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00:00Let me bring on board Amit Jaiswal, CFO Royal Orchid Hotels, to talk to us about
00:05how festive trends are expected to play out. Bookings would have likely started,
00:10traction would have picked up. Mr. Jaiswal, welcome, good morning. I want to quickly check
00:16in. So how's the traction looking this festive season? See, the festive season is looking very
00:22good. Historically, if you see, you know, the third quarter for our industry,
00:29that is the third and the fourth quarter always has been good. And even this quarter,
00:34it is looking very promising. All our leisure hotels have done very well in the last week.
00:41You know, we had high ARRs, high occupancies in the last week and so. So, you know, we are poised
00:51to do very well going forward this quarter as well as the next quarter. Hi, Mr. Jaiswal, this
00:57is Anushi joining in. I want to address to you now, if you look at the Q1 performance, now,
01:02if you take the whole hospitality industry in picture, there was a lull in bookings as well
01:08as the ARR growth and occupancies. I want to understand from there on for your company,
01:12how has the growth picked up from July, August onwards and what is the sort of ARR growth and
01:19the occupancies that we expect for the H2O of FY25? See, historically, what happens is generally,
01:27we compare ourselves with last year. Okay, last year, you know, the growth in ARR and occupancies
01:34were good. You know, post COVID, post the pandemic, we started growing, the industry has grown very
01:40well, so has our company. But this year, first quarter was not that great because of elections
01:47and the heat waves across the country. So, our first quarter was not very good. But the second
01:54quarter, we started, you know, all the hotels have done well, have started doing well. And
02:02the ARR growth, as far as the ARR growth is concerned, that is anywhere between, you know,
02:077-8%. As of now, we are looking at, as of now, as the year progresses, because Q3 and Q4 is
02:15always a better quarter than the first half. So, we are looking at an ARR growth of somewhere around,
02:22you know, 8-10%. Okay. And an occupancy growth of around 5% this year. Because occupancies
02:30already were at a very high level. Once you have reached 70% plus, you know, the room to grow,
02:36the occupancy is not there much. However, you know, all our hotels are doing well.
02:43We got hit in the first quarter. But second quarter onwards, we have picked it up.
02:49Fair point. Any scope for increase with regard to that realisation or ARR number?
02:57Would you expect that likely to trend upwards in the second half of this year? Because you
03:03indicated that. But you are still suggesting just about a 7-odd percent increase this year.
03:08Yes, yes, yes. See, we had suggested the increase because the first quarter went bad for the
03:15industry as a whole. So, we were little on the back foot. So, we are not very aggressive in the
03:20second quarter. However, the way it looks, it appears that the coming festive season and the
03:26new year looks very promising. So, we are going to increase our ARRs by another, you know, 3-4%.
03:34So, you know, I should be touching at anywhere between 8-10% growth in the overall growth in
03:40the ARR. Some of the hotels have done more than 10%. Even some of the hotels have increased by
03:4515%. But some markets have been little flattish. So, the overall ARR growth will be in that range.
03:53Mr. Jaiswal, now if you look at, you've given us a breakdown of how the Q1 went.
03:58And you did mention the election impact and there was heatwaves as well, which has led to the 6%
04:03of revenue growth. Now, if we take the FY25 picture into account, you've got it for a 10%
04:09growth. But it's FY26, which is the most exciting one wherein you've targeted a revenue of about
04:15500 crore, which is about a 60% growth. I want to understand what is the shift happening between FY25
04:22to FY26, which is leading to the strong growth picture for the company? See, we will be opening
04:29our Bombay hotel towards the end of the fourth quarter. How the plan goes towards the end of
04:35the fourth quarter, we will be opening our Bombay hotel, which is a 300-room 5-star hotel. And it is
04:43next to the Terminal 2. So, that hotel will give a big boost to the overall numbers of the company,
04:50the overall revenues of the company. And we are around 100 crores addition will be there from
04:55that one hotel. So, that's why we are poised to do one of the best financial year will be FY26
05:02for our company as well. Apart from that, couple of leases also are coming up, which will be there
05:09throughout the year next financial year. So, that's why we are very buoyed about the performance
05:14of our company in the next financial year. So, just tell us, talk to us about this Bombay hotel.
05:20So, 5,300 odd rupees is your current ARR, just for viewer context. What would be the ARR for the
05:27Mumbai hotel? Because you seem to suggest that the rates will be markedly different from your
05:34average. Absolutely. So, there the rates see, Bombay market itself is a very good market. And
05:41for years, we have been trying to get a good property in Bombay, now that we are successful.
05:46And there the ARRs will be somewhere between 8 to 10,000 rupees, it should be there.
05:52So, that will take our overall ARR of our company to our next lead, I think.
05:58How large is this one? How many keys does it give you?
06:01300.
06:02Okay, got it. And what are the other new launches in the pipeline, both in this quarter,
06:07which is Q3 as well as Q4? I won't talk much about Q2, because maybe you're on silent period,
06:13but just talk to us about the folio, especially H2, if you can.
06:18As far as H2 is concerned, actually, we have around 24 hotels in the pipeline. But what happens
06:24is that unless the hotel is opened, we don't declare it in the market. However, what are the
06:30upcoming hotels we have always put down in the public domain is there in our investors presentation
06:35uploaded on the BSE. So, from now till March, we think around 11 hotels we are going to open
06:42out of this 24. But in that the revenue share model is the Mumbai one, balance all are managed.
06:51Now, by end of March, we will also open 128 keys hotel in Gurgaon that is also under revenue share.
07:00So, these two hotels will give a good top line for the company.
07:04And sir, just give us, I'm not asking you for specific numbers, but just give us a direction
07:09if you can. Q1 was slower, of course, you've suggested that. Is there a significant pickup
07:16Q2 onwards or has Q2 also been largely soft and Q3 is when you'll start to see the pickup?
07:24Exactly, you said it, Q1 was bad. Q2 large, it is not a very high, I will not say that because
07:32it rained heavily in July and August and all our hill station properties were really affected by
07:38the rains. But Q2 is better than last year. But the real change will happen in Q3 and Q4.
07:47Okay, so Q3 and Q4 remains as a definite watch out for the business.
07:52Now, you've mentioned about opening 11 to 12 hotels, there's also a lot of
07:55pipeline in terms of the greenfield and the brownfield expansions that are taking place.
08:00I want to understand what are the CAPEX requirements for the business for this picture.
08:05And these greenfield and brownfield expansions, if you can just help us with a timeline of some
08:09of the key projects, the opening dates for these ones. Yeah, so what happens as far as the CAPEX
08:16is concerned, see in management property, we don't have to deploy any fund. There is no CAPEX
08:21for the management, it's only for the revenue share model where we invest. Like in Bombay,
08:26including the lease deposit, our investment will be around 60 crores. Okay, and in Gurgaon another
08:336-7 crores. But at the same time, what we have done is that we are planning to increase the
08:39existing hotels inventory. Like in our resort in Bangalore, okay, we are adding another 28 rooms,
08:46which also will start the new wing, will start the operations probably from the end of January.
08:52Okay, so two months we will get in the last quarter and there we have a CAPEX of around 11-12 crores,
08:58CAPEX in there. Plus, we are having a CAPEX of around 25 crores in Goa. Again, that is addition
09:05of the rooms. In Goa hotel, we have 73 rooms and we are trying to add another 40 plus rooms there.
09:13So, but that will come up next financial year only, not in this year. These are more or less
09:18CAPEX. And plus, we are doing some upgradation of our property, which we continue to do,
09:23our flagship also is getting upgraded, which will give a boost to the, you know,
09:28overall revenues of the company. Right, that was a clear picture on the CAPEX,
09:33on how it is going to pan out in the next one to two years. But coming to the margins, now Q1,
09:37there was a dip in the margins that we were looking at, there were increase in some of the
09:41expenses. Going forward for FY25, considering the higher share of these new hotels coming into
09:48picture, higher revenue growth, what is your margin guidance for the next one to two years?
09:52For FY25 and even for the new term? See, for FY25, I think the margins will be little flattish,
10:00because we are in the process of upgrading most of our hotels. So, there is a lot of
10:04R&M cost which is going up. But real growth in the margins will happen in the FY26. Definitely,
10:11there will be good growth of roughly around 20% in the margins growth in the next financial year.
10:18Okay. So, just give us context. So, you go from the current, if I can just pull out your numbers,
10:25around 300 odd crores, 295 crore you did in FY24. You go to 500 crore very quickly,
10:32right? And you are also guiding for a margin uptick of maybe two to three or maybe two to
10:39three percent. Is that the right way to look at this? No, no, no. See, you said my top line is
10:47around 300 crores in FY24. Yes. That will grow to 300, you know, 30 odd crores in the current
10:56financial year. Our PAT, profit after tax, which was around 49 crores in last year, that will go
11:02to 50 odd, 55 crores in this year. Next financial year, it will go to roughly 60 plus, 65 crores.
11:10I take your point. So, 20% growth on PAT in FY26. And what happens, what's the margin picture like,
11:19sir? Could you give us? Because we've seen some one-offs in FY23, right? It was a very strong
11:24year for the entire industry. So, on a higher base, FY24 was slightly lower, but nonetheless
11:29was very impressive. How does it evolve as you scale? Because 300 and 500 is a huge difference
11:36in terms of top line. Just talk us through where the margin number goes.
11:40See, I'll tell you what happens is when you do a revenue share there, the margins are
11:44little lower. It is not as good as in the owned hotels. See, owned hotels, your margins are higher
11:51because you have invested a lot of money. Whereas in these hotels, what are coming, we don't have a
11:57lot of capital deployment in these hotels. So, the very important part of any industry is the
12:03return on capital employed. And let me tell you on record, the ROC of our company is the highest
12:10in the industry in India. And we are looking forward to maintaining our ROC margins in such
12:20a way that it should look lucrative. With a top line of 300 crores, you are doing a bottom line of
12:2650 crores, which is a very good combination of the PAT. So, we are trying to maintain that.
12:31But what happens in a revenue share model, what happens is the profit, what we get, the operating
12:36profit, out of that operating profit only we pay the lease rate. So, the left out is not that much
12:44what is left out in the owned hotel. So, that's why our percentage may come down, but the absolute
12:50number will keep on growing. But please understand that in all these revenue share hotels, we don't
12:56have a huge capital deployment. And that is why the ROC will keep on improving.
13:02Right, Mr. Jaiswal, you've mentioned about the revenue share model. Now, if your commentary is
13:07to be taken into perspective, you're expecting about 10 to 15% of new hotels coming in with this
13:13model. So, I want to understand a clear picture between the revenue share model, the managed model
13:18and your own hotels one, how do the margins differ across these segments? And what is the trajectory
13:24ahead? Because you've guided for a margin growth as well. So, how do, want to just understand
13:30between the segments, how does it look like? Very, very intelligent question you've asked. So,
13:35that will explain a lot of stuff. Management, when there is a management hotel, our deployment
13:41of capital is zero. Okay. And we get a management fees of roughly 6% of the total revenues. That's
13:48the income we get from management hotel. Now, when it comes to revenue share model,
13:53there the capital deployment is not very high, but minimal like some deposit and then
13:58some working capital we need. So, there the margins are, the operating margins are anywhere
14:04between 40 to 45%. And around 25 or 27% we pay to the owners who has employed, deployed their
14:11capital to make the hotel. And the balance around, you know, 15% is our margin in the revenue share
14:18model. Anywhere between 12 to 15, if it is performing good, 15%, if it's not performing
14:23very good, then around 12%. But here there is a little capital deployment,
14:28whereas little means some deposit and some working capital. So, hypothetically in a hotel of say
14:35around 80 rooms, which can do a top line of 10 crores, the deployment of capital is around 4,
14:405 crores. Okay. Now, coming back to third, the owned model, you 100 room property today's will,
14:47you have to invest around 75 to 80 crores. There you will get around 40% of the top line,
14:53that is supposed 10 crore is the top line. So, you need to, or 12 crore is the top line. So,
14:58you get around 40% of that, around 5 crores as the bottom. So, the return on capital employed
15:04in my own hotel is not that great. You know, it will be, you know, over a period because
15:10the appreciation in the value of the hotel doesn't reflect in the books of accounts.
15:15Like our flagship hotel in Bangalore, the book cost of that hotel is roughly around 10 crores
15:23today. Okay. But, you know, the capital deployment was done at that point of time. But today,
15:29if you really see the valuation of that hotel is around 250 crores. So, this difference of 240
15:35crore never reflects in the books of accounts. So, that is why we have followed the asset
15:39light strategy, which is in the interest of all our investors and the company as a whole,
15:45where the capital deployment is not high, but the return on capital is very high.
15:49So, focus on ROCE and not margin. Is that your net-net thesis?
15:56You said it. Okay, perfect. Thank you so much. It's been a pleasure chatting with you and breaking
16:01down the hotel business actually. So, thank you for coming in and chatting with us. Thank you.