TAJ HOTELS TAKES AIM AT NORTH AMERICA
Robert Hogan, College of Charleston
John Crotts, College of Charleston
CASE DESCRIPTION
The primary subject matter of this case is ratio analysis on two potential acquisition
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TAJ HOTELS TAKES AIM AT NORTH AMERICA
Robert Hogan, College of Charleston
John Crotts, College of Charleston
CASE DESCRIPTION
The primary subject matter of this case is ratio analysis on two potential acquisition
targets being considered by Taj Hotels. The case has a difficulty level of three and is therefore
appropriate for junior level students. The case was crafted with management or hospitality
management courses in mind but given the pervasive use of ratio analysis throughout the
business community this case is appropriate for a broad range of courses including finance and
accounting. The case is designed to be taught during one, 75 minute class and we expect
students will need at least two hours of preparation time outside of the classroom.
CASE SYNOPSIS
This case focuses on using ratio analysis to bring the student to a decision point, namely,
which acquisition target is the best choice for Taj Hotels. The case includes background
information on Taj and both acquisition targets, as well as financial data and a detailed
description and calculation instructions for eighteen different ratios.
NOTE: This case is based on real-life facts, but all of the financials provided are
completely fictionalized. As a result the case was developed as a class exercise and should not be
used as a source of primary data or illustration of effective or ineffective management.
CASE BODY
Heather Talati stared contemplatively from her office at the corporate office of Taj
Hotels, Resorts, and Palaces in Mumbai, India. It was October 6, 2014 and in three days she is
scheduled to meet with Rakesh Sarna, Taj’s Managing Director and CEO, to present her
evaluation of two expansion opportunities in North America. Taj exited North America in the
late 1990’s but strategically re-entered the market seven years later focused on the luxury sector
in the gateway cities of Boston, New York, and San Francisco. With complete backing from the
Tata Group conglomerate, Taj Hotels, Resorts, and Palace is perfectly poised for expansion
through the purchase of a privately owned hotel/resort group.
Heather knew that a careful analysis of Taj’s options would be expected and hopefully
rewarded. She and her husband Shyam desired to return to the US, and the expansion of Taj’s
US holdings could create opportunities for both of them. The company’s operating income was
$73 million on $310 million in sales making it one of the more profitable divisions of the Tata
Group (http://www.tata.com/article/inside/Financials-of-Tata-companies).
Two expansion options seem promising. The first was Belmond Hotels (formerly Orient
Express) whose North American properties included six (6) hotels and resorts it both owned and
operated in South Carolina, Maryland, California, St. Martin, and Mexico. The second option is
Salamander Hotels, Resorts, and Spas whose five (5) properties are located in Washington, DC,
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