Posted by: John Elliott | December 20, 2007

Tata hits back at Orient-Express

The Tata group’s Indian Hotels company, which runs the Taj hotel brand, has sent an angry riposte to Orient-Express (OEH), a UK-based hotels-to-trains company that last week said an association between the two companies would reduce the value of OEH brands. Krishna Kumar, vice chairman of Indian Hotels and a director of Tata Sons, the parent company, last night accused Paul White, OEH’s president and CEO, of being “highly misinformed and unduly aggressive”. A letter sent to him by White was “pejorative, inaccurate and libelous.”

This escalation of exchanges between the two companies could be building up into a major row unless OEH backs down. Kumar denies White’s claim that Indian Hotels had launched a takeover bid for OEH and insisted he only wanted to develop joint activities in areas such as sales and human resource initiatives. Kumar pointed out that Indian Hotels’ 11.5% stake in OEH makes it the largest shareholder. He added that OEH “does not respect the most basic tenets of corporate governance” because it was refusing a dialog with his company and with Dubai Holdings, a Dubai government investment company that is the other largest public shareholder.

He ended the letter saying that “those with a fossilized frame of mind risk being marginalized” – which looks more like a warning that Indian Hotels will beat OEH on the ground rather than trying to take it over. Time will tell.

It’s not the job of this blog to track all the moves in such corporate battles, but I have returned to this one as a follow-up to what I wrote last Monday, which provoked dozens of fiery comments.

Answering some of those comments, I live in India (as I have explained before) and I have stayed in many Taj hotels over many years – at Pune, Hyderabad and Chennai in the past few months. And I do drive a Tata car – I have a slightly battered but lovely old Sierra (born out of the Tatamobile that someone mentioned, and related to the Sumo), which I have driven happily for the past 12 years. Sadly I’ll have to replace it soon.

All comments are most welcome – that’s what blogs are all about – so thank you everyone. But most of the attacks have been over things I did not say.

I have also written in Fortune magazine recently that Indian manufacturing is now transforming itself. No one I know in India disputes how appalling quality has been in the past, so I am amazed by such angry comments (mostly from outside India) about what in India is undisputed.

My views on Taj hotels stemmed from my own and many visitors’ experiences. My comments on Jaguar and Land-Rover were limited to the impact on their image of possibly being Indian owned– I did not comment myself on whether the best owner is or would be Ford (F), Tata or One Equity Partners.

Happy Holidays


Responses

  1. By the judge of the passionate posts here, I must say that “the truth hurts”. Whatever happened to being objective? India by far is not even in the same league as a first world country. India has many challenges ahead and it can not overcome these challenges if people deny them. But keep believing that “India will be an economic super power” headlines.

  2. I am Indian in India. The day is not too far, when people come to India to work and earn, instead of Indians going out to earn. India is becoming a global country like the US now. A century back so-called rich countries were not what they are now. History says there used to be bank robberies and killings, stock market riggings in the US. Changes is nature’s law. Let’s accept it.

  3. Let me start this with a note. I am not an Indian or no way connected to India. Therefore, do not do racial profiling here.

    I have had very bad experience in so called luxury hotels in US and UK. I’ve had terrible service at these hotels. I have stayed in many luxury hotels in India and abroad as I am a consultant, who travels all the time. My experience staying at Taj has been very good and pleasant. There can be one off incident. We cannot judge the hotel by one particular incident.

    To add, OEH is a peanut company compared to Tata. Why Tata is wasting their time replying to Mr. White. My feeling on this is, Mr. White feels hostile and inferior. That made him make that kind of comments.

  4. (Big) Rats in Taj Palace Delhi? Anand, when did you get high last?

    Or are you one of those half Hindi, Half English names (Anand Nelson or something) who change their nativity the day they land into their (half) ancestors origin?

    By the way, your calling Room Service would not have helped even in Orient Express. What do you expect Room service to do? Cook and serve that rat with French Fries and Mayonnaise? If you would have ever stayed in a five star you would probably know that Room Service is a F&B outlet and rats (if ever) would probably be handled by either Housekeeping or (if it is a rat your size and breed) by Security.

  5. Take it easy folks. The western capitalists want to learn lessons the hard way. We all know what happened after Arcelor’s Guy Dolle disparaged the quality of Mittal steel’s products, likening them to “eau de cologne” in contrast to Arcelor’s “perfume”. And I am amused that even the a seasoned business writer like John Elliott fails to understand the concept of a company desiring to “move up the value chain by acquiring a “well-known” brand.

  6. Mr. Rajesh Kandibanda:

    A number of points:

    1. A Brand- as any marketing or management 101 book would tell you, includes “standard of service”(and that’s especially true for a hotel company which tries to sell “service” as its main product). Taj Hotels in my experience, did not have that standard. I wanted to point “that” out.

    2. As to your comment on visting many Taj Hotels and finding them better than many US hotels; I am glad you had a good experience. I and my family did not have that experience.

    3. As to waiting in O’hare: Its NOT relevant to the topic in discussion.

    4.As to racial profiling, I did not comment on that aspect in my response. But that does not mean that I accept the racial profiling or condone it.

    5. As to your comment “…dance with the tune of being a folk who is overzealous to see his once native land growing…” : I think you need to re-read the article and my response with a more objective frame of mind ( and not with a rhetorical thought” that I want to put my country down)

    Let me set the record straight. I have stayed in many other Indian “owned” hotels (e.g. Park hotel in calcutta,and Delhi, Oberoi Grand In Calcutta etc). Taj Hotels, in my experience, did not meet the standards followed by its own Indian competitors even. Need I say more?

    I guess, aiming higher is not a bad thing. Tata’s and Taj Hotels should aim for that and by no means, Mr. White had any right to write such a non-sense and idiotic letter (which had no bearing to actual performance or business arithmetics). However, Elliot is trying to bring another facade to the arguement and that is the actual quality of service for long term success. I really wish Tata’s (and Indian Hotels)pay heed to this and improve on that front to become a “truely” world class hospitality company! Otherwise, they might be able to ride on this short term capital wave and acquire a host of companies. But later on, lack of quality could make them fall flat on their face.

  7. Image Issues ? – Maybe your mirror is Made in India.
    —————————————————————
    Its hilarious to hear about US dealers balking at selling Jaguars after they are TATA owned.
    Many large enterprises in the US are owned or co-lateral led by a host of foreign companies.
    Uncle Sam (Thank God !) is color blind . “Quality Issues” are the last refuge for the uninitiated in global finance.
    World Class products are being refined, tested & honed everyday by Asian & South East Asian countries.
    Hotmail has the same quality AFTER being financed and partly owned by an Indian.
    Sometimes its not the Mirror that needs light, but the one standing in front of it.
    Reflect on that …

  8. **Bad Orient Expressed**
    Paul White,the elitist has shown his “pedigree” by conjoining defense with an offense.He has every right to refuse collaboration,but he has no right to shoot down who he does not want to work with.He could have politely declined by saying “incompatible brand synergies”.Dont malign rivals in a global arena with off-the-edge emotions.His indignant rebuff reeks of branding his company of a higher immortal status than factual.Same goes for the other orient-Mr.Osamu Suzuki.

  9. Well Mr. Paul certainly don’t want his hotels to be connected with an Indian brand, worrying about drop in revenue it may result in.
    Perhaps he should also make it clear, if he will allow Indian patrons. Seeing colored faces might also result in drop of revenue for his hotel.
    Wake up OEH, this is 21st century, where everybody including the white men can trade and do business.
    Wondering what he will do, if some Asian investment group actually acquires OEH through a hostile takeover.

  10. It is absurb & paradoxical to compare a conglomerate like TATA with mere companies like Ford & OE’s. In terms of quality, reliability, profitability & CSR Tata is far ahead of them. Tata steel for example is typical example for its quality. Tata is conglomerate or is that if a better word is available. Kindly make a visit to Jamshedpur to see how an ethical company with diligent CSR can transform the quality of living, that too even much before India witnessed any sorts of progression. Would you sugest me middle or upper classed sedan car offered by any so- called american companies? What you have left in four-wheels? What america is enjoying is only an early-bird leverages only. When rest of the world learns how to make them, they make it far better. Thats what auto industry is witnessing,electronics industry has seen. But what rest of the world is good in doing, american companies cnat even dream of emulating it. Days are changed mr.elliot.now we are in a century, where Citicorp is approaching Abudhabi for fund, Amercians had to plead DP World to withdraw their command over their port on their cynical apprehensions, Arcelor is now have to be renamed Arcelor Mittal , Chorus is renamed Tata Chorus, Ford & GM amaze us with record losses on the same ground where japanese & germans making fortunes. So kindly adapt yourself to the reformulated world or else you will have only Google, Facebook & Iraq to flaunt on.

  11. Mr Elliot,
    I have been a frequent visitor of your blog and I quite enjoyed it. The blog I thought was a reflection of your deep understanding of India. However, I am sorry to state that your recent postings have indeed been very subjective and insensitive.

    At the outset, let me say that I have great respect for the US. I respect the US, because it tirelessly pursues freedom ( of speech, action and rights).

    Given the above, my thoughts on what you have written so far:
    a) “A more effective tack for Indian officials would be to accept that their country is just beginning to lose its decades-long reputation for dreadful quality….”
    While you are right that India has been on the global map only recently, I dont think you have properly considered “quality” of Indian products. Indian products produced by private groups such as the Tata’s have always been of the highest quality, it is the government owned industries(like in many other economies worldwide) which did and continue to do a poor job of producing poor-quality products. So, don’t color the entire Indian (private sector) industry with the same brush.

    b)”The group’s award-winning Taj hotel on the waterfront in Mumbai
    is one of Asia’s most splendid buildings, but service there does not always match the elegance. So it is perhaps not surprising that White has serious reservations.”
    Like others have commented before, every hotel/product is going to give you the occasional spotty service. Even OEH’s flagship hotel the Cipriani at Venice has average service reported on tripadvisor.com. So to paint the entire hotel/chain with the same brush is not rational/objective. I thought you will recognize this, but that you go on to justify Mr White’s arguably biased reaction is appalling!

    c) “Meanwhile, Indian jingoism is on the rise in the media and among the country’s politicians.”
    I dont think Indians are being Jingoistic here, but are only trying to rebut the obviously racist connotations in White’s response. The economic times I feel rightly stated what it did in the context of previous Indian takeovers such as Arcelor-Mittal, when there were a lot of racist comments being made.( which is the case this time as well, but the only difference being Mr White is only being a little more deceptive ! )

    In response to some other comments
    i) There is no doubt that “many” Indian companies have a lot of learning to do. But this does mean that “some” do not have the capability to be world-class organizations. I firmly believe that Tata is one of those organization which has and will run world-class companies.

    b) As regards the branding issue, there are several companies out there which have portfolios of brands. Take the Swatch group for example, they have everything from a low-cost children’s watch(flik-flak) to an uber premium brand like Breguet. The skill lies in managing each brand independently and this is something the Tata’s can do with Jaguar as well.

    So, Mr White and the dealers of Jaguar, North America: Please recognize that all business is conducted with only one aim, to be profitable entities which serve their shareholders well. Furthermore, the Tata’s were able to do the Corus merger, because they respect their employees( They were after all one of the handful of companies, which had a 8 hour workday even before it was common in the UK! ). The origins of a company should not matter, but only its performance should.

  12. Having just moved to India my family and I spent 3 months staying in a Taj Hotel before moving into our house – and I have to say its one of the best hotel experiences I’ve ever had. My previous corporate role saw me staying at major hotels all over Nth and Sth Asia, Australia, the US – and I would rate the Taj group as one of the best. What made the stay all the more pleasurable was that I had my family with me this time – including my 4 year old – but the hotel handled it all with ease and went out of their way to make our family feel welcome.

    Oh – we now have a Tata car (Safari), Tata cell phones, and Tata airconditioning in our house. Couldn’t be happier.

  13. There is a definite scare and nervousness among working Americans about Indian capabilities now.. I see it at my own work places (Aerospace) and the people I talk to across the West Coast. The way they treat you (people of Indian Origin) is also noticeably different than say as early as 5 years ago, and understandably too.. they are worried about their livelihoods!
    Indian companies will only do better, become bigger, as the fundamental in India (educated work force) is strong, which is not the same in the US. To remain competitive US companies will have to continue to rely on Indian brains in their work force..
    The Tata Sierra when it came out was actually a pretty nice car (although underpowered). It is clearly out-dated now. Taj hotels are world standard. I can believe an occasional rat or two, but have witnessed similar issues with American hotels on and off. You cannot yet compare the US with India, come-on guys! We are a generation that is witnessing an enormous shift in wealth (and creation of new wealth) that we are all learning how to get adjusted to. Change is always difficult as well as exciting.

  14. Steve, I think Tata Sumo has a reputation for reliability and it is widely used in India. Quite obviously your views are prejudiced. Secondly, several travel magazines have rated Taj Hotels and Orient Express in the same category for service quality. In addition to this, you really need to go and see Jamshedpur the town built and managed by the Tata group for the workers at its steel plant. It gives corporate philanthropy a whole new meaning. Did you know that Tata companies had an 8 hour work day, much before the concept was embraced in America? Not everything good is American. Learn to live with that!

  15. Oh this gets better and better. Apparently IHCL’s letter to OE was marked “Strictly Confidential” but OE went ahead and filed it with the SEC as an exhibit in an otherwise unneeded 13G filing. Except for the letter, there is no additional information or amendment to the original 13D in the 13G. I wonder why they filed it? May be they wanted a public review of the letter?

  16. Steve Bangalore: If you had read OE’s letter to which IHCL responded I’m sure you’ll see which party was arrogant. Not arrogance – I’d say there was a lack of business etiquette in their letter. In my opinion Tata’s response to them was very deserving. As for your going thirsty at a bar because the bartender ignored you, dude, I’d have tried to gesture loudly or just walked over to the next bar on Residency Road. Jeez, your comment is like: “My beer was flat when I went to the Ruby Tuesday in Chicago the other day, so I’m never going to buy a Dell computer ever again”.
    John – I can understand you getting offended as a Britisher when you are mistaken to be a Yank, but I don’t understand why you feel the need to explain yourself to this shouting bunch who can’t take a little bit of criticism, and the other shouting bunch who just love to shout at the first shouting bunch. You keep blogging away friend, you are actually doing a great job!
    Merry Christmas everyone!
    Oh, pardon me – Happy Holidays everyone!

  17. I think it is important to state the facts.

    As people have mentioned, the column had a lot of subjective information. Maybe blogs are like that. But when you say that your (or your friend’s experience) at Taj was not good, you are using a really broad brush to paint a bad picture. You also do not say if you stayed at any of the Oriental Hotels. Even if you did stay there, your experience would be reflective of one stay in one room during one visit.

    Steve from Bangalore complains about 7 TATA Sumos and bad service at Taj. I stayed in Ritz Carlton in Hawaii and had wall paper peeling off in my room and had bread served with mold on it. That did not turn me off Ritz Carlton for good and my next visit to their Naples hotel was exquisite. So, Mr. Elliot, while the comments from the readers are subjective and biased, it is because they are readers and not journalists like you who are expected to verify facts before reporting.

    Your column did not have any facts in it. Is there an unbiased third party that can rate service levels at these two hotel chains with a sufficient sample size? What quality metrics can be used to show that Indian manufacturing is bad and bad compared to whose manufacturing? And also on the perceived value of being Indian owned, was there a media study done to understand brand perceptions of Indian owned vs other brands? If these facts could be brought to light, the column would be less prone to criticism. People will still get emotional over such pieces but they will have less ammunition to hit you with. But then, maybe blogs are just meant to be thought based and not fact based.

    Keep up the reporting. We Indians living outside of India have got used to bad, biased reporting but with more reports coming out, there are greater chances that the good things will come out as well.

  18. Dear Mr Elliot,

    As a Global Indian living in London, the initial impression reading your blog was that you were misinfomed like most others.

    I however stand corrected since more damage to India is done by Indians living outside are ready to blame their woes on India, as rightly pointed out to my esteemed once upon Indian.

    I think the West must realise that the Economics knows no boundaries on color of investment.

    While there are certain CEO’s like White who have their heads deeply buried in sand , their are others like Bill Gates who welcome the East -West confluence of Mind and Money.

    This mindset is difficult to change since many Americans like White do not Know how many countries exisit apart frm the 52 States of USA.

    Happy Holidays whereever your are and i trust the break would give Mr White time to remove the cobwebs on his gray matter if it ever existed !!!

  19. “No one I know in India disputes how appalling quality has been in the past, so I am amazed by such angry comments (mostly from outside India) about what in India is undisputed.”

    Wow, you really are racist. Also Fortune magazine is sort of famous for its anti India editorials, so nothing surprising there. In the future it wouldnt surprise me if Fortune was also taken over by an Indian company.

    Also by the way, i am an Indian and live in India and can very well say that Indian goods have high quality standards. So your claims are now disputed in India. A little brain power wont hurt, would it Mr.Elliot

    Ofcourse we have everyone from the poor to the rich living in one society. For those who cant afford high end products, we do have low end produts too. We dont shun our poor to the suburbs and pretend they dont exist.

    So we have Ferraris to Maruti 800s being sold at the same time in India. Its just an inherent fear that Americans have ever since their jobs were ‘stolen’ by ‘cheaply paid’ Indians. Little did they realise that most Indians can maintain an equivalent standard of living with the lower pay here in India. Big Mac Index may be used here😛

  20. It seems the author is trying to wash his hands off the previous columns. His comments, he says, are based on his experiences as well as those of other unspecified/anonymous visitors. How much more subjective can you get? Its like my experiences at the Four Seasons and my friends’ experience at the Marriot.

    I have lived in India for most of my life and I dispute the author’s statement that the poor quality issue is undisputed in India.

    Finally the author says ‘My comments on Jaguar and land-Rover were limited to the impact on their image of possibly being Indian owned’…John, that was the argument of the commentators on the article…that it was subjective, biased and slanted. You proved them right. Your views are racist and demeaning and thank you for admitting so openly. I rest my case.

  21. I took the trouble to search out the 13D filings by IHCL and Dubai Holdings. Looks like Dubai was also rebuffed by OE in Oct 2007. OE’s letter is actually quite impolite, and data in IHCL’s response rips a new one for OE. The text of the letter is at http://secfilings.nyse.com/filing.php?doc=1&attach=ON&ipage=5344171&repo=tenk
    Some interesting data: IHCL has 583 hotel rooms in North America with a 72% occupancy and an ADR of $383 as opposed to OE’s 597, 62% and 302. Also IHCL’s EBITDA margin is aout 15% higher than OE’s. May be some teenage kid has stolen Mr. White’s blackberry.
    As for quality of service, I guess every person is different. I’ve had pretty harrowing experiences in a few Hyatt and Four Seasons properties, even at MGM Grand in Vegas. I won’t take it to mean that Hyatts everywhere are horrible every time, would I?
    If Taj’s quality was universally so poor as some commenters seem to suggest, they would not have survived in the luxury hotel business for the 100+ years they’ve been around.

  22. Hi, I too live in India. My firm bought 7 Tata Sumos in 1998-99. To put it mildly they were junk. I have stayed at Tajs in Hydrabad and Bangalore, they are cold and impersonal with really bad service. I could have almost died of thirst waiting at the bar for a beer at the Taj on Residency Road.

    Tata’s reply to Orient Express is just typical of the arrogance of major Indian firms.

    Steve Bangalore

  23. Mr.Anand,

    You would like to sleep or wait in chicago airport for 17 hours…may be even accept racial profiling..i dont see the point in what you are saying. I have been to numerous Taj Hotels, they are by far the best…better than most of the US hotels.
    Do not distort the facts and put down a brand that has been giving a world class service. Its the most rubbish statement i have heard…Big rats?? heck no! not even a 2 star hotel dares that sort of callousness..
    If you want beat the trumpets and dance with the tune of being a folk who is overzealous to see his once native land growing…you are far more welcome to present..more grim and distorting facts about your mother country!

    Mr.Elliott,

    I do not completely agree with your comments but do you know that since years, several auto companies outsource parts to india? Bharat forge is by all ways the largest exporter of automobile axles.!!! It is very disappointing ..Please do not generalize the statement on the manufacturing industry in India!…may be they are so low in quality that the clothes these days you find..are mainly exported from India?

  24. Mr. Elliott,

    I completely agree with your comment on quality of service at Taj Hotels. And this comes from my own experience with Taj Palace Delhi in Dec-2006. Can you imagine a five star hotel having rats(and big rats!!!) running around in the room? Over and above that, when you report it to the room service, they don’t even respond for next half an hour? This forced us to go down to the reception and make a hue and cry in the lobby before the manager shifted us to another room. And when I wrote it to the Tata’s no one even bothered to reply to us!!!!
    I think I would, say to Mr Krishna Kumar-
    Your reposte to Orient Express may be right on other counts, but your service, is definitely not five star!


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