CHALETNSEQ2 FY23October 31, 2022

Chalet Hotels Limited

6,955words
96turns
8analyst exchanges
2executives
Management on call
Sanjay Sethi
MD & CEO
Milind Wadekar
CFO
Key numbers — 40 extracted
69%
k holidays spread over 3 weeks affecting business travel and the month ended with an occupancy of 69% and an average room rate of Rs.7,425. However, September had represented rebound with occupancies
Rs.7,425
ecting business travel and the month ended with an occupancy of 69% and an average room rate of Rs.7,425. However, September had represented rebound with occupancies coming back to 72% and a very strong
72%
room rate of Rs.7,425. However, September had represented rebound with occupancies coming back to 72% and a very strong average room rate of Rs.9,070, the highest this year and one of the best Sept
Rs.9,070,
ad represented rebound with occupancies coming back to 72% and a very strong average room rate of Rs.9,070, the highest this year and one of the best Septembers for the Company. This accentuates the back-to
18%
mand and revival of non-residents business in our restaurants. F&B revenue for the quarter was up 18% higher than Q2 of FY20, in fact, the September F&B numbers were 32% higher than September of 2020
32%
evenue for the quarter was up 18% higher than Q2 of FY20, in fact, the September F&B numbers were 32% higher than September of 2020. I am glad to share the JW Marriott at Sahar, Westin Hyderabad, F
Rs. 2.2 billion
id not meet the FY20 numbers. The revenue and EBITDA for hospitality division for the quarter was Rs. 2.2 billion and Rs. 0.8 billion which is 9% and 8% higher respectively than Q2 of FY20. For the quarter, co
Rs. 0.8 billion
numbers. The revenue and EBITDA for hospitality division for the quarter was Rs. 2.2 billion and Rs. 0.8 billion which is 9% and 8% higher respectively than Q2 of FY20. For the quarter, consolidated revenue was
9%
EBITDA for hospitality division for the quarter was Rs. 2.2 billion and Rs. 0.8 billion which is 9% and 8% higher respectively than Q2 of FY20. For the quarter, consolidated revenue was at Rs. 2.5
8%
for hospitality division for the quarter was Rs. 2.2 billion and Rs. 0.8 billion which is 9% and 8% higher respectively than Q2 of FY20. For the quarter, consolidated revenue was at Rs. 2.5 billion
Rs. 2.5 billion
ch is 9% and 8% higher respectively than Q2 of FY20. For the quarter, consolidated revenue was at Rs. 2.5 billion with an EBITDA of Rs. 0.9 billion, a growth of 4% and 1% over FY20 numbers, respectively. Our H
Rs. 0.9 billion
y than Q2 of FY20. For the quarter, consolidated revenue was at Rs. 2.5 billion with an EBITDA of Rs. 0.9 billion, a growth of 4% and 1% over FY20 numbers, respectively. Our H1 numbers indicate good growth ove
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Guidance — 20 items
Sanjay Sethi
opening
“Municipal approvals and RERA amendments are awaited for the residential development in Bengaluru, we expect them soon.”
Sanjay Sethi
opening
“The project of additional 88 rooms at Pune and the conversion of mall at Bengaluru are delayed briefly due to supply chain issues.”
Sanjay Sethi
opening
“Conversion of Bengaluru mall to office space will be completed by the end of the financial year.”
Sanjay Sethi
opening
“The Bengaluru Metro has commenced trial runs on the Whitefield stretch and the metro line is expected to be open to public early next year.”
Sanjay Sethi
opening
“This marquee hotel asset is expected to be completed by FY26.”
Sanjay Sethi
opening
“We expect further improvement in foreign business traffic soon.”
Milind Wadekar
opening
“Completion of the ongoing projects along with our asset management capabilities are likely to result in higher flow-throughs from the hospitality segment going forward.”
Sanjay Sethi
qa
“We expect this to improve significantly coming November-December on the back of 2-3 things, the season typically for foreign starts in November into India and second, airline connectivity is improving as we speak.”
Archana Gude
qa
“My second question is, so when I look at the hospitality segment, the growth is primarily driven by the higher ADRs, while there is decline in the occupancy, I do understand last quarter we had this IPL which aided the occupancy, how you should look at this growth in ADR going forward given that Q3 and Q4 we should have further growth in occupancy?”
Archana Gude
qa
“Sanjay, you spoke about may be expanding your leisure segment earlier and of course you are happy that now we will be in North as well, but nothing per se came up in leisure segment to expand for Chalet?”
Risks & concerns — 4 flagged
My second question is, so when I look at the hospitality segment, the growth is primarily driven by the higher ADRs, while there is decline in the occupancy, I do understand last quarter we had this IPL which aided the occupancy, how you should look at this growth in ADR going forward given that Q3 and Q4 we should have further growth in occupancy?
— Archana Gude
I was telling what was driving this slowdown, one was the airline capacity and airline capacity was taking the rates up, so between those two people were finding it difficult to come in.
— Sanjay Sethi
And now talking about the Bengaluru side, we have seen significant ARR decline compared to pre-pandemic, still we are lower with the recovery in the occupancy and still when we see the pre-pandemic occupancy for Bengaluru is 80% and we have seen recovery in the Pune may be because of some other reason, but Hyderabad and Bengaluru is still lower than pre-pandemic, so when can we expect the pre-pandemic occupancy, we can achieve in the coming quarter?
— Sumant Kumar
And lastly on ADRs versus occupancies, so anything you feel like during festive season, so some of the pockets in terms of some of the industry segments or consumer discretionary segments have indicated of some kind of slowdown in terms of festive season expectation, is it something which can also have an impact on like sort of demand disruption at higher prices for hotel segment?
— Prateek Kumar
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Q&A — 8 exchanges
Q
Thank You for the opportunity. I have 2-3 questions. Sanjay can you help us with the revenue mix for Chalet in terms of domestic leisure, domestic corporate and international travelers for this quarter?
Sanjay Sethi
You are referring to the quarters, so let me just pick up the sheet for the quarter. So, I am going to give this to you in two ways. One is, how many room nights were occupied by Indians and foreigners for the quarter and then compare that with Q2 of FY20. So, our mix for Q2 FY23 right now is 67:33 favoring domestic. Our domestic guests, recovery to FY20 numbers is 156% so they are 56% higher than FY20. The recovery of foreign guests is at 64% to FY20 numbers, so we are still short of 36% there. The other way to look at the business is the market segmentation and there we more or less return t
Q
So, my first question is on the hospitality margins, we have seen a sharp drop, can you help us with what were the key headwinds led to this fall? And secondly, on seasonality on margin, second half is normally if we look at history, it is 500-600 basis points higher than first half, are we going to see same seasonality this time as well? That is question number one and the second question is on if you can give us any color on pricing and occupancy in coming quarters on the basis of bookings you have received till date? Finally, my third question is on the sharp drop we have seen in occupancie
Sanjay Sethi
Very quickly on the margins front, Q2 as Milind mentioned earlier, typically is little more challenged because of the revenue side of it and it is pretty normal for Q2 to be weaker than Q1. That is the natural cycle for the segment that we have operate in. So, therefore that has played out and that is why you see revenues going down and occupancies also automatically go down on account of demand going down during the monsoons in Mumbai. Mumbai did have lot of rain, so did couple of other cities including Bengaluru and that affected it, but it is pretty normal for this time of the year. So, occ
Q
Anshuman thank you for your question. I will give you a brief update on this and then maybe Milind if you have anything to add, he will share that with you. On Bengaluru, as we mentioned we have got part OC for the building, there is some final work that is pending, we should be getting that out of the way may be by third week of November. The clients that we have already signed up for the three floors we will start the fit outs at the point of time, and we have 6-month rent fee period, which is in line with what we had on our plans. Once we have the building completely sealed on the final sit
Milind Wadekar
Anushuman, the only thing I would like to add here is, infrastructure is getting upgraded, Whitefield will get connected with Metro in next 3-4 months. Infrastructure around Powai is getting upgraded, so the rentals could be higher than what we have considered in our financial feasibility. Anushuman Maheshwari: And for Powai, would you expect to make any announcement regarding any clients that you may sign up. I don’t see this making those announcements till next quarter. Anushuman Maheshwari: Would you expect lease certain proportion of the area before the building is completed or you plan to
Q
So the occupancy for Q2 FY20 was 73% and despite of lower inbound, we have shown at 71% occupancy, so with the recovery of the inbound travel in next 2 to 3 quarters, so can we expect the off season number what Q2 FY23 we have shown in occupancy side, the next year the Q2 FY23 we can surpass the occupancy of 73% with the recovery inbound travel? in Mumbai I am talking about.
Sanjay Sethi
It won't give forward looking numbers, but there is no reason why we won't cross those numbers. I won't put a number to it, but it is pretty natural for second half to have better occupancies and I think the year after that. No, I am not talking about second half, I am talking about the off-season number because we can't compare the Q1 number with Q2 and Q1 had a higher occupancy because of IPL also, so I am talking about the Q2 FY23 if the inbound would happen our occupancy can surpass outbound because we have higher foreign customer also? True, on a same store basis that is probably a realit
Q
This may be a repetition, but on the employee cost fund, I remember we discussed this in Q1, and we discussed that as compared to let us say Q2 of FY22 we have had salary hike then and the Rs.33 crores run rate is the going rate now, I am just failing to understand from Rs.33 crores to Rs.37 crores there is increase we discussed this earlier, there is something oneoff is here?
Sanjay Sethi
One minute, I will just give you the operational numbers first, so the operational numbers at hotel level, the staff cost in Q2 FY20 was Rs.320 million, in Q2 FY23 it is Rs.306 million and this is inspite of addition of one hotel, Pune hotel. So, there is a reduction of 4% when you look at the P&L on that front and if you now minus Pune, the reduction is even greater and thereby our payroll cost to revenue, percentage in Q2 is 14% versus 16% in FY20, 200 bps lower. What you see in your numbers probably includes the P&L attribution of corporate costs including ESOP costs would have been added t
Q
My first question is on foreign tourist travelers, so you mentioned for the Q2 we are like sort of short by around 36% normal run rate, how would that stake up for the month of September?
Sanjay Sethi
I don’t have the month wise data with me, I am afraid Prateek, but as I said I think H2 we should be around by around the 90% mark recoveries which means 10% short. So, this is based on for expectations of 90% is based on forward bookings? Basically, we have movement up in the recent months, plus the improvements in the available flights that are coming into these 3 cities - Mumbai, Hyderabad and Bengaluru. Also, from some of your forward looking booking in your hotels? Actually, forward looking bookings we get a visibility, as far as individual travelers are concerned, of only around 2 to 3 w
Q
I just have a couple of follow-up, firstly, any color on price negotiation with corporates or is it too soon now? And when we talk about the contracts with our global customers, are they largely in USD terms and we keep the currency benefit fully or in the contract there is a clause where we need to pass it back to the enterprise?
Sanjay Sethi
I just spoke about the price negotiation that we are working on right now. We are now at the middle of the RFP negotiation period and the hotels have gone out with 40% increases on the RFP quotes that we have given. We may close lower than 40%, but it should be material increase in the rates that we end up contracting with people, so expect a higher rate from the corporates and on your dual pricing or the dollar pricing part of it, India stopped doing dual pricing I think about a decade back, so we quote in rupees basically and that gets converted to dollars as and when when the billing happen
Q
Thank you so much. Ladies and gentlemen, thank you for taking time off on pre-Diwali Friday evening to listen to us. Wishing you and your family and your dear ones a very Happy, Prosperous and Safe Diwali. Thank you.
Management
Speaking time
Sanjay Sethi
41
Sumant Kumar
13
Moderator
10
Milind Wadekar
8
Rajiv
7
Archana Gude
6
Prateek Kumar
6
Vikas Ahuja
5
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Opening remarks
Sanjay Sethi
Ladies and gentlemen, good evening and Season's Greetings from all of us at Chalet. To begin with, the presentation has been uploaded on our website. You may want to refer to it during the call or afterwards. Sorry, there has been a little short notice between the uploading of the presentation and the call, but we wanted to get the call done before Diwali Holidays. Quarter 2 has shaped as we expected it to with a decent July followed by a challenged August and an excellent September. August had four mid-week holidays spread over 3 weeks affecting business travel and the month ended with an occupancy of 69% and an average room rate of Rs.7,425. However, September had represented rebound with occupancies coming back to 72% and a very strong average room rate of Rs.9,070, the highest this year and one of the best Septembers for the Company. This accentuates the back-to-normal sentiment for the hospitality business. The portfolio F&B revenues continue to grow at a healthy pace backed by in
Milind Wadekar
Thank you Sanjay. Good evening ladies and gentlemen. Let me now take you through the financials in some more details. Reported revenue for the quarter under discussion was at Rs.2.5 billion, which was higher by 4% as compared to Q2 FY20 on the back of strong recovery in areas and healthy F&B revenue. As we all know, Q2 is seasonally the weakest quarter for the hospitality sector and current performance shows the strong recovery for the industry. Consolidated EBITDA was at Rs.0.9 billion, up by 1% for the same quarter of FY20. The EBITDA margin for the quarter was at 35%. Profit after tax was at Rs.157 million, higher by 53% from Q2 FY20. The hospitality segment contributed to 89% of the total revenue in Q2 FY23. Revenue from the hospitality segment was at Rs. 2.2 billion for the quarter and EBITDA was at Rs. 0.8 billion. The segment reported margins of 36.3%. For two of our major cost heads for hospitality, payroll cost was at 14% of the revenue in Q2 as compared to 15% in FY20 and uti
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