For a long time, the typical model for Indian Hotels was to build hotels and to then get flow of guests and good room pricing to make profits. The model made hospitality a highly capital-intensive sort of business. This also put pressure on the ROE and on the margins, as well as exposing the hotel to construction cost risks, depreciation risks, project delay risks etc. Now, the Hospitality Asset Platform wants to separate development of hotels from the running of hotels, so that IHCL runs an asset-light business. 

Under the hospitality platform model, it will be Tata Sons that will invest in the hotel properties, while IHCL will focus on running these hotels. For Tata Sons, there will be a direct participation in the business of Indian Hotels, as they will have a share in revenues for footing the construction and development costs of the hotel. IHCL will focus on running the hotels and not get bogged down by the construction, development, and asset depreciation risks. This platform will let IHCL improve its ROE and ROCE due to an asset-light model. This also makes the IHCL business model more scalable. 

For starters, IHCL had tried this model with GIC of Singapore in 2019, but it did not take off. With an existing ownership link with Tata Sons, the hospitality asset platform stands a better chance. Above all, it fits well into the aggressive growth strategy that Indian Hotels has charted for itself. Consider these numbers. IHCL currently has around 145 properties in development mode and is likely to have a portfolio of 400 hospitality properties by the end of this year. In addition, by the end of 2030, the IHCL portfolio of hotel properties will go up to 700. For such an aggressive expansion, Indian Hotels cannot afford to be bogged down by the weight of assets. An asset-light strategy will work perfectly for them. 

For Tata Sons, this is an opportunity to play a more pivotal role in the operation of group companies. For long, Tata Sons has been dividend-earning and dividend distribution machine. In FY25, Tata Sons got ₹32,300 crore as dividends from TCS and paid out dividends of ₹17,500 crore to its shareholders. Under Noel Tata and Chandrasekaran, the idea is to make Tata Sons play a more proactive role in business operations, rather than just as a passive investor. Tata Sons has already channeled part of TCS dividend for deeper incubation of Tata Digital. The IHCL plan fits into the new thinking. For IHCL, it can be a game changer!