Lemon Tree Hotels Limited
8,462words
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Management on call
Keswani to make his opening remarks.
Patanjali Keswani
Good afternoon, everyone and thank you for joining us on the call. I'll be covering
Key numbers — 40 extracted
104%
18%
Rs. 4,822
48.2%
4354 basis point
1,320 basis point
65.1%
334%
Rs. 192.3 crore
51%
Rs. 73 crore
Rs. 53 crore
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Guidance — 20 items
Patanjali Keswani
opening
“As we move forward, we hope to deliver significantly higher profit margins as operating leverage and demand outlook improve.”
Patanjali Keswani
opening
“Hence, based on the current pipeline by FY 25, our total operational inventory will be 10,675 rooms with 110 hotels.”
Patanjali Keswani
opening
“As we look forward, we aim to have around one-third of our employees from these segments of society in our team by FY26.”
Patanjali Keswani
opening
“We anticipate that consumption will strengthen even further in the coming quarters as we continue to focus on expanding our presence across India and addressing demand across the upper upscale, upscale, midscale and economy segments with our portfolio of seven brands.”
Patanjali Keswani
opening
“Sir, my second question, in Q1 there were new signings, so should we expect the same momentum to continue, like, adding 18 to 20 Hotels going forward, and also what is the mix of timings in terms of hotels which are already operational and have come to us and will be the completely new property to be developed?”
Patanjali Keswani
opening
“So how did we achieve this despite higher room inventory and F&B cost inflation, what we're seeing currently, and how sustainable it is going forward, like you know, earlier in the interview | heard in the morning, we were talking about 50% EBITDA margin.”
Patanjali Keswani
opening
“So if | take, let's say, two- three years down the line view, will we be in the position to maintain that 50% plus margins going forward?”
Patanjali Keswani
opening
“So if there is a lot of check-ins at 11 o'clock in the morning, there you will have peak staffing to meet that demand, which will be actually underutilized for the remaining 20 hours of the day.”
Patanjali Keswani
opening
“We are also undergoing a major digital transformation exercise for our company, which is focused on revenue, on customer, on cost and productivity, and we are very confident in fact that this be maintained as a standard for our company going forward.”
Patanjali Keswani
opening
“| know some of you are skeptical, but | can say with 100% confidence that Net EBITDA will exceed 50% of revenue in this year, and will continue to be so for the next three years, primarily because the variable costs have come down by 6% and fixed costs will be spread on the larger revenue base.”
Risks & concerns — 5 flagged
My last question on margins, so there is almost 600 bps decline in employee cost and 270 bps decline in F&B in Q1 FY23 compared to Q1 FY20.
— Patanjali Keswani
Just one last question and more a thought from your end that on this forum we have regularly discussed about maybe the impact of COVID on corporate travel will see some demand permanently getting impacted.
— Patanjali Keswani
What we are completely focused on is the retail segment, because the retail segment is a bigger segment, it's more difficult to shift them once they take a choice to stay with you, it's not a decision taken by a company but by individuals.
— Patanjali Keswani
On the ADR recovery itself, now we have noted that given the share of the retail demand was much higher, you clogged much higher ADRs, but then going forward, as the question have been asked before as well, with higher share of corporate demand, do you expect that pressure to sustain because the mix change wouldn't happen.
— Yash Visaria
See, what we do is, typically, we look at corporates, we trade-off a year-round business, which is committed business, with the risk of depending on one large customer, which is, say, a corporate, and the fact that we get lower rates.
— Yash Visaria
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Speaking time
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Opening remarks
Anoop Poojari
Good afternoon, everyone and thank you for joining us on Lemon Tree Hotels Q1 FY23 Earnings conference Call. We have with us today, Mr. Patanjali Keswani, Chairman and Managing Director; Mr. Kapil Sharma, Chief Financial Officer; and Mr. Vikramjit Singh, President of the company. We will begin the brief opening remarks from the management, following which we'll have the forum open for an interactive question-and- answer session. call with Before we start, | would like to point out that some statements made in today's call may be forward looking in nature and a disclaimer to this effect has been included in the results presentation that was shared with you earlier. | would now request Mr. Keswani to make his opening remarks.
Patanjali Keswani
Good afternoon, everyone and thank you for joining us on the call. I'll be covering the quarterly business highlights and the financial performance for the quarter ended June 30,2022, post which we will open the forum for your questions and suggestions. FY23 began on a strong note bolstered by strong demand, corporate travel our business destinations. We saw increased resulting increased demand for meetings, incentives, conferences and exhibitions which contributed to our growth. The gross ARR increased 104% year-on-year and a recovery in in lemontree HOTELS 18% quarter-on-quarter to Rs. 4,822. Focus on cost optimization resulted in our best ever quarter. In terms of EBITDA margins of 48.2%, up 4354 basis points year-on-year and 1,320 basis points quarter-on-quarter. As we move forward, we hope to deliver significantly higher profit margins as operating leverage and demand outlook improve. of 3546 In Q1 FY23, our occupancy stood at 65.1% on full inventory, which is an increase quarter-
Patanjali Keswani
will open 14 hotels with over 1,000 rooms in this year and we will We will definitely sign an additional 2,000 rooms. Now when we signed 2,000 rooms, there are three types of hotels we sign, greenfield, which typically take 3 to 4 lemon ree HOTELS a years to open, brownfield, which take 12 to 24 months, and conversions, which is existing operating hotels, which we normally open within six months. at the five look if you hotels, we added in So in Vishakhapatnam is a conversion and will open at the end of this year. The Malad Hotel, which is in Mumbai, which is a 93-room hotel will open also in December 2022, which is a conversion. The Keys Lite in Jaipur will open in April, 2023. It is more of a brownfield. The Keys Select in Chirang, Assam, will open in July, 2023 it’s a brownfield. The Lemon Tree Hotel in Chandighar, Kharar, will open in April 2025 because it isa greenfield. the Keys Llte Q1,
Patanjali Keswani
So based on the type of the state of the hotel, the openings are at a different time. But as far as signings go, we will definitely sign more than 2,000 additional rooms for our company this year and what we will open from the backlog is about 14 Hotels with over 1,000 rooms. My last question on margins, so there is almost 600 bps decline in employee cost and 270 bps decline in F&B in Q1 FY23 compared to Q1 FY20. So how did we achieve this despite higher room inventory and F&B cost inflation, what we're seeing currently, and how sustainable it is going forward, like you know, earlier in the interview | heard in the morning, we were talking about 50% EBITDA margin. So if | take, let's say, two- three years down the line view, will we be in the position to maintain that 50% plus margins going forward? So the first point is about the cost, what we learnt during COVID, those two all companies get into what is called a years, see what happens over time is stable state of operations, and som
Patanjali Keswani
That's helpful. The other thing is that if | look at the occupancy for this quarter, which is at 65%, and is still, say, 10%-12% lower than what it was pre-COVID, so obviously, | think there has been a choice at Room nights which you alluded to in case of Udaipur that we've tried maintaining prices and seen to it that the ARRs don't drop across our portfolio, rather than ideally looking at getting a base occupancy and then trying to drive ARRs higher. So what was the thought behind taking this choice? Is this something you plan to continue even ahead, where the focus will be pricing and not occupancy? See, when you open in a new market and you are not too well-known a brand, then what happens, Nihal, is that you drop prices because you want to be preferred based on price. But over time, | think our brand as widely accepted by customers and we were anyway planning pre-COVID to refocus changing the strategy from occupancy led revenue growth to a price led revenue growth, which obviously
Patanjali Keswani
Also, what happened is, | think when COVID occurred, for two years, our original customers all disappeared. The customers we had were not our traditional customers. So we felt that we had an opportunity once COVID got done that we would be able to reposition and re-price ourselves. So it was a conscious call which we took, in fact, in March this year, and we said that we will now price according to what feedback we have got from various agents who work with us or what our customers feel value for money proposition is. So if you look at, now, our occupancy, yes, it is 20% below in terms than what it was in Q1 FY20, which means that in Q1 FY20, | think it was closer to 78%, now it is 65%. So really, at this price point, we are very confident we could go up to 78% to 80% in winter. Not only that, we are very clear we intend to increase the price this winter One big impact will be when Aurikas goes to about 70% to 75% occupancy in winter, its impact alone on ARR will be Rs. 200-300 on the
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