Why Ratan Tata wants Orient Express so much

What lies beneath Ratan Tata’s keen interest in US-based luxury hotelier Orient-Express Hotel?

Is it just the huge opportunity the chain of luxury hotels will add to Indian Hotel’s platter or is Tata wary of investing at home given the hurdles faced in doing business in India post 2008?

It is a well known fact that Orient Express is not new on Tata’s, who retires as chairman of the Tata Group in December, wishlist.

[caption id=“attachment_519470” align=“alignleft” width=“380”]  Reuters[/caption]

Orient Express is the owner/part-owners and managers of 45 luxury hotels, restaurants, tourist trains and river cruise properties operating in 22 countries

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In 2007, Tata Group tried to increase its stake in Orient Express, but efforts failed due to opposition from Orient Express management, which said that any association with Tatas would lead to an erosion of its luxury brand. Yet Ratan Tata did not stop there and again bid for a stake in Orient, valuing the transaction at around Rs 9,600 crore.

Industry analysts have already cautioned investors to rethink their investment strategy when it comes to Indian Hotels since the acquisition size is equivalent to the company’s market cap. But Tata remains undetered.

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“There is a great strategic opportunity for us, although there is nothing we can say or do. But, if you look at that company, it is very similar to Indian Hotels in the sense it has iconic properties in various countries,” Tata had said at the Indian Hotels annual general meeting.

So what explains this obsession?

Is Tata expanding overseas to cut the risk of doing business locally?

While it works out to be the perfect hedge to its risk in India, it will also expand Tata’s global footprint to a large extent and give it ready access to a o a high-end customer base.

According to a report in the Business Standard, this strategic alliance with Orient, will strengthen Indian Hotels position at top, even over Four Seasons and Starwood and reduce its dependence on India, as over 70 percent of its revenues come from India.

“Indian Hotels’ footprint will expand considerably from 110 properties at present (mostly in India) if it gets hold of Orient-Express,” the BS report said.