EIH Ltd
NSE:EIHOTEL
Earnings Call Analysis
Q2-2024 Analysis
EIH Ltd
EIH Limited, represented by Vikram Oberoi (CEO) and Kallol Kundu (CFO), hosted a webinar to discuss the company's earnings for Q2 FY '24. Analysts and investors were optimistic, expecting insights into a quarter reported to be record-breaking for EIH Limited, set against a backdrop of both opportunities and challenges in the global economy.
Vikram Oberoi announced a milestone achievement with a record Q2 and half-year performance. The success was attributed to increased travel activity and the company's strong market positioning. Despite foreign travel not yet reaching pre-pandemic levels, there is confidence in the potential for further growth.
Kallol Kundu provided an optimistic backdrop, describing the Indian economy as being in a 'Goldilocks Zone', implying a just-right scenario for growth and investment. The hospitality and tourism sector, despite being below pre-pandemic contributions to GDP and employment, is expected to surge, signaling additional opportunities for EIH moving forward.
The hotel industry is experiencing robust growth, especially in the luxury and upper upscale segments where EIH operates. EIH's RevPAR has seen a notable increase, outpacing industry growth. Their RevPAR leadership is maintained, signifying strong operational health and market competitiveness.
All categories and segments under EIH's portfolio, including Oberoi and Trident brands, have shown considerable growth in RevPAR, either through increased occupancy or higher average room rates. This diverse performance demonstrates EIH's strength across its operations.
EIH's financials marked the strongest quarter ever with substantial increases in revenue, EBITDA, and PAT. The company is net cash positive and has maintained a fortified fund position. The quarter's success is spurring expectations of even better business in the upcoming quarters, with the potential for complete recovery of foreign room night levels an opportunity on the horizon.
EIH is witnessing a stable corporate segment with robust direct booking trends and an upward trajectory in MICE. Financial resilience and a net cash positive status affirm EIH's premium positioning in the market. This status is consistently being recognized with a variety of industry accolades, which reflect the company's strong reputation and operational excellence.
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Good day, ladies and gentlemen. On behalf of EIH Limited and SKP Securities, it's a pleasure to welcome you to EIH Limited's Q2 FY '24 Earnings webinar. We 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 discussion, there may be certain forward-looking statements which must be viewed in conjunction with the risks 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 so much, Navin. Good afternoon, ladies and gentlemen. Thank you for joining us on this call. You may have already seen our results for Q2 of this financial year and also our half yearly results, which was published and I would just like to highlight that we've had a record Q2 and a record half year. And of course, one is because of the buoyancy in the market. people are traveling again. We're seeing there's a slide which Kallol will share on foreign travel, that's still not at pre-pandemic levels. but we hope it will get better. So there is significant upside with foreign travel, but our business continues to be strong.
And I would just like to thank our guests who are loyal to hotels. Kallol will present some SDR data, which shows that. And also our colleagues who work so hard to make our guest experience a special.
So with that, I'll just pass over to Kallol to go through the presentation, and then we'll be more than happy to answer your questions. Thank you very much.
Thank you, Vikram. Good afternoon, ladies and gentlemen. It's a pleasure to be back again. So the quarter and the half year has certainly been very good. We will begin with a brief highlight of the global economy.
So obviously, we are going through a very complex set of environment and set of factors with rising interest rates with monetary policy tightening, financial sector turmoil, supply chain disruptions, elevated inflation and so on and so forth. And amidst all this, it seems like, as pointed out by Hotelivate in one of the recent reports that the Indian economy seems to be in a Goldilocks Zone where we are looking at quite a few factors, which appear to be buoyant, including the GDP growth, the private and public investments. our streamlined tax systems. our boosted digital and infrastructure and so on and so forth.
India, obviously also has a lot of demographic advantages. which really augurs well for the Indian economy. And certainly, it appears that the Indian economy is in good shape right now. Within the Indian economy, the Indian tourism and hospitality industry is poised very well. And throughout my presentation, there would be cues where one could see or one could pick up where it's -- it's easily visible that there are certain opportunities which are yet to play out, and those are probably opportunities that one could capitalize.
So to begin with, let's say, when talking from an industry point of view, where the contribution to GDP was 7% in 2019, it's still a shade below 6%. And -- Employment is still lower than what it was pre-pandemic. And obviously, these are all opportunities for the industry as a whole. As per the WTTC, the industry is expected to grow at 8.4% and generate about 19 million jobs. Of course, the airport connectivity and infrastructure in general is really going through a boom phase in India. And of course, there's a lot of impetus on several objectives that the tourism policy has really taken forward.
But to speak on more specific terms, if one were to look at the operational trends in FY '30, one will see that in the hotel industry, on an overall basis, room revenues have -- for instance, the ARR has increased by about 13%. Likewise, RevPAR has also increased by about 13%, but one where to look at the 5-star deluxe category, which is the luxury category, there one finds the RevPAR has increased by 23%. And -- And this is the same trend that we noticed in our business because as an organization, as a company, we are -- we primarily play in the 2 uppermost segments, which is luxury and upper upscale and it seems from the trends that these are the sectors where -- or these other categories where the growth is really buoyant.
In terms of future supply also, again, as per Hotelivate report of 2023, about 55,000 new room nights are to be added in the next 5 years. which will take the supply to 220,000. But within that also, again, the majority of the supply, 2/3 of the supply looks like will be below the upscale categories, which means that the supply is in the luxury and upper upscale categories will be slightly lower, which, in fact, from a demand supply scenario augurs well for an organization like us.
On an overall basis, EIH has consistently shown or demonstrated RevPAR, which is faster -- growing faster than the industry. It's evident in the chart -- in the line chart where the top 3 lines are EIH, and they seem to show an upward trend. The numbers from HVS Anarock report of October shows that in September, where the RevPAR of -- generally of the industry rose between 19% to 21%, the RevPAR of EIH Limited taking all domestic hotels rose by 48%. So this, again, is a reiteration of the point that we saw a slide before.
In so far as operations are concerned, again, this is an ongoing chart, which is there in every analyst or earnings call presentation, and it keeps getting added. And so far, there has been not a single period barring that 1 month in 2020 when the RevPAR index was not above 100, which means that the competition set that EIH plays with has consistently enabled EIH to maintain our RevPAR leadership.
This is a new dimension that we thought we'll present to all our investors and analysts, where each of our categories, the brand, the different brands, the 2 brands that we have and the different categories where we are positioned, how they have moved between last year and this year in so far as Q2 is concerned.
So what you would notice from this chart is the green colors are the ones which are -- which represent the current year. in the various categories. It starts with Thje Oberoi Leisure, International Oberoi Metro, Trident Metro, Trident Leisure and the 2 other hotels, which are not part of Oberoi and Trident. In all these cases, there is a RevPAR growth effectively either through increase in occupancy or through increase in ARR. and we can see how the positioning is in each of these categories. By far, going by industry standards, this definitely is 1 of the best. On RevPAR, in general, again, when we consider owned and all domestic hotels, the blue line represents the [ old ] hotels and the golden line represents all domestic hotels, including managed hotels. The RevPAR has grown by 23% and 19%, respectively. And of course, throughout the various second quarters, for the last 4 years, the trend is visible on the slide.
Within the quarter of quarter 2
Kallol if you could just, on the previous slide, just highlight similar because
Yes, that's true. So one of the factors which we have mentioned here is although the RevPAR is 9,543 in case of all hotels taken together, what must be noted is that this includes Shimla Hotels, which was severely impacted by negative environment conditions. So if that was this kind of force majeure situations 1 there, then the RevPAR for the golden line 2 would be much higher. Thank you Vikram for pointing that out.
And really, Q2 was terribly impacted in -- for Shimla. We saw really demand fall off as far as our Shimla Hotels were concerned. And I think that applied to us and applied to other hotels in Shimla.
Yes, that's right. Now for June, July, August different months. Again, the trend is upwards, the same reason which we just mentioned. the drop in occupancy is -- and maybe slight muted is also because of the Shjmla Hotels. Having said that, generally, the average room rates have grown from 11,177 to 13,736 . Which is a very positive trend. And mind you, in quarter 2 of last year, really speaking, business has already started picking up. So the comparison here is very pertinent. When we look at city by city, again, the various increase, the growth in RevPAR in the various locations. Our geographies within India are as shown here. Shimla, of course, is -- and the loss of reputation is the only 1 apart from a small degrowth in Cochin, which has seen a degrowth in RevPAR.
Strong tailwinds continue across all the segments. In fact, what is heartening to note is also corporate is pretty stable. Direct continues to be very robust, and there is an upward trend in MICE as well.
Foreign room nights, as Vikram was earlier mentioning, as a percentage of total room nights, while this has picked up over last year same quarter, this is still to cross pre-pandemic levels. So in case of Trident, it is still at 32% as compared to 45% in so far as Q2 is concerned. Oberoi is at 40% compared to 53%, and on an overall basis, it's 35% compared to 47%.
When viewed in terms of absolute foreign room nights also, it is the same picture here. where it's really evident that on the left-hand side, the axis shows the absolute total number of room nights for Trident Hotels and Oberoi Hotels in India. So as we can see, the levels -- the recovery levels are still to happen completely. And as I mentioned a while back, that these are certainly opportunities for the company to generate even better business in the third and the fourth quarters, respectively.
Oberoi Flight Services and airport lounge there is a strong comeback. And as is evident in the last 5 years, this is the highest revenue and amongst the highest revenue, of course, in many years. with a very, very robust margin. This is industry-leading margin at 37%, and the business is looking really good.
On the financials, it's our strongest quarter ever, quarter 2 with a revenue of INR 490 crores, EBITDA of INR 148 crores and PAT of INR 85 crores. And -- On a consolidated basis also, it is the strongest performance. And of course, here, you can see 6 years because prior to that quarterly consolidation, as you would know, was not in place. But in this quarter in case of consolidated accounts also, it's INR 552 crores of revenue with INR 165 crores of EBITDA and INR 94 crores of PAT.
This has really enabled and strengthened our funds position both on a stand-alone and consolidated basis. And we are today net cash positive at [ INR 227 crores ] on a stand-alone basis and INR 509 crores in so far as consolidated accounts are concerned. The marginal drop that you can see from the previous quarter to this quarter is on account of an investment from one of our international companies. in terms of an equity infusion. So that's one of the primary reasons for this decrease. And the other reason is, of course, the payment that has been made for our Mashobra case.
Performance highlights, a really strong quarter. Revenue up by 33%, EBITDA up by 66% with almost a 6 percentage point margin expansion and profit after tax up by [ 233%]. Quarter-on-quarter position is provided here -- sorry. Quarter-on-quarter position is provided here. On a consolidated basis also, revenues increased by 32.5%, EBITDA by 64% with a 5.7 percentage point margin expansion. and profit increased by 256%. This is again a quarter-on-quarter sort of performance.
The premium positioning is -- continues to be reflected in our Board's accolades. of Course, from travel and leisure, Telegraph Travel Awards Anarock report, but also pleasantly surprising addition to the list is the CII DX awards for our Center of Excellence. The business footprint is for those who would like to have a snapshot of our structure. Thank you so much.
Thank you, Kallol. That was quite comprehensive, as usual. [Operator Instructions] The first question is from Vikas Ahuja.
Yes. This is Vikas from Antique Securities. My first question is -- and before that, congratulations on such a strong quarter. My first question is how should we look at? Especially this year, we have been reporting very strong numbers, and it's given Q3, Q4 is also going to be pretty strong. But how should we look at next year with election coming in Q1? Mostly, we normally see a decline in ADRs during that time.
So from Q1 onwards, how should we look at this quarter? I mean, should we see this strength we have been seeing to continue barring that quarter? That's my question number one.
Vikas. Thank you for your question. It's -- I can't recall at the previous election, what impact it had on individual hotel performance. And I really -- unless we refer to data, I'm reluctant to provide any insight. But could I request you Vikas, we look at that and we're happy to discuss it offline.
I don't want to just hazard a guess, unless Kallol has specific data. But I think we really need to look at previous elections. Typically, lead time pace of reservations this far out wouldn't be an indication. So I hope that's all right. Kallol, do you have anything further to add? .
Yes. No, I think the elections are still some time away and with the dates, et cetera, still to be concretized. It's, I think, a major event. So obviously, we'll -- closer to the date we'll know better.
That's fine. Secondly, any early indication on how rates have been moved during this -- the current World Cup? Because there have been so much of pipe, especially coming from the media.
Did we actually see any material improvement in the business because of the World Cup? Or it was a few hotels here and there or that if you can maybe answer this?
I think wheever matches have taken, we're not in all locations where cricket matches have been held and will be held. But in certainly our understanding not only for us, but for others as well as there has been a strong increase in rates. And we also experienced that in -- during G20 in Delhi, in particular. Kallol, is it okay to disclose the average room rate we achieved for the overall New Delhi during that period?
We don't get into a hotel by hotel Vikram, but I think, yes.
But it was -- we saw very, very strong rates. So I think any time, not getting into specifics, but any time there is a strong pressure on demand or strong demand versus supply, you will see that reflected in room rates.
Sure. Sure. So I mean -- so what I could make out is there is we should see some improvement because of the World Cup. Okay.
And my final question is, in one of the slides you have talked about that there is a 10 percentage point better RevPAR for -- RevPAR growth for 5-star deluxe versus the others. Demand supply, I could make out. Any other particular things which led to such a strong growth in that particular segment?
Kallol, I'm not sure which slide this refers to. Do you want to take that question? .
Yes. I think -- are you talking about the scatter chart where we -- in various categories we've shown, Vikas?
No. So there was Slide #4 on that. There was a 5-star deluxe where the RevPAR improved by 23% versus overall
Yes. And that's the reported numbers. for the industry as a whole. That's not for EIH. That's for EIH -- that's for the industry as a whole as well as reported .
Yes. Yes. Sorry, if I said I'm just trying to understand, is that trend you are seeing in EIH also? And any particular reason why the 5-Star deluxe is doing particularly well compared to the overall daily others?
Kallol, maybe worth drawing Vikas' attention to Slide #5, which shows our RevPAR, our EIH domestic hotels RevPAR which .
I was about to say that. Actually, the whole theme of the presentation, you would see and at least the way you look at data is the fact that the more luxury and the upper upscale segments are the ones which are performing better, both across the country. I mean that's a trend which is seen across the country as well as in our case. . And one of the reasons why our -- we have a very strong margin growth is also because of the higher rates that we are able to command and we operate in these 2 segments. primarily.
So like Vikram said, Slide #5 is one indication. Another one would be Slide #8, where you would see category by category, what is the RevPAR growth that has happened. So obviously, what is evident is that the spending power of our guests have increased a lot.
And in accordance with -- and one other point that I mentioned already was that the supply generally is stronger in the low categories than on the upper categories. Therefore, there's a demand on that as well. So this looks to be a more fundamental aspect that hotels that operates in the higher categories are able to enjoy better growth in RevPAR. Vikram, you may want to add something to that?
No, I don't have anything further to add to that, Kallol.
Vikas I would have to interrupt you because there are a lot of other participant with questions.
Thanks a lot and have good luck for the next quarter.
Thanks so much Vikas. Thank you very much. .
Friends request you to limit yourself to 1 question initially, and we'll come back if time permits because [indiscernible] precommitted to other engagement and we need to wind up the time on. The next question is from Amit Agarwal.
My question is regarding Marrakesh and Shimla. So because both had natural disaster, how they are doing in this particular quarter, current quarter? Both the properties.
Marrakesh and Shimla. So I'll pick Shimla first. We've seen a recovery in Shimla after the floods and Cecil's occupancy has gone up. The other thing with Cecil is and I know I'm not supposed to talk about specifically about hotels, but we get a large part of business from overseas. This is U.K. travelers coming to Shimla because of the historic nature of similar. And so that's really helped with Cecil's occupancy. That demand has been strong. . Wildflower Hall has also started to recover, but the extent of recovery isn't as strong as the Cecil, largely because Wildflower Hall doesn't get the same level of international travel, more specifically, U.K. travel.
Marrakesh there was the earthquake. Before I answer the question on that, we were very fortunate that the hotel, our staff were well. There was no injuries to our guests, no injuries to our staff and their families also were unaffected. The earthquake had the largest destruction up in the mountain regions, and we have some distance from that. Business is returning to normal, but we do -- we did see strong cancellations and I think Marrakesh is also -- Morocco is also impacted by the crisis we're seeing in the Middle East.
So we are seeing some cancellations. I hope there's considerable pressure or ceasefire and although the Americans are still holding ground with Israel. I hope we'll see a ceasefire and that will help loss of life, of course, innocent life. And also, I'm sure will impact our hotel in Morocco -- in Marrakesh.
My question more regarding the infrastructure going to the hotels, including Chandigarh? Has this been damaged? Or .
Absolutely no damage in any of these locations.
The same with Chandigarh? So how is the traffic compared to Y-o-Y in this particular quarter right now?
Chandigarh fortunately is doing well. It wasn't impacted by the floods in Himachal.
Okay. And my second question is regarding [ indiscernible] flights. how much is [indiscernible] touching INR 100 crores for the quarter? And how much of this is coming from domestic sector? And how much is from international sector?
It will be largely from international, but Kallol, you have the numbers?
Yes, I think we don't get into so much of detail, Amit. It's not a separate segment for us. But majority of the airlines is international. Of course, in the domestic part I can generally tell you that Calcutta has done very well. Of course, we have a lounge which in Bombay does very well. And both Bombay and Delhi are reasonably good. But. in general, it's more international flights for us.
Okay. And my last question is regarding any updates on upcoming projects? .
Actually, I just wanted to -- I think I saw a question from Sanjay as well. So I'll take that question now. Sanjay's comment was on the strategy for 2030. And what I'd like to mention is we have a vision, EIH vision for 2030, which is at a very minimum, 50 more hotels with about 4,500 additional keys. And we are focused on achieving that.
You'll see some hotels -- there will be some hotels that you see in our annual report. More recently, there was -- we announced a hotel in -- Trident Hotel in Tirupati which is done with Mumtaz Hotels and with EIH Associated hotel in Vizag. But as and when we announced projects, we will as per stock exchange guidelines informed the stock exchange, but we are -- we have a number of hotels that are coming to fruition and we'll be able to make announcements, I hope, on an ongoing basis.
You said 15 or 50?
5-0.
In next 7 years?
That's correct. .
And how many would be managed and how many will be owne?.
It will be a combination of owned and managed.
Any percentage?
Kallol, do you -- do we -- should we give the percentage?.
Amit, As Mr Vikram Oberoi mentioned that we'll be adhering to the LODR guidelines. We are very careful about the new disclosure norms, et cetera. So as and when it comes, we'll give.
For the 2 projects that has already been announced, these are owned by our subsidiary companies, meaning 1 has been owned by a subsidiary company, Mumtaz, and 1 by our associate company, EIH Associated Hotels and both will be managed by EIH Limited. And of course, being a subsidiary and associate, EIH will also get a share of the profits.
So really speaking, there are complications around the structures which are positive to our business. And therefore, we would want to make the announcements as and when -- following the guidelines of LODR.
The next question is from [indiscernible]
So congratulation, Vikram and Kallol. I mean, on good set of number. Vikram, just taking forward from in previous participants. And so from a short-term perspective and medium-term perspective, if I look at it without going in any hotel, does we look at past trend of our H1, H2.
So H1 is used to be around 40% of the top line and 60% is H2, whereas bottom line is the other way, 25%, 75%, so do we expect that also to continue that same trend in this year also without going? Because this is before elections, so we don't know about the election.
Yes. [indiscernible] , I'm sorry, I didn't understand your question? Kallol, did you understand [indiscernible] question?
I think what he's asking is the seasonality of business, basically, what earlier we used to see the revenues between H1 and H2 used to be 40-60 according to Mr. [indiscernible] and the profitability was lower than H1 and higher in H2. Is the same trend going to continue? That was your question, right? .
Sorry. So profit, I mean, bottom line used to be 25% in H1 and 75% right?
Okay. Now I understood the question. So I think winter, we do fairly accurate forecasts of business and our winter touchwood is looking strong. So I would say that we will be very close to previous -- again, I don't know if I should give forward-looking statements like that or not.
I would say business is looking good. Let me just answer it that way. .
I think already, to add to what Vikram was saying already, if you look at H1, it's very different from the H1s of the past. So the EBITDA of H1 on a stand-alone business is already INR 300 crores. So therefore, really difficult to say that the ratio will be maintained or not. But there is really speaking, when you compare H1 of FY '24 with any other year, it's very, very different.
Kallol may I also say one other thing, which is -- and I touched upon this last time we were on a call, and I had highlighted that there is considerable upside on average room rate and we are already seeing that. So we're seeing strong increases in average room rate in hotels, EIH where demand -- in fact, across all our hotels where demand is strong. That is being then reflected by sharp increases in the average room rate. And I just wanted to add that as well. .
Yes. Vikram so in terms -- I mean, veteran hotelier, how do we see this ARR trend, which is, say, after 10 years of say, from 2008 onward it was also, do we see maybe growth rate on ARR? May be softer? But do we expect that it should continue? So summing here.
So [indiscernible] my perspective on this is that we have in India are exceptional hotels in the 5 -- start deluxe like segment and these hotels are relative to global prices, particularly in city locations, maybe to a lesser extent in leisure locations. But in city locations to a large degree, and to in leisure locations, still underpriced but to a smaller degree, are well below what you would pay for our guests would pay in other locations across the world. And therefore, demand being strong, we should see substantial upside in average room rates.
Okay. And last question on the expansion. You said that by 2030, we plan to add 50 hotels Is it possible to get some kind of? -- I mean, how much would be, say, for say, next 3 years and then balance how much will be there? If you can -- because you must be working very closely on the plan and maybe some may be under the pipeline for announcement. So if you can give some broader, I mean, breakup or?
So I think 2 things. First of all, we are confident of achieving that. And secondly, as and when we finalize hotels like we did with the Tirupati and Vizag hotels, we will make announcements. And you can also -- if you refer to our annual reports, there are some projects already underway. . So Rajgarh, for example, is one. So that's covered in our annual report. But we've taken a decision as and when hotels get finalized, we will make those announcements by informing the stock exchange.
Apart from that, there is 1 more hotel we have mentioned in our annual report is on Andhra Pradesh which is, I'd say, for tourism
So I don't know which is the location mentioned. We are actively pursuing other opportunities in Andhra Pradesh and we will make those announcements in .
I think [indiscernible] may be referring to some newspaper reports that came out. So please wait for that announcement because we -- there are 2 hotels which just got concluded and where we've intimated those to the stock exchanges. As and when it happens, we will certainly intimate to the stock exchange and you'll get to know.
The next question is from [indiscernible]
Sir, regarding this occupancy levels like pre-COVID like even compared to the previous year, the growth rate is very low. Everything else is good. Like any reason for that, sir?
I think, [indiscernible], 1 reason Kallol mentioned is Shimla. Shimla did very, very, very low occupancies for the entire quarter. Kallol, is there anything further you would like to add to that? .
No, not really. I think pre-COVID wise it's fine. I think what we are generally seeing if you compare with last year, it's the Shimla Hotels, which is really.
Let's take a question from [indiscernible].
Firstly, in terms of the rates, what I hear from you, Mr. Oberoi is that we understand that the global prices and where prices are in India, I think there is a good disparity there. But given that the majority of your demand continues to be still driven by domestic guests, how much further room do you think there might be there to the ADRs before it starts impacting demand duty on affordability?
So [indiscernible] May I answer your question a different way, just to illustrate the point I mean on supply and demand. And I'm going to give you a very specific hotel to answer that question. I don't know if -- I'm sure you're familiar with Gurgaon, but when the Trident Gurgaon, which is a managed hotel opened, there used to be 1 hotel in Gurgaon , which was the Bristol and that hotel was doing just under a INR 20,000 average room rate. The hotel is now doing a low average rate than it was doing then. . So to me, and there's more -- there's greater buoyancy in the market today than there was then. So I think the key drivers are really supply and demand. And of course, provided the hotels or quality hotels. So I believe I will stick to what I'm saying that I believe there is -- whether it's domestic or international, I believe there's considerable upside. And we see the Indian guests having a high propensity to pay as well. So we're already seeing that today.
And sir, lastly, on your vision as well, vision 2030, then there has been significant upgrade because as per, say, the 4Q presentation, the plan was to open about [ 9] hotels, but given that majority of your hotels might come in, let's say, 4 to 5 years out, I mean, don't you fear that the capital cycle, the traditional capital cycle might be up for the worse by the time your [indiscernible] come up? What will be our reaction to that?
So I think there a number of hotels that we'll be able to -- it won't just be that hotels will come right at the end. So again, I'd say the proof of the pudding is in the eating. And we would like to take a more conservative approach in making announcements. And -- But we remain confident, we remain driven, we remain focused on driving the right kind of growth. And I remain confident that we will achieve our vision.
The next question is from Tarang Agrawal.
Congratulations for an extremely strong set of results. Sir, you spoke about higher propensity for an Indian consumer to spend. I was just curious to know over the last maybe 3 years, 4 years or 5 years, are you witnessing any change in the demographics of patrons visiting your properties? Any tangible -- I mean, are they getting younger? Or I'm just curious what drove you to make that comment?
So the -- first of all, the age at Trident Hotels is younger than Oberoi. And that was in the past and that continues to be the case today. We are seeing more women travelers. So if we go back historically, we'll see more ladies traveling, particularly business. We're seeing family demand, Indian family demand traveling in small groups at our domestic hotels.
I'm just trying to think if I missed anything out. And then maybe I haven't -- I don't want to certainly give you the wrong answer, but if my memory serves me correctly, the Oberoi guest and the Trident guests have both become marginally younger.
Okay. That's helpful. The second question was if you could give us a consolidated occupancy and ARR for the hotel business.? I mean including managed domestic international.
Yes. Sure. Kallol, do you have that? .
That's already there in the presentation. So .
Kallol, we given EIH, just EIH owned and managed hotels separately? Have we provided that as well?
Yes, we have given for all domestic hotels taken together.
But I think because EIH has impacted most significantly by the hotels, we not only manage, of course, we manage them, but we also own them, would that be? I don't know if we have
Okay, if you want only EIH numbers, I can share those numbers. So EIH owned hotels, the occupancy was 77.5% against 75 -- sorry, 76.5% in the same quarter last year and an average room rate of INR 14,535 as compared to 12,018 of the same quarter last year.
Yes. Last one, if I might have missed it, but if you could just give me the F&B revenue for this quarter?
Sorry, the F&B revenue of first quarter?
Of Q2 and the same quarter now in the base year.
Okay. So. And while you're looking at that, Kallol, I just wanted to mention that in the large part -- a large contributor to banquet revenue comes from the Trident Nariman Point. We have a board room which is under renovation and rooms next to it as well. So -- and therefore, the board room has a significant contribution to revenue. So when Kallol gives you that number, please keep that in mind .
Yes, it's about 40%. .
40% for this year? this quarter of INR 5310 crores. .
Yes.
And for the base quarter?
The [indiscernible] Revenues as well [indiscernible]
And for the base quarter?
Sorry, which quarter? . Can we just take it offline because these are reported numbers and would help you definitely offline with the numbers. .
The next question is from [indiscernible]
Let's take a question from [indiscernible]
Let's take the question from Saurabh Patwa.
Thanks a lot for highlighting the big picture of the expansion. Just your thoughts on 2 things. One is our strategic partnership with Mandarin , which is the past you have highlighted and also Reliance just to announce 3 hotels in partnership with EIH. What would be your thoughts and like how -- what was -- what's EIH's contribution to that partnership? --
So are you -- which -- would you like me to answer it for So we -- yes, that's correct. There was 3 hotels, Reliance has released -- made a press release and those details are in that. And we look forward to developing those hotels and also other hotels with Reliance, I hope, in the future. As to not only those 3 hotels that Reliance had announced. As far as Mandarin goes, really, the objective was to bring benefit to our guests and Mandarin guests to bring benefits to our colleagues. So there would be learning opportunities from each other.
And those were really the 2 objectives, and we continue to work on those fronts so that we can offer greater value, greater experience to Mandarin guests and visa-versa and also enrich the experience of our colleagues, both for Oberoi and for -- for the Oberoi Group and for Mandarin.
The next question from Sanjay Kohli.
Thank you for the opportunity. A nice decent set of numbers. My main question has been answered, sir, about the strategic plan. If you can elaborate on when you say the right kind of growth, if you can throw some light on this.
Happy to Sanjay. Sanjay, for us, we really -- our vision or our founder's vision and our Chairman Emeritas vision for the company. has always been to be the best. And therefore, we want to be RevPAR 1 against our competitive set. And we at very closely where we are not, we work hard towards being RevPAR 1. But I'm happy to say that in most locations, our hotels are RevPAR 1 and in some cases RevPAR 2 in their competitive mindset. That's a vast majority of our hotels.
So as we look to the future, we would like to continue. That's a very important objective of ours because higher RevPAR or higher revenue leads to a more profitable hotel with better margins. The hotel business -- is a large part of the business is their fixed costs. So once you cover those costs, your margins have the potential to increase substantially.
And just a quick follow-up. In -- when we are looking in the next 6, till 2030 and the expansion put into place. Is there going to be a change in the philosophy on how you will manage the capital structure?
And do we -- can we expect greater leverage? And a certain amount of -- so a little -- perhaps a little less conservative on the financial management, the way you manage your assets. Is that to be expected in? Perhaps an environment where the cost of capital is now sort of uncertain and has spiked up in the last 24 months, for instance and may continue?
No, Sanjay, very good and a very relevant question. So thank you for that. We -- today, you'll see in Kallol 's presentation on -- our cash position both on for EIH stand-alone and for the consolidated, but we will be taking -- in order to drive growth, we will take on debt. And the management's internal benchmark for this has been 25%. So we would like to remain within that. Kallol, is there anything you'd like to add to that?
Yes. I think firstly, it's -- again, I would echo what you said. I think, Sanjay, it's a very good question and very pertinent question. What is important is that the hotel sector, especially luxury hotel sector will always be seen as a cyclical sector. So we must be cautious and one of the hallmarks of our organization has been that. We've managed our cash and on balance sheet pretty well. And therefore, we've been able to weather the storms.
So what is important is as we drive growth, obviously, there will be in these years in which there is a high EBITDA accrual. Obviously, cash generation is high. And therefore, our ability to take debt is also there.
What we very closely look at is several parameters. When we embark on projects, we have our [indiscernible] internal rate of returns, and those should necessarily exceed the cost of capital at any point of time. And therefore, to your question on the increasing interest rates and therefore, increasing cost of capital, obviously, we will go into projects that make sense for us financially. That is the first point.
The second point is over a 5- to 7-year period, we look at return on capital employed for each specific asset and towards that, we make sure -- we see what kind of balance between the capital structure enables us to generate those kind of returns on capital employed or return on capital -- invested capital.
And thirdly and most importantly, I think while we embark on this path of growth and maintain our profitability. What we also always keep in mind is what is our debt service coverage ratio and what is our interest coverage ratio. And we have our own hurdle rates for those as well. We will not go beyond the situation which makes us uncomfortable. if this somehow gives you some insight on how we operate.
We just have time for the last 2 questions. Let's Takeda this one from Nilesh [indiscernible] .
Okay. Good, Good. I think thanks for doing this on Zoom, it is nice to put a face on the voice. I joined a bit late. So I perhaps missed a bit of your comments around expansion, right? . But I just -- yes, we really appreciate your conservatism and your sort of -- you're in a philosophy towards maintaining your brand and RevPAR 1. I
just wanted to understand, as you look to expand now, right? Right? -- When you enter as you expand, right, whether you are entering a new market or an existing market, how do you manage your occupancies given that it seems that you want to really maintain your pricing, right? How do you sort of balance that dynamic right? You can comment on that.
And the second question that I would have is that do you find other mechanisms such as managed hotel and stuff like that, that can help you grow faster without necessarily taking on deck? So those are 2 Broadcom questions. feel free to answer to the extent you can, and I look forward to meeting you guys at some point and having a more detailed discussion.
Thank you, Nilesh. So when we look at locations where we can potentially open hotels. We do the best we can to analyze what the market will be. And we -- our objective is to go into markets that have good occupancies and good average room rates. So that has worked for us in the past, and I hope that works for us into the future.
So I think selection is very important where we're going to build hotels, number of keys that we will build. And our focus is certainly also to increase a number of hotels we manage.
Whether we manage them or own them, our objective is to be RevPAR 1 and to drive strong numbers for our owners or for EIH. So that doesn't -- that doesn't change. So I don't -- Nilesh, have I answered your question?
Yes. Just I think given that you are entering into an expansion mode after some time, and the fact that the industry is also picking up. So in your estimates now that if you were to -- I'm just trying to imagine, right, when you open a hotel -- and you are RevPAR 1 on day 1 in that market, right? What is the path for that property to reach your company level occupancy?
How long would that take in your? I'm just sort of ballpark, -- that's what I'm asking with a
Sure, Sure, Nilesh. Good question. So it takes typically 2, possibly 3 years for a hotel to stabilize. Again, it could vary, and it could vary based on a particular destination. so greater competition in that location. It will take longer.
Largely, if you're more dependent on corporate business it could take longer because you have the RFP process for rates, corporate ratio are a large part of your demand in city locations.
I just wanted to add in our vision we -- as far as Oberoi is concerned, our focus will be leisure and to a large extent, Trident with Leisure hotels I think the cycles are relatively short and I hope and will continue to be strong demand in the domestic market where our we have a loyal guest base. So the ramp up that will be above what it normally takes
Right, right, right. The second I asked.
Sorry Nilesh, sorry, I actually have to head off for another appointment. So I really apologize, and perhaps that's why Navin is limiting the number of questions.
Friends I have already shared the investor presentation and I'll share the coordinates. We have just about time for 2 final questions. Vikram, is that fine?
Yes. No, please go ahead.
So we have the next question from Rajiv Bharati.
So you've given the time lines of the 2 projects Tirupati and Vizag seems to be 4 years, slightly aggressive from the history of what we have in terms of meeting there.
So are we building some conservative in that thing also is it aggressive? And is it going to be a thumb rule incremental as well? When you assign and take up a green field project this will be the kind of time lines you would have?
Well, I'm hoping actually the time lines will be shorter than that. That's the outer limit, but I hope we can finish the hotel sooner than that in both locations.
And the land at Tirupati, is it lease or this is owned by us?
It's at least from the government, from the state government.
And lastly, in terms of the, let's say, per key cost, which is INR 1.3 crores, INR 1.4 crores for these 2 projects. This is again can be used as a thumb rule incrementally plus? Let's say, when you build out Oberoil, what is or, let's say, incremental premium per key cost?
Right. So you're right on Trident and -- that -- sorry, Tirupati and Vizag. And the lease terms are very favorable but hotel development costs will be roughly that. And like I said, when we make announcements on Oberoil, we will share those as well with you at that time.
Just if I can squeeze one. Are you looking to participate in the Noida, in business [indiscernible] business impact? .[indiscernible] Noida Airport You want to have competitors has announced some arrangement there.
Can I answer that . Rajiv, we are in all of the locations where we are present, we definitely evaluate but one must also look at what is the composition of the domestic business, what is the lead time and all of that. So at the appropriate time, and given if we see that business as -- as close to our business model. And then as it works in terms of cost, we would definitely look at any opportunity, including Noida and Navi Mumbai. .
We are out of time completely. So I'll take the last question from [indiscernible]
[indiscernible] Sorry for my earlier sense, my voice or for audible at that time. So quickly 2 questions. One is on the Shimla, [indiscernible] So how exactly the situations are there now? And when can we expect the normalcy of the tourism to be back to the pre issue, which we have seen earlier?
Great. It's [indiscernible] and right? You said Okay. Well, we can hear you loud and clear, Anuj now. So the similar hotels are already coming back. Like I said, Willoe is taking slightly longer because of us going into winter and us having various series looked at Cecil, we've seen a very quick recovery at Cecil or a quicker recovery at Cecil. But I'm sure both the hotels will recover in due course. And I think that will be sooner rather than late, I hope.
Okay, [indiscernible] And on the expansion purse, you mentioned that by 2030, we expect to add incremental 50 hotels that if I'm not wrong, would translate somewhere close to 4,500 keys.
Can you just bifurcate or provide any kind of guidelines among the proportion between the owned and the managed hotel for the same?
And also, sir, as these orders will come up, say after 5 to 6 years kind of a time line, which probably we may see some kind of a moderation happening. So just to understand your view on the longevity of this cycle, would there be any cyclicality in -- persistent in this sector at going ahead? Considering the way our economy is growing.
So the -- I'm just trying to [indiscernible] sorry, your first question was on owned versus managed. For the incremental capacity. And please, my request is please be patient as and when we're in a position to announce, we absolutely will. We would like to grow through both managed and owned hotels or hotels where we have a significant investment and yes, so that's on the first part.
On the second part, on cyclicality, it's your guess is as good as mine on what's going to happen in the future. And if demand continues to be strong. I hope we'll be able to do even better. If there is some events that cause us to relook of course, we will do well.
Friends we have run out of time and we have over short the time that was given to us. Request you to foward your questions unanswered and follow-up to me, I have shared my e-mail ID. And now on behalf of all of us at SKP Securities, thanks a lot, Vikram and Kallol. Vikram, Kallol any closing remarks, please?
No, I just wanted to say thank you, Navin, and [indiscernible] Naresh. So thank you both so much, and thank you to all our colleagues who joined us for this call. Very much appreciated. I hope we can move the company from strength to strength going forward.
Thank you. Thank you, everybody. .
Thanks a lot Vikram and Kallol once again. Thank you, friends, for joining us for this webinar, and we look forward to hosting you again on the next call. Thank you.
Thank you so much. .
We wish everybody a very happy Diwali.
Oh yes, I'm very happy Diwali. Gosh, how did I forget that? I apologize. I'm very happy Diwali to you and of course, to your family as well.
Thank you, bye-bye and have a lovely evening.