MUMBAI: One of the first questions tackled by Charles Allen and Sharada Dwivedi in The Taj at Apollo Bunder, their weighty new history of the hotel, is why JN Tata built it at all. They note the popular story of it being built to avenge the insult of being turned away from a Europeans-only hotel, but point out that while this may well have happened, “it seems far too petty a reason to fire a man of the caliber of JN Tata, who in the past had not hesitated to cross swords with governments and powerful commercial concerns”.
Allen and Dwivedi suggest a more plausible explanation could lie in an article written by an editor of the Times of India, Lovat Fraser, who was a close friend of Tata. Fraser recalled he had written that “the man who built a hotel worthy of such a city would do more for Bombay than the donor of many museums”. Tata came to him after that and said the idea had been in his mind for a while: “He had not the slightest desire to own a hotel, however; his sole wish was to attract people to India, and incidentally to improve Bombay.”
Fraser’s article may have impelled Tata to action, but Allen and Dwivedi also point to a particular reason for Tata’s concern. In 1896, the plague hit Bombay and over the next few years, the once-prospering city became a shadow of itself. At its peak, in 1899, 2,800 people were dying each week, and people were fleeing the city. Tata had thrown himself into plague-combat work, and must have realised that while the disease could be brought under control, the confidence in the city would not be easily restored.
Building a grand hotel in Bombay then was a sign that, at the start of a new century, the city was open for business again. Of course, a lot of the business was with Tata, which simply shows how, as with many canny businessmen, he could promote both public and personal interests together.
But this larger vision was lost upon Tata’s sisters who were horrified at the idea of him getting into something as low-class as hospitality. One is said to have exclaimed to him in Gujarati: “You are building an institute of science in Bangalore, a great iron and steel factory, and a hydro-electric project – and now you tell us you are going to put up a bhatarkhana (eating house)!”
Today with the Taj restored to its status as one of the world’s best hotels and other corporate groups looking to enter the services sector, this remark really seems archaic. Yet this incredulity at the Tatas’ hospitality involvement persisted for decades, not least during long stretches when the sector was stagnant, and the flagship hotel something of a dump.
Sometimes, Intangibles can be Strange
The 1950s and 60s were probably the worst, when the hotel’s reputation – and relative importance compared with the group’s booming manufacturing businesses – was at its lowest, yet its costs were a drain. But the Tatas resisted the temptation to dispose it of, and far from being unusual, their attitude actually parallels that of a number of super-rich business people. Dig into the portfolios of many of the world’s top investors and you will find a hotel, perhaps a chain, that while rarely making a loss would hardly seem to generate the returns such investors usually require.
Mexico’s Carlos Slim Helu, for example, has interests in telecom and other businesses that regularly put him at the top of the world’s richest person list, yet one of his most long-standing investments is in Hotel Geneve, an elegant 105-year-old establishment that may be Mexico City’s equivalent of the Taj. Prince Al-waleed bin Talal, the fabled Saudi investor, is a major shareholder in the Four Seasons hotel group, and has taken particular interest in restoring London’s famous Savoy Hotel.
He was also rumored to be in the running for Aman Resorts, the ultra-luxury spa resorts, from its current Indian owner, the DLF Group. Another Middle-Eastern investor, the Qatar Investment Authority, has bought Singapore’s historic Raffles Hotel. The Sultan of Brunei owns such landmark hotels as London’s Dorchester and Paris’ Plaza-Athenee. And in India too, Mukesh Ambani’s Reliance has taken a significant stake in the Oberoi group.
In all these cases, good business reasons can be made for the investment, yet all these investors could probably have made more money elsewhere if they were looking only at returns. Hotels need lavish investment in infrastructure, upkeep and regular renewals, and returns can be only seasonal and scarily dependent on the general sentiments about a city and travel at a particular time.
A deep-pocketed investor can really help, and as all these cases prove, quite often such investors are found who are willing to look beyond just monetary returns, to various intangible benefits of opening hotels as well. Sometimes, it’s true, the intangibles can be strange.
The Waldorf-Astoria in New York City, one of the most genre-defining luxury hotels, originated in a family feud. After the death of American multimillionaire John Jacob Astor III in 1890, his younger brother William Astor’s wife Caroline, a New York society diva, declared she was the social head of the family and had to be called just Mrs Astor, as opposed to Mrs William Astor, as was the norm.
JJ Astor’s son, William Waldorf Astor, was so infuriated at this usurpation that he tore down his family mansion next to his aunt’s and built a huge hotel, the Waldorf, to dwarf it. She tried to ignore what she dismissed as “a glorified tavern next door” before finally giving in and moving out, allowing her more peaceable son to tear down their house and build a matching hotel, the Astoria, that eventually merged with his cousin’s as the Waldorf-Astoria.
Another notable New York hotel, the Pierre, now run by the Taj, was built by hotelier Charles Pierre Casalesco, who was dismayed at the fall of manners due to “the vast democratic size of World War I parties and unrestrained prohibition guzzling that followed.” The 42-story mansion was meant to be a return to the exclusive ways of old New York, but the Great Depression set in soon after it was completed in 1929 and it went bankrupt. The buyer was oil millionaire J Paul Getty, who sold a number of apartments to similar super-rich survivors of the Depression.
When the Taj eventually took over the management, it was presented as an important international foray for the group – but it is hard not to wonder if the group was not at all influenced by the prospect of seeing the Taj name and the Indian flag flying outside one of the most prestigious addresses on Fifth Avenue. One of the more practical reasons for opening hotels has been linked to transportation.
The boom in Bombay that made a hotel like the Taj possible was partly driven by the opening of the Suez Canal, and one family that made its money there, the Baghdadi Jewish Kadoories, shifted their base to Hong Kong and in 1928 opened the Peninsula, one of the grandest hotels in Eastern Asia, to coincide with the completion of rail links that brought the city closer to the rest of China.
Another famous hotel created by the railways was the Pera Palace in Istanbul, developed by the company that ran the famous Orient Express train because they realised their guests would need a place of as much quality to sleep in once they finally reached Istanbul. (Agatha Christie would later write most of her Murder on the Orient Express in the hotel).
Government regulations can be an unexpected reason for opening hotels. When Theodore Roosevelt was police commissioner of New York, he enforced a highly unpopular measure called the Raines Law, designed to cut down on drinking by banning the sale of alcohol on Sunday – the most popular day for drinking.
The one exception was for hotels which could serve alcohol with food or in rooms, and almost at once bars started opening 10 rooms – the minimum number required – and turned into hotels. Of course, the bars weren’t averse to the rooms being used, in any way, and very soon a huge boom in prostitution took place using them, totally subverting the moralistic intentions of the law.
In Chennai today, similarly stupid measures require bars to be attached to hotels, and some have created lodges for this purpose, though it isn’t clear if this has facilitated prostitution.
Some of the owners of the grand hotels have, of course, used their properties for similar reasons and even for more decorous purposes it is clearly quite a kick to have a grand and well-run address to stay in. The Ambanis have tweaked this formula slightly by getting in the Oberoi’s services to run Antillia, their controversial new skyscraper mansion, which insiders say is run like a hotel, with a manager for each floor. But even at a more general corporate level, there are ways in which a hospitality business’ expertise can be used across a group.
The Taj does a great deal for the Tata Group, from providing excellent catering at its Bombay House headquarters, to supplying food (via its flight catering subsidiary) to cafes at Westside stores run by Trent, the Tatas’ retail operation.
The Taj often handles hospitality at Tata Group events, not for free, but certainly at very competitive rates, and Tata managers also get to use Taj properties wherever they travel at special rates. And in Mumbai, the Taj runs Wellington Mews, a complex of luxury service apartments that the Tatas developed on an existing parcel of property owned by the group. With the ITC Group, the hotels division has been able to use their land assets profitably.
“We have a large land bank and this has been a great way to leverage it,” explains ITC spokesperson Bindu Panicker. The ITC Grand Central in Mumbai, for example, was built on the site of an old cigarette factory and the ITC Gardenia in Bangalore came up on a compound where senior company officials used to have their bungalows. Panicker says the other big synergy of the hotels with the rest of the company has been in the use of products.
We use all types of ITC products. Paper from the paper division, ITC matches and agarbattis, Fiama di Wills toiletries from the personal care division, Aashirvaad atta from ITC Foods, and more. With ITC Foods, in particular, the collaborations have been multiple, with top chefs from the hotels helping the foods division develop products like its Kitchens of India packaged food (one of its products, Bukhara Dal, links directly to the restaurant at ITC Maurya).
Perhaps the biggest cases of owners benefitting from hotels come not from the big chains, but individual hotels that are leased out to the chains to run. The owners of these hotels, who are typically local businessmen with the property, but not the expertise to run a hotel, benefit from having a professional team running the place in return for a percentage of the income – and several other benefits.
The form these take varies; some chains have formal, standardised programmes for owners, but others keep the contracts individual and are possibly not too keen on all owners getting to know what the others are getting.
Typically, though, a package would include use of other properties and services of the hotel chain up to an agreed amount. But there is also an intangible benefit that comes through the chain’s general manager posted to a property. A significant part of his job involves keeping the owners happy, and this can be onerous.
Managers are often asked to get bookings at other prime properties at the busiest times of the year, and because these are owners they can’t be refused, so much begging and pleading for favours between hotel managers take place.
The flipside of this though is that because such owners tend to have other business interests in the same city as the hotel, a steady stream of business can accrue from providing hospitality services to them. “You do have to be firm and say no to freebies not specified in owner contracts,” explains one general manager.
“And of course, they will get a special rate, but then it will be regular revenue.” The relations between owners and hotels can be complicated and occasionally really fraught – there’s the notorious story of how the owners of the Imperial in Delhi demanded the Oberois return it in exactly the condition they got it, so MS Oberoi ripped out every airconditioning duct and infrastructure improvement, leaving a total mess. But with enough give and take on both sides, both hotels, which do need deep-pocketed investors, and the owners can have a beneficial relationship that goes beyond just business.
Source: The Times of India
