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Good day ladies and gentlemen. It's my pleasure to welcome you on behalf of EIH Limited and SKP Securities to EIH Limited Q1 FY '24 earnings webinar. have with us Mr. Vikram Oberoi, Managing Director and Chief Executive Officer and Mr. Kallol Kundu, Chief Financial Officer.
This meeting is being recorded for compliance reasons, and during the course of this discussion, there may be certain forward looking numbers, which must be viewed in conjunction with the risk that the company faces. We'll have the opening remarks and a presentation by the management, followed by a Q&A session. Thank you, and over to you, Vikram.
Thank you very, very much. Thanks, Navin. Ladies and gentlemen, good afternoon, and thank you for attending the call today. We had a very positive result for Q1, and Kallol will share a presentation on that. I'd just like to say a few other things which I tend to repeat. So please forgive me.
As a hotelier, our focus continues to remain our guests and our colleagues and really providing exceptional experiences to both, through our guests through the service and care they get at our hotels, and for our employees through their learning, development and growth. And we continue to work on future growth in terms of number of hotels with the company. And we hope we will be able to share positive news, but Kallol cover that as well with you in the not-too-distant future.
So with that, over to you, Kallol for the presentation.
Thank you, Vikram, and good afternoon, ladies and gentlemen. It's a pleasure to be back again. Navin, if you could just confirm that my screen is visible to everybody.
Yes, and the presentation is visible.
Thank you. Thank you so much. So we are here to present the earnings results for our quarter 1 of financial year '24. The key highlights as per HV ANAROCK report of July 2023, provides 2 highlights. One is the hotel industry in India saw rates rise in quarter 1 of FY '24 boosting RevPAR despite a slight drop in occupancy. And domestic air traffic in India increased by 19% in June '23 compared to June 2022.
Coming to some operational statistics, Q1 FY '24 has been higher by 16% in terms of RevPAR over the same quarter of last year. And this is typically to show the movement quarter-on-quarter. But if you could look at the shaded areas, these really reflect the quarters, the quarter 1 of each of the financial years since financial year '19/'20.
So as it's visible here in quarter 1 of financial year '19/'20, the RevPAR for EIH owned hotels, which is marked by the line in blue, was INR 6,506 and the RevPAR of all domestic hotels, including those managed by EIH as part of the group was INR 6,317, and then these have continued to move on. Of course, COVID years in between.
And the last year, quarter 1 was INR 8850 and INR 8219 respectively, which is now INR 10,236 and INR 9484, respectively. So essentially a 16% increase over the same quarter last year. The company continues to demonstrate RevPAR leadership, which is evident in the RevPAR index when considered for all domestic hotels taken together. The RGI is depicted in terms of this blue line, which has been consistently above 100 which shows really that vis-a-vis competition, our hotels have been doing better in terms of RevPAR. In fact, the overall RevPAR index has been 124%.
Moving on to some more parameters just to show how citywise the RevPAR has grown in quarter 1 of FY '24 versus quarter 1 of FY '23. The highest has been International for us in the locations that we are present. And as you all know, we are present in Indonesia in Bali and Lombok, in Marrakech, in Mauritius, in Egypt and in Al Zorah. This is followed in India by the city of Agra, which has really seen a lot of traction, especially with the arrival of a lot of foreign guests. This is, again, followed by Jaipur and Ranthambore, which has been clubbed together under one, which has seen a 34% growth in RevPAR, followed by Delhi, 24%; Mumbai, 19% and Chennai, 26%; Kochi, 24% and so on and so forth.
Simla, unfortunately, has seen a degrowth essentially because of the rains, the floods, et cetera, and the condition of the infrastructure currently, which has been seen after the floods. So that's one of the reasons. Month-on-month, it's looking pretty good in terms of what trends have been seen in the past. So basically, April is obviously the best month. in terms of occupancy as well as in terms of ARR, followed by May, followed by June. But overall, it's looking good at a quarter 1 quarterly occupancy of 70% at 13,059 for all our domestic hotels, including managed hotels.
When we look at it from a classification point of view, in terms of Oberoi Metro, Oberoi Leisure Villas, Trident Metro, Trident City, Trident Leisure and others, overall Leisure Villas, of course, continues with a high traction in terms of RevPAR at INR 14,948 and Oberoi Metro follows at INR 10,947 on but also closely followed by Trident Metro, Metro Hotels, which is INR 8,724 and in all the categories, as you can see, there's been an increase in RevPAR.
Strong tailwinds continue in case of direct. The trend is upwardly, but the heartening thing is also the comeback of corporates. And obviously, as we move into winter seasons, we're sure that the other 2 segments will also pick up equally.
Trend of foreign room nights. This has been on the rise. As you can see here, it's quite a simple chart, so I won't really get into detail. Food and beverage revenue to domestic hotels, including managed hotels have done a revenue of INR 169.5 crores as compared to INR 163 crores. So quite flat that way. But the turnaround story, like we've mentioned in the past, is our flight catering and airport business, airport catering business, I'm sorry. which has seen revenues grow from INR 45 crores in the last quarter, in quarter 1 of FY '23 to INR 87 crores in quarter 1 of FY '24.
So that's really robust.
Moving on to financial performance after the operational statistics. I'll just share with everybody that we've used the color coding scheme, which may be helpful for our friends to really track the numbers that follows in the following slides. Revenues generally being depicted in yellow, EBITDA in blue, PAT/PBT in green, expenses in gray and funds are shown in red. So this may be an interesting picture for all of you which really has -- shows where the company has moved, where revenues, EBITDA and PAT has moved over the last 15 years, starting from FY 2010 for the quarter 1.
So if I look at only PAT in the interest of time, where we used to do INR 19 crores, minus INR 16 crores, INR 15 crores, INR 9 crores, INR 11 crores or thereabouts, going down to INR 118 crores, of course, minus in FY '21, the first quarter of COVID.
The last year, first quarter, we did the first time INR 42 crores of PAT and this year, we closed at INR 90 crores of PAT in the stand-alone, which is by far the strongest quarter 1 for the company. The same is evident in terms of total revenues at INR 455 crores and also in EBITDA at INR 154 crores, which is more than double of any of the years in the preceding 15 years.
The same story is in case of consolidated figures as well, of course, the consolidation of costs has had commenced only a few years back. So therefore, we have given the numbers that really represent the last 6 years, where PAT used to be INR 15 crores or thereabouts, of course, and then it was minus during the COVID years. Last year it was INR 66 crores and this year is INR 106 crores at a consolidated level for quarter 1.
Stand-alone if you look at the growth in revenue, in fact, both in case of stand-alone as well as in case of consolidated, while the revenue has grown by 27%, EBITDA has grown by 64% in case of stand-alone and 53% in case of consolidated, which really demonstrates the efficient operations and effective cost management that the company has been able to really carry out over the last few years, which is now yielding results.
Expenses, just as a carryforward from the last point. So total increase in revenue is 27%, but total increase in expenses is only 14%. Just another way to detect the same information. And this just gives you some outlines of where costs have gone up and by how much.
On a fund position, we are really in a very, very positive zone. So where we were at minus INR 453 crores moving up to a debt of -- peak of minus INR 560 crores in September 30, we're happy to share that we are now net cash positive since March 31, 2023, at INR 129 crores. And as on June 30, we our net cash was INR 188 crores which are, of course, currently deployed in treasury operations and will be usefully deployed, gainfully deployed in the projects that are upcoming over the next few years.
In terms of consolidated funds, the group has a total of 542 funds. This includes certain earmarked balances. But that's the net position in so far the company as a consolidated group is concerned. I won't really go through the performance highlights, which would have been seen by all our participants as reported in the stock exchange and which is also available on our website.
On a stand-alone basis, how revenue has moved over the last few quarters. Quarter-on-quarter, this is what has been shown here, revenue, EBITDA, PBT and PAT. Similarly for consolidated accounts and likewise, for quarter-on-quarter consolidated financial results. The business footprint, we have given a little more detail as had been sought by many of our friends in the past. We've given the keys and we -- entity holds or has ownership of these hotels and these are all obviously managed by EIH's subsidiary. And with this, we have about 3,772 keys in India today and 497 keys abroad.
So that comes -- that brings me to the end of my presentation, and we shall be happy to answer any questions that you -- thank you so much.
[Operator Instructions] The first question is from Ravikant. Ravikant, please go ahead. I guess there's a problem. We take the next question from a Akshath [indiscernible]. Akshath, please go ahead.
Hello. Am I audible?
Yes Akshath.
So I have a couple of them. So first, can you please just guide us as to the expansion plans for FY '24?
Yes. And any other questions? Or would you like me to answer that first? Or...
Yes. So a couple of questions. So first, on the expansion plan. Then second is how are you on the strategy side, like how will the company focus on owned and managed strategy, owned hotels and managed rooms? And what is the growth guidance for the quarter?
Sorry, for Q3 -- for the next -- for Q2. Certainly, hello Akshath. Expansion for next year, we will be opening 2 hotels next year, a small Villas in Madhya Pradesh and that's a very small hotel, that will be managed, but still a very important hotel, which -- with high rates. It's all tented and a beautiful hotel.
We're also opening Rajgarh Palace, which has also Villas and that will also open next year. In terms of growth beyond that, be able to share a more comprehensive plan for our growth leading up to 2030 with you shortly, and that's quite an ambitious growth plan that we have in mind. But we'll share details on a subsequent date regarding that.
Our owned versus managed. The -- historically, our focus has been on owned. We have far fewer managed hotels and we'd like to see our growth taking place in both owned and managed, or even owned with equity investment partly owned. And the reason for that is the returns that we get, assuming we select the right locations, the right sites and are able to achieve the rates and occupancies.
The returns from owned hotels are substantially higher. This is particularly with Oberoi, as you'll see. I don't think Kallol presented return on cap employed details, but the return on cap employed for Oberoi Hotels, Oberoi Leisure Hotels is the highest. And that's where our focus will be also on mixed use developments, and we'll be able to talk about this in the future in greater detail with you.
Guidance, Kallol, I don't think we give any guidance. So I'll refrain from commenting on that.
Just a follow-up question.
Yes, go ahead, sorry.
Kallol, anything you wish to add to what I've said?
Yes. You just mentioned about return on capital employed. I think we can give an idea of the return on capital employed on a consolidated basis for the last year was over 17% on an overall basis on a consolidated basis. This year, obviously, we have our own projections, but we wouldn't like to give any guidance on that. And when we do the year-end results, we will definitely bring out the numbers. But like you rightly mentioned, Vikram, the overall return from hotels itself, the returns on capital employed from hotels last year was about 35%. So...
Yes. Just a follow-up question. So these 2 hotels that we will be adding for the year. Sir, can you just tell me the number of rooms that will have? The keys?
Yes. So the one which is in Madhya Pradesh will have Public 20 keys. We -- initially we're going to do 17 and then the owners have wanted to increase keys, so it will be either 20 or 21 keys but with a very high average room rate. This is ultra-luxury, an ultra-luxury hotel. And Rajgarh Palace, Kallol, if I remember correctly, 65 keys, am I correct? 66 keys.
Both are in Madhya Pradesh.
Sorry. Yes, that's also -- Both are in Madhya Pradesh and that actually not far from Khajuraho and also next to a Tiger reserve as well. So these are the 2 hotels. Rajgarh is an old Palace, which we are restoring and there will be some accommodation in the Palace and also accommodation in the land, which is around the palace.
We have Hari, he has question.
Can you hear me, sir?
Yes, Hari, loud and clear.
Thank you for a wonderful result. Well, my question, sir. Why is there like a company not as -- doesn't have much exposure to beachfront properties in our own India, sir? And second question is regarding this. What is the percentage of management contract fees in revenues? And the third one is regarding its price revisions with corporates like how did it go? And can we safely assume like post-COVID the seasonality of the hotel business has gone down and it's like a year-long good business? That's all.
Thank you, Hari, and good afternoon. Beach front, actually we -- you're right, we don't have many beachfront hotels in India. In fact, we don't have any beachfront hotels in India. But we have a beautiful site in Goa, which we will -- or at least our endeavor is to open a hotel, an Oberoi Hotel on that site. So I think in time to come, we'll be able to share further details on that hotel and when it will open, et cetera.
In overseas, we have a number of beachfront hotels. In fact, a large number of our hotels overseas are beachfront. That's a Bali, Lombok, Al Zorah and [ Shalashish ] . So they are beach front. But your point is well taken. As propensity to pay increases in India, and it's increasing rapidly, people will look for beach locations, and we should have a presence there and we'll start that with Goa.
And there's also one other location, but we'll be able to share further details and that's work underway. So I don't want to announce that at this point. In terms of seasonality, I think our business is seasonal still because we're still quite dependent on international business. And that business comes to international leisure business, and those guests tend to travel to India when the weather is nice. So there is some seasonality. But I think seasonality has significantly reduced.
And I'd also add one other thing in terms of our city hotels, what we've seen is strong demand even in the summer. So I think if that trend continues, seasonality in city hotels may be greatly reduced or eliminated. But in leisure hotels, we still see seasonality, and we expect seasonality to continue because people tend to travel to India from overseas when the weather is nicer or slightly cooler. So -- and your last question was management fees. Kallol, can I ask, request you to answer that question?
Yes. So management fees for the quarter was about INR 7 crores. And the percentages you can work out. The total number of teams that are managed is about 54% of the total number of fees that are available for the group.
The INR 7 crores is not very less from the management fees?
Well, most of our income, like Mr. Vikram Oberoi mentioned that we have a large part of our income, which comes in through our own hotels. And that actually yields way more than what management fees would yield. So it's not to say that we will not be getting into management contracts. But if you look at the revenues that the company earns from its own hotels, that's substantial. So in comparison to that, yes. But of course, going forward, we'll have more calibrated mix, I would say.
And Kallol, I don't know if it's right or not for me to say that. So I'll say it as my understanding and perception is that if you look over a period of time, management fees have, at a hotel management level, whether it's Five Star luxury or whatever you want to call it, management fees, at least my understanding is that they've come down for our industry over a period of time, which is a concerning trend because a lot goes into running a hotel. And if your margins are getting squeezed through very tight management contracts with a low fee structure, that's actually not good for the hospitality industry in general.
I don't -- I hope I haven't said anything wrong, Kallol but this is my understanding of the hospitality industry, certainly in India, I'm commenting on. So I'd just like to bring that to Hari's attention as well.
Price revisions with corporate, sir?
I beg your pardon?
Price revisions with corporates.
Yes. I think if you see our rates, our endeavor has been we really operate at the upper end. And our focus is on driving RevPAR growth through increases in average room rate that's what we endeavor to do. We have excellent hotels in excellent locations with excellent service. And we believe our guests are willing to pay a premium for that.
So we have whether across all segments, including corporate, we've had healthy rate increases. And the headwind in the ARRs that Kallol shared in his presentation.
The corporate ARR has gone up by 10% literally.
We have a question from Saurabh Patwa.
Just 2 quick questions. One is, how is the response to the club and the restaurant which we recently opened -- of course, it is too recent, but you would have got some initial feedback? And how do you see these 2 businesses getting up in form of new openings, et cetera?
So I heard the club, but I couldn't hear the... Amadeo. Okay. No, happy to answer both. The club has been -- the response to the club has been absolutely fantastic. Members and people wishing to become members are -- there's a long list. In fact, I was this -- I was talking to a colleague of mine who controls membership or is responsible for going through membership and we don't directly control membership. EIH just operates the club, as you may know. And he was telling me that the number of inquiries they're getting, and the number of people who want to become members as long. In fact, they're having trouble reviewing all the members and the member information. So that's the backlog, as I understand.
So that was the first thing. Amadeo just recently opened and guest feedback of diners at Amadeo have been very, very, very positive. As have revenues, as you know, in the geo convention center, the retail segment or the retail area, luxury retail has not yet opened. But despite that, we're doing strong revenues. We have an excellent location there overlooking the fountain at the convention center. And later in the year, there will be a rooftop bar, which hasn't opened as well. That will open after the monsoon or as we approach better weather in Bombay.
But to answer your question, both for the club guest feedback or member feedback has been really phenomenal and equally guest feedback of diners Amadeo have been very, very, very positive.
Second question is, in the past, you've given in your presentation to have your growth plans? I understand you have mentioned in the beginning of slide that you will have presented plan till 2030, which you would be sharing -- detailing at a later date. But is it going to be substantially different from what it was there previously? The annual report also, you have mentioned on like something in Andhra, Telangana region. -- something of that sort. So any broad guidance you can share now?
I think let's wait for us to present our plan and I think it's best to wait rather than to speculate if that's all right. I hope you don't mind me...
No, absolutely. We're just trying to get into gather the -- crossing the data, which you had shared in the annual report and the past. That's it.
And we'll share details with you, I hope very soon.
And just last question on my side. Your debt equity now is commented. Historically, we've been in debt position, now we are cash free. So of course, you have planned for that. But any big debt which you would foresee in the future or any -- given the cyclicality of the business, you would want to maintain a specific debt level?
So Kallol, is it okay to comment on that or not? I don't know?
We maintain a debt equity of 20%. That's our company policy. But obviously, that is not to say that in the future, it might not change depending on circumstances. So obviously, as we line up our funds and as we await the projects to get launched over the next few years, it will be a story that really will remain to be told. So -- but in the past, our trend has been that we have been conservative on debt and our debt equity has been around 20% at the maximum.
We have a question from Ritesh Gupta. Ritesh? We have questions from Bharat?
Good afternoon, Vikram and Kallol. Had an excellent result. Just want your sense on, say, this whole industry cycle, up-cycle or whatever we call, which is typically cyclical. So in your fair opinion, this up-cycle, of course, in 2003, 2004, it started. Last year for 5-6 years -- now how do we perceive that cycle from here onward, which has just begun?
A very good question, Bharat. Historically, luxury hotels in India would depend on -- significantly on international travel, the propensity to pay for guests coming in from overseas was substantially higher than guests domestically. And you'll recall that there used to be a dollar tariff and a rupee tariff, when the industry moved to one tariff, which was in rupees. I think there's been a phenomenal change in India, and I don't see that change slowing. In fact, if anything, I see that change becoming even -- growing even at a more rapid rate and that's the affluence that is in India. People have greater propensity to spend. People are now traveling more than ever before internationally and they want to -- even when they're traveling certainly domestically are willing to pay more for superior hotels, superior service, et cetera.
So I really do believe that seasonality is going to come down because we have such a strong domestic demand and a willingness of guests to pay. And I think that willingness will just increase. If I were to look forward 5 or 10 years and 5 or 10 years isn't long, the Indian consumers' ability to pay will be significantly higher. I'll just add one other thing, which is relevant. If you compare the rates that we -- the quality of hotels that we have in India with the quality of hotels elsewhere, our hotels are -- and when I mean, are, I don't mean -- I'm talking about us as a country. Our luxury hotels are amongst the best in the world. You won't get service that you get in Indian hotels in other parts of the world, and I'm sure you would have experienced that personally. And our rates are substantially lower than what exists in other parts of the world.
So I see huge upside in average room rate in time to come. And I believe this will happen quite rapidly. So our focus is on driving rate, driving margin, of course, looking after our guests looking after our colleagues because only if we have people who are happy, we will be able to provide great guest experiences. And I believe guests will be willing to pay a premium for good hotels and good service. So I remain very, very optimistic on the future and reduced seasonality to answer your question.
No, I'm not talking about the seasonality. This upcycle, you believe that can last more than the previous cycle?
Very sorry, I apologize. I -- again, for the same reasons, I believe they will because you have domestic demand. Domestic demand will -- people will continue to travel. People will continue to conduct work. People will continue to go on holiday domestically. And that's why I do believe -- I'm certainly optimistic.
Second thing, on the interim, we are almost operating at around 70-plus kind of occupancy and at the most, we can go is 80%, that's what I believe. And though there is also some room for the growth in the ARR. So in many time, our pose for taking a growth by increasing hotel is not a little delayed or we may not be able to miss some opportunity in the early phase?
So I'll answer your first -- I believe there is - actually our Bangalore hotel, for example. And again, I don't know if I can give -- actually operates, I won't give you specifics but operates in the 90% plus occupancy, still significant upside if there's strong demand. Secondly, I think there's even greater upside in average room rate. So I think with that, there is an upside in revenue for our hotels and improved profitability, of course, because ours is largely a fixed cost business, as you know Bharat, variable cost per additional room you sell is miniscule. So any additional rooms you sell or an increase in rate, of course, goes straight to bottom line. Your question on expansion, are we -- should we have done this earlier? I -- my belief is let's not look in the rearview mirror. Let's -- because if we focus on what has already happened, we won't look forward, and we need to look forward. We need to drive growth.
Is it fair understanding about large big hotel and big hotel in next may take at least 3 years before it starts operating?
I think 3 years is a reasonable time frame, yes.
Meantime, do you think that we will be able to continue to operate at every time increasing higher ARR and hence increasing the revenue and profit because occupancy even once we touch at, say, 80%, 90%, then there is a limited room? So is there -- do you think still room or there is a limitation also will be there on ARR?
Bharat, I ask you to do one exercise, right? Just -- and you do the exercise yourself and then maybe you can answer the question. The -- we operate at a INR 20,000-plus average room rate at the Oberoi New Delhi. That's in dollars is under $250 or thereabout. For a hotel of that quality, anywhere else in the world, on most places in the world, and particularly India has so many positives, we have a very strong economy, strong domestic demand, et cetera. Hotels will be operating at double that rate, $500 a night, if not more. And I'm not even looking at Europe and North America at this point where to get a luxury hotel, you'll be paying GBP 1,500 a night for the leading hotels and probably $1,500 to $1,800 a night or thereabout. If it's unnegotiated, this is on bar pricing in a major city in -- so I'm talking about London, Paris, New York, et cetera.
Delhi, Bombay are major cities, Bangalore is a major city. So I firmly believe that there is tremendous upside on average room rate. And please just run the numbers yourself. Take the Oberoi, New Delhi, take a 50% increase in rate and please see what happens to profitability.
I'd just add to the point that you're making, Vikram and Mr. [indiscernible] Say this may be helpful. The very reason why we, this time, introduced a new chart in our presentation is the 15-year chart from quarter 1 every single year. So that's one point. And I would urge you to follow that chart, number one. Number two is many of our own hotels, like Mr. Vikram Oberoi rightly mentioned, even though we're not talking of Europe and America, many of our own hotels internationally are earning average room rate in excess of $800 per night on an average. Another hotel is earning more than $600. Even in Southeast Asia, there are hotels that we have, which are running in excess of $300. So therefore, this is a substantial [Technical Difficulty] that India has a long way to go.
Fair answer. I don't underestimate the payment capacity or affordability capacity of Indian because now still a large part of the overall our bouquet will remain Indian. So whether can it cannibalize I mean, our ARR or something? That is my whole question. I'm not -- and what you are asking that may be possible in some of the best season, travel season and all, but across the year, so I'm just a little confused because about all our growth strategy honestly.
Bharat, I make a suggestion to you. Can we take this -- we'll do some work on this. We'll share some additional information with you on global pricing. And maybe we'll -- we learn from you maybe as a little bit you can learn from us and then let's have a conversation. I think this needs far greater detail, far greater analysis and study than what we can attempt to do right here.
And then please take a view on it, but you should be able to do this work very easily yourself because all pricing is available today, please go to companies like Four Seasons, Mandarin Oriental peninsula. If you're looking at leisure hotels Six Senses, the true luxury brands, and please see what rates they charge and what premiums they get and then compare it to the Indian hotel industry that is providing accommodation facilities and service, certainly on par, if not better than what they are. So I think that will help answer some of your concerns.
I appreciate that Vikram. We'll get in touch with Kallol either in Delhi or in Mumbai.
Thank you, Bharat Bhai. We have a question from Sakshi Chhabra.
Sir, my question was on the F&B revenue side that you reported. So what would be the reason that it has remained flat year-on-year?
Actually, Sakshi, one very big reason why it's remained flat year-on-year is Trident, Nariman Point, we have large banqueting revenue at Trident, Nariman Point and Regal Room, which is the main banquet function area and the rooms adjacent to it are under renovation. So they're not currently operational. And we -- these will open -- the renovation will be finished by beginning November and it will reopen beginning November. But that's a large contributor to -- it's a large hotel with large banqueting and a large banquet space currently is not being sold.
So around what percentage of our F&B revenue would be contributed from that hotel?
I don't know that figure on hand, but we can...
Sorry, you would agree, Sakshi, that, that's too specific a figure to really get into. But like Mr. Vikram Oberoi said, it contributed substantially. It's more than one.
So that will be functional by November?
Beginning November.
So at least we get that benefit in the second half of the year?
Absolutely. And the busiest time for banqueting in the year, it's normally busier in the second half of the year.
We have a question from Namit Arora.
My question is for Mr. Oberoi. While we equally await the 2030 plan, sir, could you guide us through some drivers in the near term, for example, let's say, a B20 or a G20 or a cricket world cup. In your view, besides, of course, the weather and the regular holiday season for India and the festive season, generally, your view on the next couple of quarters, what could be some major drivers for growth of the company, any events, et cetera.
Again, Kallol, I need your help, is it okay to answer that for us? Can I answer it for the industry in general? I would much prefer to do that. I think G20, anytime there's a high number of visitors to a city or country, you see hotels benefiting from that, whether it's us or anybody else. And there's enough historical evidence to suggest that. So I think both the G20 and Cricket. And when most locations, I think, other than Pune for Cricket as well, I'm sure hotels will benefit from that increased demand.
Incidentally, we also have the Motor GP in India that is coming in September coming to Noida where the track is. And we've already got inquiries from Shell, et cetera, for accommodation. And the teams will need accommodation. These are big events, Formula 1 Motor GP. So the more events we have in our country and in our cities and the more global events we have, the greater the amount of travel and demand build for airline seats, hotel accommodation, restaurants, et cetera, and the economy benefits as a result of that.
One more question. You've taken some new initiatives such as the club, et cetera, as well. Now clearly, the pedigree of the group and the foundation, et cetera, there is a huge possibility to deliver experiences outside the traditional hotel formats. Could you talk us through your thought process, if there are any other such similar initiatives being planned or maybe a rollout of these initiatives across your other locations?
I don't want to comment on that at this point, Namit. Let's wait for -- we'll share details on our prospects for growth. As I said, it's -- let's wait for that, if that's all right. I hope you don't mind.
Perfectly, I understand. Thank you very much.
I have a question from Yashwardhan Aggarwal.
My question is on the management fees. So sir, what part of EBITDA do we take as a management fee?
I beg your pardon? I didn't mean -- I'm so sorry, I shouldn't have interrupted you. I beg your pardon. Please, Yash, please continue.
Yes. No, issue, sir. So sir, my question is what part of our EBITDA do we take as a management fee? And is there a system for a revenue-sharing basis too?
Yes. I think what I was commenting on, and I'm not going to get into specifics of our management structure code, so already answered the question on management fees. But I'm not going to get into what our management fees are and what they're not and how they're structured. But what I will tell you, please, and I'd urge you to do a study on it, if information is available, please look at management fees over the last maybe 10 years and see.
Basically, management fees are -- there's a certain fee on revenue, on total revenue. And there's a certain fee on GOP, and if you plot these over a period of time, my guess is you will see not the profit for the luxury industry for major players that's us, whether that's other -- you know all the companies in India, the international brands and the Indian brands. And please see what's happened to fees over a period of time.
I think that will be very telling if that information is available, okay.
So you mean that the fee structure has changed in a decade, right?
I'd say that the fee structure has changed over a period of time and you'd need to study it over a period of time to see how it's changed.
Next, as always, Rajiv Bharati.
Sir, on this Mashobra thing, the litigation by Himachal Pradesh Government, what's the progress there? Is there any chance we are going to pay this up or say, in the green part, which we are looking at?
No. So we're very clear on where we stand. But maybe, Kallol, do you want to -- again, I don't know...
I'll just answer Rajiv. So we've given a detailed disclosure, as you would have seen. And the reason why we believe in giving disclosures is for everybody to understand the impact of anything that happened, any event that comes up. So this is an intermediary position as we speak. The case is subjudice as you know. And we had accepted the arbitration order in October last year, and we had filed an execution petition with the high court of Himachal Pradesh, to which there are these objections that have been filed by the Government of Himachal Pradesh.
Now in the objections, they have provided what they believe or the counterparty believes is what it should be there and we, based on very strong legal opinion, have provided for in our accounts, what we think is right. And this has been vetted and reviewed by all concerned parties. So really speaking, as of today, we don't believe there is an exposure more than what we have already provided for. And of course, depending on an outcome of the case and how it proceeds, we'll see what happens in the future.
And this is only -- the INR 50 crore is only provided. We have not paid out anything yet, right?
No, we have made some deposits because we don't want interest to accrue. So as a prudent measure, we started depositing whatever has been allowed to us by the court. We've started depositing the amounts.
And so far, we have -- the exposure is close to INR 80-odd crores, right? There was a INR 30 crore in Q2 of last year as well.
Total exposure for EIH Limited and Mashobra Resorts Limited, if you add the two up, as of date, it stands at about INR 99 crores. and it's been all accounted for in exactly the way in which the arbitration order was.
And sir, in terms of renovation, for example, you have mentioned Trident, I think Trident Agra is under renovation in your associate entity. Is there any big asset which is undergoing, which is up for renovation this year, which will be out for action?
No, there's -- the other big renovation, which is happening, which I mentioned is the Regal Room, that's currently being renovated. And at the Oberoi Mumbai, we also are renovating some of the smaller rooms that are out of inventory. They've been out of inventory for some time and making them into long-stay residences. So that work is also underway. So there'll be all suites, and there will be about 20 suites, 20 additional suites. So those are the only significant. And I wouldn't say significant, but those are the only renovations that are currently underway.
I think related to your question, Rajiv, I think there's another question that I could see on the Q&A, which also was about Trident Agra. So Trident Agra is closed only for 2 months for infrastructure upgrades and it's not typically a large-scale renovation, but it is for infrastructure upgrades.
And there were some 69 rooms for Oberoi New Delhi as well, right, which is supposed to be added in '24?
No rooms are being added at the Oberoi New Delhi I am afraid.
Some residential apartment at the backside of Oberoi New Delhi.
No, I think you may be confusing that with Bombay, where we're doing 20 suites, which are long-stay suites, but nothing in Delhi.
And lastly on the flight services business, what would the full potential at full capacity? What is the revenue it can throw?
I haven't done that calculation. Do you have that number hypothetically Kallol?
No. Rajiv. I don't think he expects the answer -- but obviously, I can tell you something that currently, if you were to reverse it, the capacity utilization is still way, way less than what the potential is. So I think from that, you can probably gauge and obviously, with flights increasing and flights going full most importantly and more destinations getting added, more aircraft getting added, the unutilized capacity obviously will get that added further or use for them.
And could I just add that, again, we are quite optimistic given all the fundamentals on the aviation, demand for air travel in India, both domestic and international. So we think any business associated with that, and flight kitchens being one, will benefit from that strong demand.
Lastly, on Slide 6, the [indiscernible] market, there was a RevPAR growth of just 1%. Is this some -- even because of this or is it generally slowed down?
I think, Rajiv, I don't have the numbers all in front of me, but my understanding is that this will be largely driven by social events. And last year, there was like had many, many, many weddings, et cetera, and that number has come down. Two reasons. One is, and I'm assuming the first one is that people are looking at locations perhaps outside of India as well. Earlier on, it wasn't possible to do large wedding events outside because of restrictions on Visa, travel, et cetera. All those have gone away.
And also, there are fewer [ side dates ] a bit relative to last year. So in Q1 of this financial year. So for those 2 reasons, you've seen a decline in events in Udaipur. And these are high-paying pieces of business with large room requirements over several days.
And by any chance, we have a metric for what is the contribution of revenue from marriages in our, let's say, the standalone [ means ]?
We absolutely do. I don't have those figures with me, but we -- our market segmentation is -- does break that up, yes.
[Operator Instructions] We have a question from Vikas Ahuja.
Congrats on a good quarter. My first question is regarding the occupancy and ARR trend, the monthly, which you have given on Slide #8. And what we can see is from May to June last year, there was maybe -- the pricing was INR 300 higher. But this time, it's INR 300 lower. Is it largely because of some weather-related disruption maybe you have seen in New Delhi or Mumbai and how that trend has moved to the month of July. That's my first question.
Kallol, I don't have that slide in front of me. Could you have a look at it and...
I will just share the screen once again. I'm not sure which...
Yes, so I'll just read it out. So if we...
Help me with Slide number because we can -- can show us.
This is Slide #7. Which shows the ARR and occupancy trends for domestic hotels.
Correct.
And if we look this year, this year, there has been almost 300 bps decline from May to June. And last year, it was more of a 300 uptick. So just trying to understand it was largely because of some weather latent disruption which happened in June or it's just -- I shouldn't read much into that.
Actually, if I read the slide correctly, and maybe I'm not -- I see an increase in average room rate.
I think Vikram I think he is referring to the ARR in May, which was IND 13,052 which has gone down to...
I see. So this is from one month to the other, okay. I think June typically -- and again, we need to go back to historic data. But if my memory serves me correctly, June is one of the slowest months in terms of occupancy. So I wouldn't read too much into that. I think this is quite normal. So please don't read too much into that. I think...
It was nothing related to the weather?
No. What we have seen is -- I'll tell you what we did see is we saw slow demand in -- for the Simla hotels -- and that came from -- we had a very mild summer. I don't know if you're Delhi based because, but we had a very mild summer to begin with in North India, including cities like Delhi and NCR is a major source of business to our hotels in Simla. The single largest segment or the single largest region from where guest travel to Simla. And the weather was quite mild to begin with. The minute the weather started getting hot, we saw demand pick up. And in fact, when demand wasn't picking up, we're doing a number of tactical things to try and drive business and shore up occupancies, which does have an impact on rate.
But that was limited to the Simla hotels. In Udaipur as well, because MICE business has not been as strong, we had to try and drive business from other segments, and that comes at a lower rate as well. Wedding business by far achieves the highest average win rates and very strong contributions to food and beverage revenue. So that was related specifically to Udaipur.
I'm just trying to think if there was anywhere else. And the last thing I'd say as you probably know, Simla has had or Himachal has had very, very heavy rainfall, the road going up to Himachal, actually part of the road collapsed. So access to Simla has been difficult. But I believe those issues are being addressed, but that's much more recent. That wasn't in Q1. So I don't know if I've answered your question.
I think his line has got disconnected, just got disconnected. We will take up question from Abhishek Khanna.
One of two question I have. One, the Rajgarh Palace is an owned property, right, just for clarification?
Yes. Yes.
The second question is just a follow-up on an answer that you gave earlier. You were referring to reduced cyclicality in the business over a longer time period. I just wanted to understand in your past experience, the cyclical downturn that we would have seen, let's say, in the early 2000s or around the early part of the last decade, were they driven by lower foreign tourist versus, let's say, a lower demand by the domestic tourists. Would you have some data around that?
So this is cyclical for it's not seasonal falls, right?
Yes. Over a long period.
I just like to remember, Abhishek, there were a number -- we had the attacks in the dreadful attacks in Mumbai. And we saw sharp falls in demand from overseas travel. I can't recall what impact it had on domestic travel at that time, but we did see sharp declines in international travel, not only to Bombay, but to India. We had the twin tower attack where we saw global demand fall across, and I'm sure it impacted Indian travel as well, but I can't recall because that was a long, long time ago, the Twin Towers terrorist attacks.
We had tension between India and Pakistan and those concern of nuclear war as well at one point, there were troops on the border, significant tension, international travel just set off a cliff. So if I think of these incidents, I think that the -- and again, I'm just going by memory, there maybe we had the crisis of 2008, a global economic crisis, global recession. So I think if it's not a global event, but in-India event, it impacts travel to India from overseas. If it's a global event, and I don't think -- I can't remember if the Indian economy had a negative economic growth or 2 quarters of negative economic growth that would classify as a recession in 2008. I don't think we did. But these events in India cause overseas demand to reduce. I think Indian demand is much, much more resilient.
Fair enough, which is why you believe the increased share of domestic travelers as of now, domestic customers as of now might just help reduce that cyclicality going forward also?
Yes, that's my hypothesis, yes.
Fair enough. And the second question again is what is your view? I believe you've referred to your expansion plan that you will come up with soon. But Oberoi as a brand has always been associated with Uber luxury and super premium hotels. What is your thought process on mid-income or a mid-segment hotel portfolio, if at all, in the future?
Are you talking about an additional brand or...
Probably because I believe you don't want to dilute your existing brands? Is there a plan or thought to have an additional brand maybe which targets a relatively lesser premium customers [ saving and progressing ]?
So certainly, we've thought about it, and we've examined it. But I think there's -- and this is my personal view, there's enough opportunity for growth with Oberoi and Trident and that's where we should focus on.
So you believe this space offers enough opportunity for you to not really venture into that. Do you not really believe that space has an even greater opportunity? Or is that understanding not really correct?
Yes. No, so again, you'll know these numbers much better than me. But if you see anything -- I mean, again, I'll just give a few examples. They may be relevant or may not. But if we look at 2-wheeler sales in India and we look at 4-wheel sales, which is -- I know that the base may be totally different, but the percentage of growth, albeit on a different basis is much higher for cars than it is for two-wheelers. In fact, I think, if I'm not mistaken, 2-wheelers, may have even declined.
If you look for at a -- we're a country of whiskey drinkers you see where the strongest growth is coming in whiskey demand. It's coming at the premium segment. I think the advantage of competing in the premium segment is that you have, number one, it's not a commoditized product. People are not making a decision based on price. And therefore, you can charge premium prices provided you provide quality, premium prices with higher margins, greater profitability in that segment. And that's why we would like to focus on that segment.
I could give you some interesting statistics. And Kallol will say he know this because I say this all the time. And I'll take maybe 2 minutes to give you this. I was the opening manager at [ Roger ] last when we opened in '97. In year 1, we did a 22% occupancy. Of that 22%, this was at about INR 8,400, INR 8,300, just under INR 8,400 average room rate in those days. Rambagh in those, let me not mention -- I'm not going to talk about other hotels. We were by far the highest average room rate hotel at that time. And our Indian occupancy was 8%, right? 8% on the -- if 22% became 100%. Today, Indian occupancy is our single largest source of business. And this has happened in 20 years.
I think the speed of change is going to be far greater than it was -- and I'm giving you one example, if I were to give you, Udai Villas, which has a very high average room rate than Raj Villas, 60% roughly of our business is from India. It just tells you how India has changed and the ability and the propensity to spend money has changed. And my firm belief is that, that is going to become even greater. The rate of change would be even greater given everything that's happening in our country. So I remain very, very optimistic Abhishek on rates going up and demand being strong. And for luxury, whereas if you take the -- we did an analysis, I'm going to give you one more piece of information. We did an analysis for -- and we looked at, I think, from 2000, we looked at STR data from 2010 up to now, so for upper-upper luxury and 5 star. Sorry, these are very loose terms. So I'll maybe classify it. Luxury is operating at about $800 upper-upper luxury, and this is for the market of Bali in Indonesia. Upper upscale -- luxury is operating at around about a $850-plus average room rate. And if you call 5 Star, it's at about $300 -- just over $300. That's the rate difference. And we then looked at RevPAR over -- and this is STR data. We identified the hotels and then looked at STR data over from 2010 up until now.
What we found is that the -- in the 5 Star, it hasn't even reached pre-pandemic levels. And the trend was downwards in RevPAR over this period of time. This is a 13-year period. For luxury, it was an upward trend, and they have surpassed pre-COVID levels.
So I don't know if this is just typical of what -- and in India, I think it will be even more extreme. So we are, at least based on the data that we see and we're quite data-driven. We try and validate all our hypothesis. We think with our hearts, we make decisions through with data. And we -- at least everything that we're looking at tells us that, that's where the opportunity lies.
Got it. I appreciate. Just one last quick answer, you said your 50% of your keys are managed as of now. Do you plan to continue with that broad breakup going into the future also, 50 managed and 50 owned, let's say, broadly speaking?
I don't think we have a fixed formula for this. If we -- if a hotel comes up where we believe we can perform well for an owner, we'd be more than happy to manage it. And of course, when we're looking at our own hotels, we will do our due diligence to make sure that we operate or build a hotel where we see strong potential where we see a strong future. So -- but we don't have a formula for the fixed versus managed.
Thanks, Abhishek. Kallol we have time for a few more questions and there are a few other queued in?
Navin, I actually sent you the message to say that we should start closing soon because we are already passed by 15 minutes. I can maybe take the last question and the rest, we can always address in subsequent forums.
Sure, Sumant, please go ahead.
So can you talk about the -- we have taken 10% increase in corporate rate. So is there any mix changes driving ARR growth also? Customer mix change?
So I don't think the -- Sumant -- and Kallol has that, I think, that slide. But I think our direct segment is the largest segment and that has become a more important segment over the last -- if you look at the last 5 years, directors really substantially increased. Corporate is #2, leisure is #3 and MICE is #4. And when I mean leisure, this is primarily foreign leisure. For us, we define leisure as coming through a destination management company or two operator from overseas is our foreign leisure definition. So that would be the trend.
So direct customer mix change compared to previous year same quarter has increased?
You have -- I'm sure it has...
Just any sense?
So Kallol, could you have a look at that? And I don't have a -- but I think you have a slide on that. You don't give them, but you give the general trends. And...
I'll put it up for Sumant's benefit once again. So it's on Slide 9, which gives you an idea of what the trends are like in various segments.
Sumant is your question answered?
Yes, yes.
Thanks, Sumant. Thank you so much.
As we run out of time, actually, we taken it a lot of extra time. I have shared my e-mail ID with you on chat. Whatever questions remain unanswered or if you have any follow-up questions, request you to please send them to me, I'll follow them to the management and get back. On behalf of all of us at SKP Securities, thank you very much, Vikram, and Kallol for taking time out. And if there is any closing remarks, please.
Being other than Kallol may have some closing remarks, but I just wanted to say thank you, and it's always nice to be on these calls and speak to people. Any of the people are people who attend these calls are on more than one occasion. So it's nice to catch up. My thanks to everybody specifically to you and to Naresh as well. Thank you.
Thank you, Navin and Naresh, and thank you, ladies and gentlemen. We look forward to the next earnings call and may be some announcements around that time. Thank you so much.