Hotel Centaur: Still waiting to say athithi devo bhava

#Business, #Hotel Centaur

There is no signage to navigate the twists and turns in the road leading up to Centaur Hotel. One has to rely on GPS and old memories to reach the hotel, situated close to terminal T3 of the Delhi International Airport (DIAL). The driveway is deserted on a late afternoon midweek, though a liveried doorman holds open the door, which leads to a cavernous lobby. It is nearly empty, but for the few people in the coffee shop at the far end eating a late lunch. A large moat-like structure at the centre, with a fountain, lies dry as its water inlets are clogged. There is no music playing in the background, and the front desk is manned by a single employee. The Soma bar, next to the coffee shop, is shut as are some other restaurants at the ground level.

A cursory glance around the lobby reveals the familiar Air India mascot — the turbaned Maharaja is at the extreme left corner of the lobby, bowing with a hand on his heart to welcome the few guests Centaur entertains nowadays. Centaur is a part of Air India subsidiary Hotel Corporation of India (HCI), which also houses ChefAir flight catering and two lounges at Delhi airport. There are two hotel properties under HCI — the Centaur at Delhi and one at Dal Lake, in Srinagar. HCI has been a loss-making venture for years. At the end of March 2020, it had accumulated losses of nearly Rs 570 crore. The net loss for FY20 was Rs 65.55 crore and its current liabilities exceeded total assets by nearly Rs 341 crore. The auditor has noted in HCI’s annual report for FY20 that the company’s net worth has seen “complete erosion”.

Second birth?

In 2019, one thought Centaur would become history as the government was thinking of razing the Delhi property. The land on which the hotel stands is under lease from the Airports Authority of India (AAI) and there was a plan to terminate the lease since AAI had wanted to take over the land to expand the airport. But this never happened and Centaur still stands, with the lease now valid till 2031-32.

In a sense, this could well be Centaur’s second birth. The government appears to be interested in reviving this perennial loss maker, which is perhaps why it brought in hospitality industry veteran Deepak Khullar as CEO last year to turn the business around.

Khullar brushes aside the usual questions about the need for the government to be in the hospitality business. He seems convinced that some of the ideas already under discussion with the board of directors will infuse fresh life in HCI’s moribund hotel business, and emphasises that Centaur is “definitely revivable”.

A person familiar with the developments revealed that a large Indian business house with interests in the hospitality business had been approached by the government just before Covid struck India. But the government remained undecided about which model to follow: offer a management lease to a private party or sell the hotel. This person said that the business house conducted extensive due diligence of the Delhi property and concluded that it would have to be razed and then rebuilt because there was “such inefficient use of space”. But indecision on the government’s part led to the status quo continuing and neither plan being put into action.

Asked why the government continues to be in the hospitality business at all, Khullar points at the airline-hotel model followed with some success by German carrier Lufthansa in the seventies.

Revival ambitions

The Delhi Centaur has 376 rooms but less than half are operational due to leakages and other operational issues. There have just not been enough funds to make the necessary repairs.

Without getting into specifics, Khullar says that efforts are now underway to “build enterprise value through improvement of the guest experience, enhancement of revenue streams for the various operating units and exploring distribution extension opportunities”.

A workforce expansion is surely needed to achieve any or all of this since the average age of the staff right now is 54 and there is no one tasked with marketing and brand building for the hotel property. The company has 500 permanent and 200 temporary employees on its rolls, and as per the FY20 numbers, employee benefits were equivalent to nearly 85 percent of the company’s total revenue in that year.

Besides reviving the hotel business, Khullar says he is also working on improving ChefAir’s share in the airline catering business, which is in a state of flux, with some players downsizing and one possibly shutting shop. HCI has been “underutilising its capacity” in the catering business and can easily scale up with a little investment, he says.

But will any of Khullar’s plans to revive the hotel business and improve the market share of the catering business actually take off, given the near certainty of HCI moving to the Special Purpose Vehicle (SPV) created by the government? This SPV is expected to house all the subsidiaries of parent company Air India that are not being disinvested and aims to eventually monetise them.

The person quoted earlier said that in the case of Ashoka Hotel in Delhi, ITDC has decided to offer it on a management contract.

When all is said and done, the need for the government to be in the hospitality business does pose an uncomfortable question, especially now that it is finally on the path to exiting the airline business through the Air India disinvestment.

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