Ladies and gentlemen, good day, and welcome to The Indian Hotels Company Limited Earnings
Conference Call for the Quarter Ended 30th September 2026. On the call, we have with us Mr.
Puneet Chhatwal Managing Director and CEO, IHCL; and Mr. Ankur Dalwani, EVP and CFO,
IHCL.
As a reminder, all participant lines will be in the listen-only mode and there will be an
opportunity for you to ask questions after the presentation concludes. Should you need assistance
during the conference call, please signal an operator by pressing star and then zero on your
touch-tone phone. Please note that this conference is being recorded.
I now hand the conference over to Mr. Puneet Chhatwal. Thank you, and over to you, Mr.
Chhatwal.
Puneet Chhatwal:
Good evening, everyone, and thank you for joining our global conference call for Q2 '26-'27.
We are pleased to inform you that we have continued our record performance for the 18th
consecutive quarter, underpinned by our diversified operating model and disciplined execution
despite macroeconomic headwinds.
Building on this strong foundation, sustained momentum and seasonally strong quarters ahead,
we are confident of exceeding our previously communicated FY27 consolidated revenue growth
guidance of 12% to 14% by 300 basis points. Accordingly, we are revising our full year growth
guidance upwards to 15% to 17%. And within that, the Hotel segment revenue is expected to
grow by 17% to 19%.
I'll now outline the 10 key highlights of the quarter. Number 1, the strong performance in the
second quarter. Our consolidated operating revenue grew 22% year-on-year to INR2,484 crores.
Operating EBITDA grew 24% year-on-year to INR706 crores, yielding operating EBITDA
margin of 28.4%, an expansion of 50 basis points.
Our bottom line grew by 23% to INR349 crores. Consolidated Hotel segment operating revenue
and EBITDA grew by 25% and 30%, respectively, driven by the strength of our diversified
brandscape and unique portfolio.
On the stand-alone basis, we continued to deliver strong performance with operating revenue
growing 26% year-on-year to INR1,336 crores and operating EBITDA growing by 40% to
INR520 crores, yielding operating EBITDA margin of 38.9%. That represents an expansion of
400 basis points. Our stand-alone PAT margin stood at a healthy 27%.
Our performance is not defined by a single year, but by sustained execution over time. Over the
past 5 years, we have delivered double-digit CAGR across revenue, EBITDA and PAT,
reflecting consistency and structural strength of our business model. Importantly, our current
growth rate is ahead of our 5-year CAGR, demonstrating a clear acceleration in our growth
trajectory.
Moving on to the second highlight is double-digit RevPAR growth across all brands on the back
of strong domestic demand. The Indian hospitality sector witnessed multiple macro headwinds
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during this quarter. Ongoing geopolitical tensions in West Asia resulted in elevated fuel prices,
leading to reductions in airline capacity and higher airfares, which moderated travel demand,
particularly in certain international and long-haul corridors.
Despite these challenges, domestic demand remained resilient, supported by multiple large
MICE events such as the BRICS Summit. We delivered double-digit RevPAR growth across all
our brands, demonstrating the resilience of our business model and the strength of our market
positioning.
This translated into market share gains with occupancy increasing from 75% in Q2 last year to
82% this year. Our continued focus on efficient revenue management and operational excellence
enabled us to achieve 28% growth in stand-alone RevPAR and 25% growth in consolidated
domestic hotel RevPAR.
Number 3, as a highlight was asset management driving pricing power in key cities. Our asset
management strategy continues to be a key driver of growth and value creation. During the last
financial year, we completed major upgrades across several marquee hotels, including Taj
Palace, New Delhi, President, Mumbai, Taj West End, Bengaluru, Taj Fort Aguada in Goa and
Taj Lake Palace, Udaipur. These investments are now translating into stronger pricing power
and improved operating performance across key markets. We expect this momentum to continue
through the second half of FY27.
A strong example is Taj Palace, New Delhi, where room revenue grew 132% in Q2 FY27 versus
last year. In September, the hotel crossed INR100 crores in monthly revenue for the first time
while delivering a very high CGOP margin. This underscores our ability to deploy capital in a
disciplined manner, unlock value from our existing assets and generate strong returns with a
relatively short payback period.
Number 4, portfolio growth. We continue to deliver industry-leading portfolio expansion with
47 hotels signed and 20 hotels opened in H1 FY27, taking our portfolio to 670 hotels with over
69,000 keys in operation or under development. With 390 operational hotels, we are on track to
cross the 400 hotel milestone in November or latest before the end of Q3. Our pace of growth is
accelerating. It took us 110 years to reach 100 operational hotels in 2013, another 12 years to
double that to 200 in 2025 and just 18 months to approach 400 operational hotels.
More importantly, our growth remains capital-light and very well diversified. Of the over 34,800
keys in our pipeline, 94% are capital-light, comprising 81% under management contracts and
13% under capital-light leases. This model strengthens earnings visibility while limiting capital
requirements, which, in return, enable us to scale our portfolio, expand our margins and improve
returns on capital.
This is a very interesting phase because we have given a guidance under Accelerate 2030 of 700
hotels portfolio. We will revert to all the investors by middle of November with a revised target
of the 700 because we should get to that number definitely before the end of this financial year.
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Number 5, management fee growth backed by new openings momentum. Our asset-light growth
driven by management contracts continues to translate into strong growth in management fees.
During the quarter, management fee income grew by 25% to INR156 crores from INR125 crores
in the corresponding period last year. This growth was driven by 25% increase in managed room
inventory, higher RevPAR, technical fees and new revenue streams like brand fees from various
branded residential and villas projects.
This performance despite temporary headwinds, reinforces the resilience of our asset-light
business model. Looking ahead, we remain confident of sustaining management fee growth at a
high teens CAGR, supported by a strong pipeline of hotel openings and incremental
contributions from newly added hotels.
Number 6, select service business consistently driving and delivering on all fronts. IHCL's select
service business comprising of Ginger, Qmin, Ama and Tree of Life continued to deliver robust
performance. Consolidated revenue of Ginger stood at INR193 crores, delivering 25% growth
year-on-year with an EBITDA margin of 40%. Our growth brands continued to scale new
milestones this quarter.
Ginger became India's first hotel brand. Yes, it became India's first hotel brand to reach 100
operational hotels and is on track to reach 150 by March 31, FY27. Qmin now has over 130
outlets. Ama Stays & Trails has crossed 400 villas and bungalows and Tree of Life has grown
to a portfolio of over 50 resorts.
Number 7, a strong balance sheet with healthy cash reserves. Our balance sheet continues to be
healthy with gross cash reserves of over INR4,350 crores. This provides us with the flexibility
to continue investing in brand and revenue-enhancing initiatives, including hotel upgrades,
expansions, greenfield developments and asset management opportunities such as strengthening
our marquee food and beverage concepts.
Number 8, Oriental Hotels merger as a strategic transaction, unlocking synergies. During the
quarter, we also announced strategic merger of OHL with IHCL, which will unlock operational
synergies, expand asset ownership and accelerate long-term revenue growth. It will also leverage
IHCL's strong balance sheet to fund inventory expansion and product upgrades, further
strengthening the portfolio's premium positioning.
The all-stock transaction with a share exchange ratio of 25 IHCL shares for every 117 OHL
shares is expected to drive 6% to 7% upside in our stand-alone operating revenue in FY28. We
do not expect this transaction to come into force before 1 st April of next year. So the guidance
that we are providing of 300 basis point increase in the total revenue for the year does not include
revenues from OHL. That will come on top next year.
The merger will further simplify the group's holding structure by increasing IHCL's direct
ownership, thereby streamlining governance, optimizing corporate overheads and enhancing
operational efficiency. The scheme of arrangement has been filed with the stock exchanges. And
as I already mentioned, the appointed date remains at 1st April 2027.
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Number 9, Paathya staying aligned with our ESG++ initiative, Paathya, that is what we call it,
is well on the journey towards our 2030 targets. It remains absolutely on track, and IHCL now
uses 41% energy from renewable sources and has installed over 361 EV charging stations across
170 locations in India.
Continuing our journey of eliminating single-use plastic, IHCL has installed bottling plants at
92 hotels and achieved 54% recycling of water used in Q1. IHCL currently partners in operating
83 skilling centers across 20 states in India. Since 2020, we have trained over 56,000 youth or - and we are very well on track to reach our goal of skilling 100,000-plus youth by 2030.
Finally, the Number 10 point is Taj was rated by Brand Finance's World's Strongest Luxury
Hotel Brand. And we are extremely delighted that this is happening again and again year after
year, including Taj being recognized as India's strongest brand across all sectors, which was
announced in the previous quarter.
Further reinforcing this leadership, Taj Falaknuma Palace and Taj Lake Palace have retained
their 3 Michelin key's rating for the second consecutive year making them the only 2 hotels in
India to receive this distinction. We are grateful to our loyal patrons and dedicated colleagues
who have played an integral role in making Taj the epitome of hospitality and luxury.
Finally, looking at the remainder of year, which is H2. As we look ahead, we remain confident
of delivering on our upgraded guidance of 15% to 17% revenue growth for FY27 with Hotel
segment growing from 17% to 19% with sustained margins and strong cash generation. We are
also on track to achieve our target of 50 hotel openings this year.
That means 30 hotels are expected to open in the second half of this year. With strong
foundations in place, disciplined execution and a clear strategic direction, we remain focused on
delivering sustainable, profitable growth and long-term value for all our stakeholders.
Thank you, and we will now be happy to take your questions.
Moderator:
Thank you very much. We will now begin with the question-and-answer session. Your first
question comes from the line of Binay Singh with Morgan Stanley.
Binay Singh:
Congrats on a very strong set of numbers. I have 2 questions. Firstly, when we look at your
revised guidance, it implies mid-teens plus growth in the second half. Given that occupancy rates
are already running quite high at 82%, though they keep surprising us on the upside. But fair to
assume that the incremental growth will be more driven by room rates plus to an extent, higher
trickle down to -- on the leverage side on the margin side? That's the first question.
Puneet Chhatwal:
And the second?
Binay Singh:
The second is when we look at the TajSATS Air Catering business, even sequentially, we see
the EBITDA lower. So could you talk a little bit about what happened over there?
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Puneet Chhatwal:
So Ankur was signaling he wants to answer the second question, but let me answer it also first.
So we'll answer the second one first. TajSATS is already improving. The geopolitical crisis has
not been very helpful and kind to airlines sector as well as airline catering business. Having said
that, if you look at the non-aviation revenues from TajSATS, which is really driven by
institutional catering, they have really done quite well diversifying that revenue. I would say,
optimistic on TajSATS going back to where it was and actually even improving upon it in the
second half. Of course, we have no control over any further activities on the war front in West
Asia.
On the first one, yes, most of the revenue is coming from rates, but we also expect besides the
typical domestic and average rate, I think we are also expecting to do much better in the third
quarter in our international portfolio, especially London, Pierre, San Francisco and anything else
that we're opening. And Frankfurt will be ramping up quite well after the 6 months of, let's say,
start-up challenges, which we have had, and we mentioned those in the last call also. So all in
all, it's positive.
I think Ankur wants to add to whatever I said, and I...
Ankur Dalwani:
A couple of points, just to add to that, Binay, one is that you see in the Q2 numbers, it's been a
balanced growth between occupancy and ARR. It's not purely ARR-led growth, so which means
that our hotels have gained market share in key markets, both on a stand-alone basis as well as
the domestic consol numbers, both in both the markets, we've increased occupancy by roughly
by 6% to 7%. And therefore, that is one trend, which you should take note of as you think about
the H2.
And secondly, on your point on TajSATS, what was different between Q1 and Q2 was that the
curtailment of schedule in airlines happened primarily in June. And therefore, the first half of
Q1 was actually quite strong for them, and they got impacted more so towards the second half
of Q1. Going into Q2, we already knew that it's going to be a challenging quarter because all the
curtailments had been announced. And that's why you see relatively -- from Q1 to Q2, a little bit
more impact on the margin.
But I guess this year is a year of consolidation for TajSATS. They were at a pretty high base as
far as the catering business was concerned. And therefore, we think from here, it can only look
better. Good thing is that they've been able to preserve the top line growth by diversifying into
non-flight catering business, which is albeit at a little bit lower business, and that also gets
reflected in the combined margin for them.
Moderator:
Your next question comes from the line of Prateek Kumar with Jefferies.
Prateek Kumar:
Congratulations, sir, for very strong numbers and raising the guidance. My first question is on
your second half outlook. Of course, second quarter benefited from a series of events, both in
Delhi and Mumbai, which also should show up in like 50% ADR growth, which we have shown
in PPT in Delhi. So is there a way to strip out the impact of MICE in your performance? And is
second half outlook factors any significant events for your forecast?
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Ankur Dalwani:
We do give the MICE breakup in the pie chart. It's gone up from -- if you look at H1 last year to
H1 of this year, it has gone up, and you can see it in the mix there. But I think this is obviously
H1, if you were to look at Q2, Q2 clearly MICE has grown much faster. The good thing is MICE
is a structural story. It's not a one-quarter story. So you will keep on happening -- you will keep
on having events in the country and with the infrastructure of holding events going up.
And even this quarter, you've already seen a few of them, some heads of states coming in as
recently as this week. And then, of course, the Bloomberg New Energy event, which happened
in Delhi last couple of weeks back. So we also had the fintech event happening in the last quarter.
So upcoming events are also the Aero show plan in Bangalore, which happens every 2 years,
plus Vibrant Gujarat. We put a few list of these also in our -- in the presentation. Also, we have
much more wedding nights in H2 compared to -- particularly Q4 compared to Q4 of previous
year. So I think the event economy is both social MICE and corporate MICE is something, which
we are very bullish on, and we are well positioned to take more than our fair share of that market.
Prateek Kumar:
Sure, on wedding -- comment on wedding calendar, it actually beyond -- extends beyond Q4
into Q1 and other quarters also like throughout FY27. Does that mean you could book like
significantly higher revenue from social MICE also versus like your ongoing 2,3 year?
Ankur Dalwani:
Yes. See, you're right, the wedding calendar for next year is actually more of 95 wedding nights
as opposed to normal 65-odd 60, 65 wedding nights. So there is clearly potential to sort of grow
the social MICE business next year. We will be able to answer this with much more granularity
as we get towards the end of the year and we have a forward calendar coming in. But this is
definitely going to be a tailwind for next year.
Prateek Kumar:
And my last question, while you are expanding your supply significantly outside top 10 cities,
how do you see ADR growth or RevPAR growth for cities outside top 10 markets for yourself
and for industry?
Ankur Dalwani:
So I think this goes back to the fundamental question, Prateek, of demand supply. And I think
every micro market is going to be different. And it's very hard to sort of paint the whole country
with the same brush. The key markets where we are located and where our key assets, which are
the big cities or the big leisure markets, they continue to have fairly healthy growth.
If you see our city-wise numbers, which we've also shared with you in the presentation, you can
see pretty secular growth across the market. And with everybody doing double-digit growth and
a lot of cities doing high teens to early 20s. I mean even Delhi, which obviously has the benefit
of BRICS in this quarter. If you adjust for that, it would have been a very healthy growth of, let's
say, late 20s.
So fundamentally, I think demand supply balance continues to be in favor and that plays to our
strength of consolidated hotel locations in the domestic market and also plays to our strategy of
management contracts and complementing the consolidated hotels, which we own.
Moderator:
The next question comes from the line of Karan Khanna with Ambit Capital.
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Karan Khanna:
Congrats on the guidance upgrade. First question to you, Puneet, 1H has seen about 18% growth.
And if I take midpoint of your full year guidance of 16%, this implies you're indicating about
14% growth in the second half of the year. How should one read this considering you're also
entering a seasonally strong 2H?
Do you think this 14% growth number is still conservative and there's an upside risk even now
this is the visibility you have for December? And base quarter also had the impact of Indigo
flight cancellations in December and the West Asia crisis in the month of March. So how should
we read the 14% number for second half?
Ankur Dalwani:
Yes. I think 2 things. One is depending on how you do the math, it probably would be higher
than that number which you actually said to arrive at our guidance of 15% to 17%, we will have
to end up doing much higher than that to arrive at that because it's not just -- we have to balance
the hospitality growth with the somewhat slowness in the TajSATS. We are running into a
quarter, which is seasonally strong, like you said. So there's a lot of MICE events, marriages,
which will sort of add to our growth momentum.
We also have to keep in mind that there is a base which we have to sort of keep in mind,
especially we had a high base of Q4 last year. So that's keeping in mind, we have given this
overall full year guidance.
Karan Khanna:
Sure. And then secondly, on the acquisition landscape. As we understand, you've been actively
evaluating asset-light expansion opportunities globally. So at what point do you expect to close
some of these potential opportunities? And how do you expect the fee yields on international
management contracts compared to what you're seeing in the domestic benchmarks?
Puneet Chhatwal:
Karan, I mentioned in my opening note that we'll come back to all the investors in the next 10
to 15 days, latest by middle of November with a separate development guidance as we are
already -- if I go away from the end September numbers, we've already crossed 675 hotel
portfolio, and we are at 392 hotels opened as of yesterday with 4 more openings for the
remainder of this month. So I think that guidance needs to be revised. And when we do that,
then we'll come with what all we are planning to do and what kind of growth will come from
there.
And when we say we'll open 30 hotels in the remainder of the year or even maybe 32 or 34, that
is what is also adding to a certain revenue guidance because the not like-for-like growth is very
strong. So a few hundred basis points of your revenue guidance, if it was to slip on the existing,
it will be compensated through the not like-for-like growth.
Karan Khanna:
Sure. And lastly, on the international subsidiaries, St. James' Court has seen the revenue
trajectory improving, but the margins have declined 360 bps Y-o-Y for 1H FY27. So what's
driving this negative operating leverage? And what's the outlook for all international subsidiaries
for the rest of the year?
Puneet Chhatwal:
The guidance remains positive for all subsidiaries, including London, we have spent every year
a lot of money. In the last quarter, we had explained that some of the works were delayed,
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including the meeting room space, the lobby works, the new bar, the new cigar lounge, the new
whiskey lounge, etcetera, etcetera. So a few months of delay with all this supply chain disruption
around the world happens.
And when that happens for one or the other quarter, the margins drop and the revenue drops.
But important is those works are completed. The London property is coming back with a big
bang. We see very good increase and a double-digit increase at least in the month of October as
far as London is concerned.
So we are very positive because this is where in your own portfolio, the operating leverage kicks
in. So although we are so much focused on capital-light growth, but a lot of our operating
leverage is coming through asset management initiatives, which we are undertaking in the
company-owned assets.
Ankur Dalwani:
Karan, just to add to that, London also had -- I mean, London and U.S., both the markets did get
impacted by the Western Asia crisis on the cost side, apart from some impact on the revenue,
but cost side, the fuel and power actually has gone up there. And then specifically, there was a
property tax waiver, which was there in London, which got also removed in this quarter. So that
is something, which is specific to London. But these are things, which will get built into the base
going forward should settle now.
Moderator:
Your next question comes from the line of Sameet Sinha with Macquarie.
Sameet Sinha:
Congratulations. I have a couple of questions. So first, remind me, I mean, last year, you had
taken -- done some renovations so you take some rooms offline. Is that the low base that's
contributing to some of that 25%? And the reason I ask is I don't want to be assuming that this
is going to be the sustained growth rate going forward. So I just want to make sure I model it
properly.
And secondly, on the guidance side, are you -- clearly, you're benefiting from some of the
domestic travel, probably people who are trying to travel internationally and decided not to and
splurge domestically. So are you assuming that continues for the rest of the year? And if so, can
you help us with quantum, maybe occupancy, something so that we at least have that in our
thoughts.
And my final question is, more of a higher-level question. The international assets, clearly, there
has to be a strategic rationale for you to continue with them. They are problematic, margins are
lower. So financially, it does not seem like it's making sense. But strategically, I'm sure that
there's something to validate ownership. So if you can talk about that.
Puneet Chhatwal:
The first point was if the room base is lower. This is not the way to look at it. We are a 123-yearold company. Even if we take the last 50 years with the, kind of, assets we have, including the
ones in our ownership, something is always under renovation. We are spending -- if you look at
our capex spend in the first half of this year is higher than what we used to spend annually.
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It's 20% to 30% higher what we spend annually on an average for the last -- for the preceding 7,
8 years. So given that we own the assets, these are iconic assets, there will always be something
or the other, which is under renovation. And it is good that way because that is what maintains
the iconic nature of the portfolio. That's why the Taj hotels are very iconic across the world.
Number 2, is you're saying that because people are not traveling and is domestic. No, there is a
-- in our opinion, there is a structural shift. This sector, I've said many times in various forums,
not only just our quarterly calls, but other tourism associations that I chair or I'm associated with,
there is a structural shift when it comes to India, the consumer behavior has changed.
The consumption is for now. And it's not for like 5 years from now, we will do this or 3 years
from now, we'll do that. So people are traveling. People are dining out, and they are doing that
more and more than we have ever seen before as a sector.
Finally, on the international assets, I don't know what gives you that impression because London
is highly profitable for us. Dubai is at the moment down because of the West Asia crisis, but it
gives us very rich management fees. Cape Town has become highly profitable for us.
Yes, the margins internationally will never be the same as in India because there is a change in
-- when you go more and more west, your labor cost is much higher. Your F&B footfalls, the
weddings like they happen in India don't happen outside. So that part is there.
But what is the key differentiator between us and the rest of the brands from this part of the
world? We are present in the 3 of the 4 largest lodging markets of the world, which is New York,
London and with 3 hotels in Dubai. We are missing Paris.
So what is the differentiator when it comes to people going to these places who send business to
us, be it because of their family issues, be it because of their health issues, be it because of the
United Nations General Assembly or it is India playing cricket in the U.K. or it is Wimbledon,
that is -- the courtyard of London is the key differentiator to the rest of the brands even in
London, other international brands.
So international is what makes Taj the world's strongest hotel brand. You cannot stop
international. And how do you put a value to it in terms of, as you rightly said, strategic reasons
and consideration. We are very happy with the margins of 35% consolidated. This is industryleading when you also include other international brands.
And we will not be aggressive on international growth, but opportunistic whenever we can, we
will keep adding because it is the first and at the moment, the only consumer brand from India
that has made it on an international front. We should actually coming from India, be very proud
that there is Taj in London, that there is Taj on the Fifth Avenue, not a hotel in New York, but
on the Fifth Avenue.
So I think these are important considerations for strategic reasons where it is very difficult to
calculate the value that is added to the Indian portfolio because you are in that part of the world.
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Hopefully, this answers, but otherwise, when you come, we can share with you some customer
data to see how that works and what are the kind of people I was talking about, but not in a call.
Moderator:
Your next question comes from the line of Shaleen Kumar with UBS India.
Shaleen Kumar:
Congratulations to the management for a very solid numbers. So see, it seems like FY27 is in
pocket. And I'm jumping the gun here, I know. So when I think about FY28, we have a much
more number of weddings. TajSATS should be in base, and we should be hopefully looking for
recovery. Oriental will be there to add to the growth. And then we are talking about many more
signings, which should contribute. So qualitatively, FY28 can be better or equal to FY27?
Puneet Chhatwal:
What do you mean can be, it will be better.
Shaleen Kumar:
Okay. I want to put you in the right position.
Puneet Chhatwal:
No, no. I'm just trying to give you an answer that you're looking for, putting it diplomatically
and I'm putting it straight. Those 50 hotels added this year, another 50 or 70 coming online next
year with none of that coming at a risk with the international business hopefully recovering and
this is all safe for war or pandemic or whatever. So if that happens, every sector, everybody
starts suffering. But if that does not happen, then mathematically, it's not possible that we don't
do better than this year.
Ankur Dalwani:
Yes. And like you said, everything is in the base, whatever had to go wrong in terms of, let's
say, some of the businesses, which haven't fired. And despite that, we have grown what we have
delivered. That's going to be in the base. And we'll have the tailwind of the OHL merger as well.
Moderator:
Your next question comes from the line of Saurabh Kundan with Goldman Sachs.
Saurabh Kundan:
Sir, my question is around the management fee. Your guidance always has been high teens. But
the current run rate is obviously a little higher than that. I just wanted to ask you if this high
teens guidance, in your opinion, is a little bit conservative? Or is that a fair number to work with?
And what's the time period for this high teens that you guide to?
Puneet Chhatwal:
I think it's a very good and a very interesting question. So we said in my opening remarks that
this also includes certain brand fees for branded villas, residences, etcetera. So if I take an
example of Ras Al-Khaimah, where we were getting these fees and suddenly, there comes the
West Asia crisis and it stops.
High teens represents something between 15% and 20%, right? So 17%, 18%, we are doing 25%
I think it is possible that we keep growing because of our pipeline with or without this branded
villas and other fees coming in. I think now that we have the confidence, we have done it over
several quarters, it is possible to keep growing that business.
I would say we will change that guidance also maybe end of next quarter. At the moment, we
have just done it. Whatever the number is, is included in the total revenue. The 300 basis points
includes the increase in fees. But if you want a separate guidance on that, we'll do that also end
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of next quarter because we are doing some work on the expected income and the value of the
pipeline that we have.
Ankur Dalwani:
Just add to that, look, given where we are, what we see of the pipeline, our opening trajectory,
like we've also said we'll open 5,000 keys every year. That's the guidance we've also put out in
terms of number of hotels in the keys. And as the older hotels stabilize, I think we'll be
disappointed if we don't cross INR1,000 crores in 2 years from today.
We are -- I think, given where we are. So you can derive your CAGR or whatever from there.
But broadly, that is what we are internally targeting, and we will be able to sharpen the pencils
by end of the quarter.
Saurabh Kundan:
The second question is, again, going back to the previous participant's question on the U.S.
assets, the Pierre specifically. I completely appreciate that it brings a lot of value to the Taj brand.
But what is your view on where should the sustainable EBITDA margin of this business be of
that subsidiary specifically? And what will get you there? And how long could it take?
Puneet Chhatwal:
Yes. As I said, I think I'll answer this instead of Ankur. I've already stated that. There are -everything is not going to give you big margins. There are certain things you have to consider
as a marketing expense. I think where Pierre was and where it is today is a huge gap. And in a
positive way, it is not doing any cash loss. It is doing positive EBITDA margin.
And we expect this year for it to go beyond the positive EBITDA margin that we had last year.
And San Francisco as a market had tanked, especially all you people on the call would know
what happened in the SFO market, how it went down and it's on the way back up. It's almost
90% there where it used to be 3, 4 years ago.
And hopefully, post the biggest event that San Francisco sees in January is the JPMorgan
conference. I think post that, I expect it to go beyond that 100, go to 105, 110. And we have this
very nice location there. It does good for the brand. And we are very pleased with both the assets.
Pierre has been difficult. As you all know, we have never made any secret about it. But I think
we are getting very close to finding a more sustainable solution, but this is not the one which
will do 20% 25% EBITDA margin. You have to see this as having the Indian flag flying on the
Fifth Avenue and doing wonders for us, getting us guests, which we would normally never get
that kind of profile.
Moderator:
The next question comes from the line of Achal Kumar with HSBC.
Achal Kumar:
So my first question is around the demand structure. So Puneet, as you rightly said that the
structural changes there. But apart from that, we've been talking about airline versus hotels. And
for airlines, of course, there are a lot of challenges and the demand is soft. But on the other side,
if you see inbound international tourism has been strong.
And if you see this quarter, inbound international tourism was up 8% to 9%, partly could be
because India is a lot cheaper now, forex INR depreciated. So how do you see -- I mean, do you
see a bit of a change for you guys also in terms of international inbound international versus
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domestic mix? And going forward, do you think that could continue and that will also help the
hotel industry and especially upper upscale hotels or luxury hotels? Any thoughts around that,
please?
Puneet Chhatwal:
Yes, yes, yes. So in the last 10 years, the international -- the foreign tourist arrivals has seen a
CAGR of 3.9%. That's not bad. It could improve by a few hundred basis points. The domestic
has seen more than a double digit, around 11% growth in the last 10 years. Having said that, I
think maybe not everybody is aware of the good news. The World Travel and Tourism Council's
Global Summit next year is happening now in India.
And I think it has the who's who of travel business, and they will start marketing India. I'm
hoping that it could give a much larger growth to our foreign tourist arrivals over the next 12
months period, and this marketing should start through the WTTC already in a few months from
now.
So all in all, I see this as a hidden upside. I've always seen it as a hidden upside because we were
lagging behind. And at some point, markets are efficient, as we have all learned. -- and they all
correct themselves. If they are too hot, they go down. If there is too low. India is very low in its
share of -- even I think Albania and Croatia get more foreign tourists than India does. And there
is no reason why you cannot marry in India, heal in India, spiritual tourism, all possible things
that are there that should give it the required tailwinds to go beyond.
But domestic will remain the stronger pillar. If today, it is giving you like 90%, then maybe on
a larger base, it might give you 80%, 85%. The only thing is the foreign tourist arrivals has to
grow to a number which is helping us get to a 5% or 6% CAGR versus a 3.
Ankur Dalwani:
I think that's the upside, Achal. If you see our current year numbers, I mean this current quarter,
if you look at the room nights sold in that data, we look at track internally, it's not really moved
too much from what it was from last quarter of previous year -- same quarter of previous year.
So it's pretty much flat in terms of room night. Of course, the revenue contribution is higher
because of the fact that there are more high spending contribution from the foreigners. But the
upside is if the 3% becomes 5% or 6%, that itself is an automatic upside to all the numbers we
are talking about.
Achal Kumar:
Right. Fair enough. And then I think going back to the previous question and to one of your
slides where you mentioned that the capacity growth in Tier 2, Tier 3 cities could be around 12%
CAGR. And now we are talking about the Tier 2, Tier 3 cities where probably the demand is not
as strong as or maybe not corporate demand is negligible.
So how do you look at 12% CAGR growth is really enough for creating a bit of a pressure on
ARR? Or do you think that demand actually is much stronger than that? How do you see the
demand versus supply balance going forward in Tier 2, Tier 3 cities? And given that you have a
lot of growth coming in Tier 2, Tier 3 cities, please?
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Ankur Dalwani:
Yes, Achal, Tier 2, Tier 3 is obviously a combined number for so many cities. If you start -- 300
cities, I'm told, so if you start looking at per city-wise, it will look like 500 keys per city kind of
a number or even lower on an average. And therefore, what happens then on that base, you add
200 keys, it starts looking like a 50% addition.
The fact of the matter is that even we look at current year data, a lot of these markets are facing
at 15% to 20% demand growth on the room night side. And a lot of that is getting met through
unorganized or unbranded sort of chains, right? So automatically, when you put up a quality
supply, that shift will happen, and we are seeing that even in this financial year and last year as
well.
So one has to look at this in that context. The headline numbers are, of course, what got reported
by the recent industry report, which came out. And keep in mind, these are supply over a period
of 5 to 6 years. We also don't know how much of this will actually get built in the time frame it
is supposed to get built.
So these are all numbers which assume a certain start date and assume certain completion date.
And as you know, in India, the projects do move around in terms of that execution time line.
And therefore, we don't think it's a big concern as far as the headline number is concerned
because it's getting divided across a large ecosystem.
Moderator:
Your next question comes from the line of Akash Gupta with Nomura.
Akash Gupta:
Am I audible?
Ankur Dalwani:
Yes, Akash. Please go ahead.
Akash Gupta:
Congrats on an excellent set of numbers. My question is on the stand-alone EBITDA margin.
We saw 400 basis points of margin expansion in the second quarter. Was there any one-off that
was involved? And how should we think about the EBITDA margin going forward? Is that how
we should project it even going forward, roughly 2% to 3% margin expansion?
Ankur Dalwani:
See, there was no one-off in this quarter. In fact, this quarter, we had a normal payroll increase
in stand-alone, which was not the case in the previous quarter. So in fact, we had the normal
payroll coming in. And this obviously benefits from 2 things. One is the operating leverage and
the MICE activity, which happened in this quarter.
Plus, also the mix of revenues because all the management fee gets booked in the stand-alone
entity. And therefore, that contributes to expansion of margins going. And I think that trend
should not change, whether it's 1% or 4%, that obviously varies from quarter-to-quarter.
And if you see, we've given some more color to you on how we have held up margins despite
absorbing costs of new hotels stabilizing, both on consol as well as some of the IT spend we
have done, some of the regulatory changes, which have happened because of the -- on the HR
side, for example, there were new rules on provident fund, which came in.
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There was code of wages which got implemented. All of that is sort of has been absorbed in the
numbers. And if you see Slide 10, it will give you -- basically, we are saying we will have a
positive outlook on margins without giving a specific guidance on the numbers.
Akash Gupta:
Understood. My second question is on the RevPAR for the stand-alone. If we exclude the BRICS
Summit impact, what would be the RevPAR for the quarter?
Ankur Dalwani:
See, again, while we're not getting into specifics of that event, but I can just tell you one thing
that events is an ongoing thing for us. So whether we have BRICS Summit or AI conference or,
let's say, the Bloomberg Summit, which happened this quarter, these are all things which are
kind of contributing to the MICE activity.
All I can say that even without that, even it would have been a very healthy number. It would
have been a comfortable double-digit number without the BRICS Summit as well. Because what
happens, if you remove the BRICS Summit, you would have done something else. There would
have been a replacement of that with some other business.
Puneet Chhatwal:
See, that's one. The second is our base is so large that one hotel or one city, it can benefit. So it
may have, let's say, a couple of basis points and percentage points in additional growth but
whether it's a G20 or the year after with the AI Summit or the year after with the BRICS Summit
or the Bloomberg or tomorrow, we have NDTV Summit in -- starting in Taj Palace Delhi.
So, India is becoming an important market for both international and national players. And there
are a lot of events happening in all these places that have been built like Bharat Mandapam,
Yashobhoomi. Yesterday, I went for this Marco Rubio's reception. He was staying at the Taj
Mahal Palace, but we can't accommodate so many people. So the reception was at the Jio.
So, I think there is a lot of these activities happening with a lot of people coming in from outside
of India, for business reasons, not necessarily for tourism. So with them, they don't come alone.
They bring a full entourage and some of them stay longer. And I don't think that is going to
change in the short to medium term.
Ankur Dalwani:
Yes. I think the point that Achal also made about the currency being a tailwind, I think this is
something we've also mentioned in the past. One is, of course, the government events are not
really impacted by this, but then the people come back and stay back and then they not only stay
in Delhi, Bombay, but also end up doing leisure trips, which benefit markets like traditional
leisure market, but also the newer ones, which are state of Uttarakhand, Uttar Pradesh, etcetera,
or down south. So I think those are all tailwinds as far as the sector is concerned.
Akash Gupta:
Understood. And my final question is on our penetration. So we are at 390 hotels moving
towards 700 hotels. Once we reach this 700 hotel mark, how much penetration ability do we
have after that? Just wanted to know your thoughts.
Ankur Dalwani:
I mean if you look at the branded supply in India, it's a miniscule of what it really should be,
right? I mean if you look at that picture firstly, it's only we're talking about anywhere -- pick up
different reports, you're talking about anywhere between 210,000 to 230,000, 240,000 keys.
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Several cities in the world will be either that or at least half of that. So as such, the penetration
levels can -- there is no as such outer cap on this 700 is the number we set out for ourselves,
which when we did the Capital Market Day 2 years ago.
And that was -- a lot of people told us it is very challenging how will you get there. But like we
are saying that we'll probably get there in the next few months. So we'll reset that number. The
opportunity set is pretty large, given where we are on the consumption cycle of services, not of
products. We continue to be very bullish on that.
Moderator:
Your next question comes from the line of Prashant Biyani with Elara Capital.
Prashant Biyani:
Mr. Dalwani, the stand-alone -- sorry, non-stand-alone depreciation is up 34% year-on-year or
around INR27 crores for Q2. This incremental depreciation would be relating to which
investments?
Ankur Dalwani:
It's about 20% growth if you go to the consol depreciation. It is basically pertaining to the normal
depreciation, which we have done in our stand-alone and the new and our existing subsidiaries.
It also includes depreciation coming on account of newer assets.
So Frankfurt, for example, Noida and TajSATS, all the assets, which have come in because of
the acquisitions have all added to this. If you adjusted for this, this would have been a normalized
8% to 9% growth without the assets which have come on board early this year. And that's also
reflected in the revenues for those being contributed from those assets.
Prashant Biyani:
Right. And sir, similarly, your non-stand-alone owned hotel EBITDA, as per my calculation, is
declining for this quarter or for the last 2 quarters. Can you give some color on that, whether it
is correct or how should we look at that number?
Ankur Dalwani:
Prashant, we can't look at business like this because at the end of the day, this is a consolidated
business. At different points in time, different things work and sometimes stand-alone fires,
sometimes our international business fires. So that's what gets reported. We've already given the
disclosure on how international has done this quarter. And like we are saying, we are positively
inclined towards how H2 will play out for international because a lot of the things which were
happening in H1 are kind of getting in the P&L, and that's where we are.
Moderator:
Your next question comes from the line of Amyn Pirani with JP Morgan.
Amyn Pirani:
My first question is just going back on the supply growth discussion, which happened earlier in
the call. And you've given city-wise supply growth expectations. Would it be fair to say that
given that a lot of these cities have expanded a lot and have become mega cities in a sense, if we
look at large localities within the city, then the supply growth is even tighter than what the
numbers suggest, which means that the RevPAR and the occupancy could continue to be quite
high in the existing large hotels for you as well as for other brands?
Ankur Dalwani:
Yes. We've said that these are megapolises, actually, not just metros. And in these megapolises,
you have to look at micro markets, and maybe like you cannot compare South Bombay with
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suburb, for example, similarly, Central Delhi with other parts of Delhi. So clearly, there is a sort
of area of influence of a hotel or area of where the business falls for the hotel. And that is very
true what you're saying that these are overall numbers and micro market-wise, they will be
different numbers.
Amyn Pirani:
Okay. And secondly, just on the MICE growth, I mean, like you rightly said, I mean, in fact,
we've now seen for a few years that there are MICE events. And initially, you used to call out
that there was an event last year, so we should adjust for that. But like you rightly said, every
year, we are having events.
My question is that given that a lot of these events also end up happening in the first half of the
financial year, -- should we assume that going forward, the seasonality in your first half versus
second half as a business should come down materially? Or do you think that 2H would continue
to be the large chunk of revenues and profits even going forward?
Ankur Dalwani:
I mean, H2 has traditionally been a seasonally strong H2. I think that to some extent, it will
continue to be that because of the fact that this is also the holiday season where Indian weather
becomes far more amenable for foreign tourists to come in, more domestic travel to happen. And
also the MICE dates can vary, right? I mean and the MICE dates will vary from season to season,
and that's reflected in the wedding business, right?
So like, for example, you do have H2, which is going to have a good amount of wedding days
coming up now. And that will obviously vary from year to year. So I don't think that's
fundamentally changing where H1 will kind of become equal to H2. But our view is that you
will see a lot more corporate MICE happening throughout the year.
Moderator:
The next question comes from the line of Abhay with Axis Capital. No response from the line
of Abhay. We'll move on to the next question. Our next question comes from the line of Vaibhav
Muley, which will be the last question for today from Haitong India Securities.
Vaibhav Muley:
Congratulations on a strong set of numbers. My first question, Puneet, sir, was on our -- on our
new acquisitions. So Brij Hospitality, Clarks as well as Atmantan have seen a very strong growth
after we have acquired the properties. I just wanted to understand what kind of interventions you
have taken after acquisition that has led to the strong growth? And related to this, after
acquisition of Oriental Hotels is completed, what kind of interventions do you plan to take to
improve the performance in that entity? That's my first question.
Ankur Dalwani:
So the acquisitions, which we have completed early this year and both Bridge and Atmantan,
both have actually done very well because of the fact that they play to different segments.
Atmantan is focus on integrated wellness. We have now sort of done our integrations with our
marketing sales efforts. So that has definitely helped in pushing the business in H1. And I think
that this is just the first year of integration.
So, we think that benefit will also play out as we move towards H2 and towards the next financial
year. Clarks, which is the ANK, Pride brand, Clarks which has come part of the ANK, Pride
transaction is also getting integrated with Ginger. And we have now -- I can say we have
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completed 75 signings, close to 75 signings, out of which 30 have already sort of come on board
as Ginger.
So I think there is, again, going to be a lot of upside from that integration as we bring them on
level as far as the Ginger brand is concerned, both in terms of quality, customer experience and
overall RevPAR and overall margin profile is concerned. And that will play out in the next
financial year.
So I think we have dedicated task forces actually working on integrating the revenue
management led by my colleague on the commercial side as well as my colleague on the select
service side on the Ginger integration with the Roots Corporation.
So -- and this is something we obviously review on a very regular basis on a monthly basis. And
I think we're happy to say that they're tracking what we have set out for ourselves at the
beginning of the year.
Coming to OHL, it is still sometime -- we expect it to close sometime in next financial year with
an effective appointed date of April 1. There are synergies both on asset management since the
business was going through a debt reduction cycle in OHL's case, they were not looking at asset
management proactively, but now this will become a proactive focus for us.
And even before the merger gets completed, we can actually -- we will start sort of engaging
and seeing what can happen immediately post-merger completion. So we have given some
guidance on how it will contribute to our numbers next year. But more importantly, as we get
closer to the end of the financial year, we will also tell you what benefits we see both on revenue
and margins going forward.
Vaibhav Muley:
Perfectly clear. Second question on our Bangalore and Chennai performance. While overall
RevPAR has been very strong, relatively, Bangalore and Chennai have underperformed, I
presume this is because of higher dependency on FTA. So from Q3 onwards, can we expect
higher contribution from Bangalore and Chennai in overall RevPAR baking in FTA recovery?
Puneet Chhatwal:
Yes. I think Bangalore anyways is a strong market. So should have recovery, but Chennai and
Kolkata have been lagging behind versus other metros. So we do expect whether it's next quarter
or the quarter after that, that both these markets will move up significantly from where they are
today.
Vaibhav Muley:
This is very helpful. Thank you so much and all the best for coming.
Puneet Chhatwal:
Thank you, everyone, for joining the call. Anyone who feels that they need some more answers
to questions, please feel free to reach out to our Investor team led by Rupesh, and all of you,
have a wonderful evening and look forward to our next call with you in -- after the closing of
the Q3 results. Thank you very much.
Ankur Dalwani:
Thank you.
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Moderator:
Thank you. On behalf of The Indian Hotels Company Limited, that concludes this conference.
Thank you, everyone, for joining us, and you may now disconnect your lines.
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