the same period, the group turnover was IRs.5,630 million (about US$126 million, up 30%), and profit after tax IRs.850 million (about US$ 19 million, up 95%). F&B earnings were also outperforming budgets on the back of strong banquet sales and good performance by key restaurants, the company said.

Earlier this year, the company announced the creation of a new brand called Ginger which Mr Bickson said will “change the dynamics of the entire hospitality industry” with a range of “simple, unique, reasonable, basic, very different, light-hearted, Indian and innovative” properties.

Properties will be between 100-200 rooms each and priced at “surprisingly affordable rates” ranging between Rs. 900 (US$ 20) for a single room to Rs. 1175 (US$ 26) for a double room.

Mr. Uday Narain, Chief Operating Officer, Roots Corporation Ltd., said Ginger was based on extensive research among both the guests and the staff, leading to an “indigenously designed and developed product” that provides facilities matching the key needs of today’s guests ranging from families on holiday to individual business travellers.

The first two Ginger hotels are in Haridwar and Bangalore with plans for Bhubaneswar, Pune, Mysore, Thiruvananthapuram, Durgapur and Goa by the end of 2006.

In addition to growing its own brand abroad, Taj Hotels is forging marketing alliances with like-minded groups worldwide. The first was signed with Korea’s Shilla Hotels & Resorts, affiliated to the Samsung Group, “to harness each other’s strengths in their respective markets of dominance.”

Under the alliance, both groups will develop reciprocal and joint marketing activities that include participation in trade shows, sales events, culinary promotions and niche marketing programmes. They will also exchange sales leads, conduct roadshows across India and Korea and publicise each other properties through their respective newsletters and websites to the joint client base, the group said.

The group’s expansion is also leading to some internal restructuring with a merger of five other subsidiary and affiliate companies into the main IHCL group.

All these companies, Taj Lands End Ltd, Asia Pacific Hotels, Indian Resort Hotels, Gateway Hotels & Getaway Resorts and Kuteeram Resorts Pvt. Ltd., were managing different units in the group and are being rationalised to cut legal costs and effective interest rates on borrowings, while improving liquidity.

The merger will also boost IHCL’s room inventory by 10% as well as the company turnover.

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