CHALETNSEQ4 FY2022May 17, 2022

Chalet Hotels Limited

7,265words

96turns

10analyst exchanges

2executives

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Management on call

Sanjay Sethi

MD & CEO

Milind Wadekar

CFO

Key numbers — 40 extracted

84%

ase levels. As an outcome travel confidence has improved significantly, domestic airlines witness 84% recovery to pre-COVID levels in India. Hospitality sector also witnessed a sharp recovery as pe

60%

o witnessed a sharp recovery as per HVS in the month of March, occupancies pan-India were between 60% and 62% and ADR was between Rs. 5400 and Rs.5600. Amongst the key cities, Mumbai out-performed

62%

sed a sharp recovery as per HVS in the month of March, occupancies pan-India were between 60% and 62% and ADR was between Rs. 5400 and Rs.5600. Amongst the key cities, Mumbai out-performed the over

Rs. 5400

per HVS in the month of March, occupancies pan-India were between 60% and 62% and ADR was between Rs. 5400 and Rs.5600. Amongst the key cities, Mumbai out-performed the overall recovery cycle. Chalet’s por

Rs.5600

e month of March, occupancies pan-India were between 60% and 62% and ADR was between Rs. 5400 and Rs.5600. Amongst the key cities, Mumbai out-performed the overall recovery cycle. Chalet’s portfolio also

55%

e quarter due to the COVID the company had reported a reasonably good quarter with occupancies of 55% and ADR of Rs.5429, which are higher by 7% from the preceding quarter. Portfolio occupancies for

Rs.5429,

the COVID the company had reported a reasonably good quarter with occupancies of 55% and ADR of Rs.5429, which are higher by 7% from the preceding quarter. Portfolio occupancies for March were at healthy

eported a reasonably good quarter with occupancies of 55% and ADR of Rs.5429, which are higher by 7% from the preceding quarter. Portfolio occupancies for March were at healthy 68%. In the month o

68%

hich are higher by 7% from the preceding quarter. Portfolio occupancies for March were at healthy 68%. In the month of April, Chalet clocked occupancies of 81% as against 76% in April 2019 and RevP

81%

occupancies for March were at healthy 68%. In the month of April, Chalet clocked occupancies of 81% as against 76% in April 2019 and RevPAR of 5757, a 93% recovery from April 2019. JW Marriott Saha

76%

March were at healthy 68%. In the month of April, Chalet clocked occupancies of 81% as against 76% in April 2019 and RevPAR of 5757, a 93% recovery from April 2019. JW Marriott Sahar, Westin Powai

93%

th of April, Chalet clocked occupancies of 81% as against 76% in April 2019 and RevPAR of 5757, a 93% recovery from April 2019. JW Marriott Sahar, Westin Powai, Four Points Vashi an

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Guidance — 20 items

Sanjay Sethi

opening

“We restarted Bengaluru residential project.”

Sanjay Sethi

opening

“Conversion of the mall to a commercial space in Bengaluru is on track for completion in Q3 of this year, development of the new commercial at Powai is as per plan for completion by end of the year, Bengaluru had a slight delay on an account of certain supply chain challenges, but we should be done with it in the next quarter.”

Sanjay Sethi

opening

“The Airoli project is still on wait and watch and we will continue to assess demand dynamics to take a decision on this project.”

Sanjay Sethi

opening

“For the next two quarters, we will be focusing on four key areas, one capturing the domestic and global rebound, efficient execution of growth projects, roll out of the ESG strategy and attracting and nurturing talent.”

Sanjay Sethi

opening

“Ladies and gentlemen, we are excited about the current business trends and have set internal target of surpassing revenues of EBIT and EBITDA numbers of FY2020 in the coming year itself.”

Milind Wadekar

opening

“There has been no new subscriptions from promoters on zero percent, non-convertible redeemable preferential shares for funding the outflow relating to residential project during the quarter.”

Milind Wadekar

opening

“Based on our market assessment the realization per square feet for this project is expected to be higher than our earlier estimates.”

Sanjay Sethi

“In terms of revenue I think we have shared indicative numbers in the past on rentals for these two locations, we expect that we will actually end up higher than those number that we shared in the past and the EBITDA flow through will be 90% plus.”

Sanjay Sethi

“Q1 in terms of numbers I do not want give any forward looking numbers at this point whether it will be at pre-pandemic numbers or not, is yet to be seen in our estimate we think in this financial year we should be able to close all financial year as an opening statement above FY2020 even on a like-to-like basis.”

Sanjay Sethi

“With revenue hitting pre-pandemic number in the current financial year as stated earlier and our fixed cost as well as variable cost well below pre-pandemic numbers there is no reason why the margins would not improve, but I am not going to give any guidance at this point and you are right as and when the office business comes in that will again add a further improvement on the margins.”

Risks & concerns — 6 flagged

Barring the impact of pure geopolitical tensions in Russia-Ukraine war, global travel across Europe, middle east, Asia have had a smart pick up.

— Sanjay Sethi

And the impact of the higher wages and the other costs which is which is the phenomena now and most of the other companies are also facing that is not going to impact the savings on costs which we are seeing?

— Vikas Ahuja

We had taken the impact of all the inflation in our current forecasts of this year as well as wages.

— Sanjay Sethi

Sure, Sir, when we look at the Bengaluru markets, you can give us more detail on why exactly the Bengaluru markets are so laggard and we compare the rest of the cities and they're doing pretty well, so Bengaluru is like a kind of weak market for almost everybody, is there any structural change that has happened last couple of years during this COVID time, what exactly is going wrong with the Bengaluru markets?

— Archana Gude

We have considered inflation, and we think it may cool down next year or so, but we have considered impact of commodity price increase.

— Milind Wadekar

If we had thought that the IPL will drag down the RevPAR we probably would not have taken the IPL.

— Sanjay Sethi

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Q&A — 10 exchanges

Congratulations on a good set of results. Sanjay, I had two questions, firstly on the recent brand upgradation to Westin Powai any initial comments in terms of the overall market perception in terms of conference or occupancies and ADRs also had this led to an increase in corporate sales for the property?

Sanjay Sethi

Karan, thank you for the question. Yes, we have seen the really strong response to the change of brand and the renovation of the hotel in Powai and it has done extremely well in the month of April, I think both corporates as well as MICE presence has picked up over their, weddings are going strong and it seems to be renewed interest in that property after the brand change. So I can confirm to you that the response is very positive I am not in the liberty of sharing number because we have not made them public, but it has been very well received. Sure and secondly, Sanjay in the past you have sp

Good morning and thanks for the opportunity. My first question is on the occupancy levels in April, which was in the presentation it was about 80% increase from 68% in March, is it largely led by Mumbai or other cities also witnessed a similar trend, I am talking direction wise at least and do we think Q1 would be better than pre-COVID across markets as well I mean you have talked about the overall portfolio, but looking across all the markets, that is my first question?

Sanjay Sethi

There were two questions, the occupancy in April we said is 81% and I think the signs are positive in all cities in fact in my statement earlier I did mention that even a couple of other hotels outside Mumbai have shown similar results, so to give you a sense we have seen Mumbai of course do extremely well on the back of the IPL this is also in the city with the hotel reporting between 80% and 92% occupancy, Four Points Vashi had actually 98% occupancy, Marriott Bengaluru, which was only hovering around 20% mark earlier now it is 56% and I must point out here this 56% is in a total inventory o

Thank you for the opportunity. Sanjay, I have three questions, firstly on the business side, can you guide us some more on the business mix in terms of leisure and corporate for this quarter and full year?

Sanjay Sethi

For the quarter that has gone by in February and March, we saw strong resurgence of business travel coming back and the transient segment has improved significantly in the mix and it has actually gone up to now 66% of the revenue in the last quarter, which is primarily the business travel and that is for the full quarter if you were to look at the second half of February and March, will probably be in the mid to high 70’s, so clearly business travel is the primary driving factor for the occupancies now and in March we did 68% occupancies, we see that being the largest contributor and in April,

Thanks. Good to see things are coming back and when you talked about the April occupancies kind of makes you feel good, so one question just on the demand side obviously you can see that there are booking for the next few months as you go ahead and also you can see there is a lot of weddings and other stuff that got pushed out and those bookings also must be coming in, so can you just say that this year is going to be a really good year driven by all those pent-up weddings and other stuff besides just business is coming back?

Sanjay Sethi

Jeetu, it is always pleasure talking to you, yes, indeed I can confirm that this year should be better on two or three counts, one corporate travel is back with a vengeance, I do not know whether corporate travel has too much of pent-up demand I think it is more steady demand that is going to happen and we see that already happening, on the wedding and other events or MICE events including meeting, etc., there has clearly been a long period of no activity and I think that is going to come up as pent-up demand that is going to reflect in the hotels, we are not in wedding season, in spite of tha

Thanks for your opportunity, otherwise most of my questions have been answered, can you give us some sense on changing ADR for corporate travel versus pre-COVID given business travel is now coming back in a big way?

Sanjay Sethi

Sure, Amandeep, happy to reconnect with you again, so look let me explain this is slightly in a longer explanation, one is we gotta to break down the corporate segment into two, domestic and international, so domestic ADRs are same as they were pre-pandemic, international ADRs are almost same as pre-pandemic; however, the mix right now is different than pre-pandemic weighing more heavily towards domestic, as and when that starts correcting itself into 50:50 ratio for domestic and international, we expect to be back on ADRs in the corporate side to pre-pandemic, so we think this will happen ove

Just two questions, can you talk a bit about staycation, but just wanted to check whether the trends are still sustaining given the sharp increase in ADR for the properties or for the mix changing more on the corporate travel that is question number one?

Sanjay Sethi

Sorry, could you just repeat that? So, on staycation which were the segment which was doing very well for us in FY2021- FY2022 whether the trends are sustaining in the month of April because the ADRs have reverted, so I just want to check if that is still appetite at these ADRs for staycation or that has gone down? Look it is changing towards corporate for sure, staycation I think the challenges at staycation now is in the two primary hotels that we used to see in the staycation, there is no availability of rooms, so whilst the demand continues to be consistent, the corporate travel has taken

Good morning, Sir, thanks for the opportunity. Sir, regarding the capex you mentioned 140 Crores on the hotel side and of which I think 22 Crores to 25 Crores is towards Novotel and if I am not wrong 750 was a total which is required for the second Westin so the balance 40 Crores is towards, can you reconcile that number?

Milind Wadekar

Rajiv, Milind here, RHI re-branding 150 rooms are pending and some banquet renovations, so we spent around Rs. 45 Crores on Westin at Powai, new Westin in Hyderabad we will be spending around Rs.60 Crores and normal hotels renovation capex. On this RHI with the re-branding thing have the rates gone up because of this re-branding? So, it has yet to seen, this re-branded was in March and then we had the IPL team come in, but corporate segment is paying us much higher rate than they were prior to the pre- pandemic. What I wanted is in terms of the entry when the management contract agreement with

Couple of questions from my side. Sir you mentioned that the recovery comes through at around 94% and if I had to just breakup the demand you have been highlighting that the foreign travel is still to come back and correct me if I am wrong, my understanding is that Chalet used to get 50% of its business coming in from foreign travel pre-COVID, so assuming that number is significantly lower, is it that domestic corporate travel is significantly high, which is leading to this kind of occupancy?

Sanjay Sethi

Yes, Nihal, your assessment is right, domestic corporate travel is higher and as far as international travel is back as I mentioned earlier 50% of the international travel is back, another 50% is yet to pickup because you know the opening of the skies happened very recently for international travel and there is still some challenges of long haul flights from US because of the Ukraine-Russia war so the direct flights were still not coming in, so they take connecting flight via Europe or middle east, so that not happened, but once that sort of stabilizes and on a weekly basis we are seeing growt

My, question is regarding the MICE, so can you talk about the pre-pandemic level MICE activity percentage of our business and the current MICE business and what is the quantum of pent-up demand you can see in the coming quarters and after a couple of quarter you see some normalization in MICE segment?

Sanjay Sethi

So, Sumant, I do not have that number handy right now, but we would be happy to share that number, but I am giving a very rough guesstimate here I think our MICE business in Powai was very high when it was Renaissance, now with Westin I see that remaining high going forward, JW Sahar also because of the nature of it and size of its banqueting facilities has always been very strong in MICE business, we think that will remain considerably very strong, overall I think the ratio of MICE to non-MICE segments will remain consistent with where we were in the pre-pandemic era, gotta remember that MICE

Thank you, as I said earlier we excited about where we are today and the future from here on looks strong, we will obviously put in everything that is available as resources to back the business to ensure that we remain very healthy on margins, we will continue to stay focused on the cost side and whatever advantage that we have been able to bring into the business through cost rationalization over the last couple of years we will come continue to benefit the business as we go forward, our focus is that as I mentioned even in my opening statement will be too basically ensure that we capture th

Management

Speaking time

Sanjay Sethi

Moderator

Milind Wadekar

Rajiv Bharati

Prateek Poddar

Vikas Ahuja

Archana Gude

Jeetu Panjabi

Karan Khanna

Nihal Jham

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Opening remarks

Sanjay Sethi

Thank you. Good morning ladies and gentlemen. I welcome you back to exciting times and to the earnings call of Chalet Hotels Limited. We have closed a challenging year with the pandemic; however, we have also witnessed profound resilience of the travel industry. The recovery period post each wave has got shorter and visibility of normalcy is far higher. Barring the impact of pure geopolitical tensions in Russia-Ukraine war, global travel across Europe, middle east, Asia have had a smart pick up. India revoked the disaster management act and all accompanying COVID restrictions across the country about a month ago and COVID cases have been declining and they continue to be around 3000 case per day for the past two months. Some states have imposed limited restrictions based on local case levels. As an outcome travel confidence has improved significantly, domestic airlines witness 84% recovery to pre-COVID levels in India. Hospitality sector also witnessed a sharp recovery as per HVS in th

Milind Wadekar

Thank you, Sanjay. Good morning, ladies and gentlemen. Reported revenue for the quarter was 1497 million, which was marginally lower than Q3 FY2022 due to the resurgence in cases led by Omicron. During the quarter, the company received income tax refund and we have written off few creditors of 38 million, which is recorded as other income and we have recorded 18 million under sunk cost towards retail assets repurposing. Adjusted for these EBITDA was at 331 million as against like-to-like performance in Q3 FY2022 of 419 million. Loss after tax for the company was at 115 million, an improvement from loss of 144 million in the sequential quarter of Q3. This was after taking credit for deferred tax asset of 146 million for the quarter. The hospitality segment contributed 82% of the total revenue of the company in Q4 FY2022, occupancy for the quarter averaged at 55%, lower by 5% points sequentially. The ADR for the quarter was higher by 7% at Rs.5429 as against Q3 FY2022. As mentioned by Sa

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