EIH Limited (EIHOTEL) Earnings Call Transcript

Good morning, ladies and gentlemen, and thank you for attending this virtual meeting. I'm pleased to welcome you on behalf of EIH Limited and SKP Securities to EIH Limited's Q1 FY '27 Earnings Webinar. We have with us Mr. Vikram Oberoi, Managing Director and Chief Executive Officer; and Mr. Vineet Kapur, Chief Financial Officer. First, this virtual meeting is being recorded for compliance reasons. And during the discussion, there may be certain forward-looking statements that must be reviewed in conjunction with the risks that the company faces. We'll have the opening remarks from Mr. Oberoi followed by a Q&A session. Thank you, and over to you, Vikram.

Good morning, ladies and gentlemen, and a warm welcome. You would have seen our Q1 results, and there are just a couple of points I'd like to highlight. One is that we had both on stand alone and consolidated strong revenue growth. EBITDA margin was impacted for several reasons, which Vineet and I will cover during the presentation. And the other point I wanted to highlight was that really what has stood out for us is strong domestic demand. Despite the West Asia crisis that impacted foreign arrivals at our hotels, we were still able to do well and drive revenue growth, largely driven by the domestic market. With that, I will hand over to Vineet to make the presentation, and then we'll be able to answer any questions that you have. Thank you very much.

Thank you, Vikram. Good morning, everyone, and thank you for joining us. We'll begin with a brief overview of our performance for the quarter, followed by key business updates, and then we'll open the floor for questions. The industry performance for Q1 was positive, both for occupancy and ARR. Occupancy was higher by 2% to 4% and ARR grew by 6% to 8%. The domestic demand was buoyant, which offset the impact of lower foreign bookings on account of geopolitical situation. For the current year, we continue to see increase in ARR due to limited supply and MICE events like BRICS as well as Aero India show, which will happen in the later part of the year. And we hope and expect the foreign tourist arrivals coming back to normalcy in Q3 and Q4. Considering our management perspective, we are working on a robust expansion plan of almost 30 new properties, which will be in operation by 2031, which will be managed both managed as well as our own hotels. Looking at the RevPAR and the leadership over the comp set. EIH continues to maintain leadership over the competition set. In Q1, EIH hotels occupancy improved versus competition. We were -- the MPI was 108% versus 106%. The MPI was 108% as compared to 106% while the RGI was flat to last year, which resulted in a RGI increase of 4%. From 121%, we ended the quarter at 125%. 14 out of 15 hotels ranked first and second wherein STR provides benchmarking. Our aim...

Sorry. Somebody could...

Vineet, just 1 sec. Friends some of you have probably unmuted yourself' and that's causing a disturbance. Request you to kindly mute yourself. Thank you. Apology for that.

No problem. Vineet, you just want to run through this slide again because it's an important slide, and there were people talking in the background. So if you could just run through that again. Thank you.

So EIH continues to maintain leadership over the competition set. In Q1, EIH hotels occupancy improved. So MPI was at 108% as compared to 106% last year. Though the ARI was almost flat, both 115% and 115%, but the increase in occupancy helped us grow the RGI where we went from 121% to 125% over our com set. So 14 out of 15 hotels are ranked first and second, wherein STR provides benchmarking. Out of that, 8 hotels are ranked first and 6 hotels are ranked second in the comp set.

Vineet, may I just add a couple of things that may be relevant, and I'm sure people on the call will be aware of this. So sorry, if you're aware of what I'm saying, please forgive me. But people give data on comp set information. And really, you can -- depending on who you select as your comp set, you can get varying numbers. And I think it's important to -- for one to understand who -- which hotel is on the comp set because if you really were to do it, establish your comp set with doing it as fairly as possible to truly reflect who your competitors are, then your RGI numbers are really of value. If you select competitors, to show good numbers, then obviously, relative to the competition you selected, you will do better. So I think it's very important that at EIH, we -- I can say with absolute assurance that we select our comp set based on what we believe are our true competitors. We do not do it with the objective of showing good numbers. We do it with the objective of really measuring ourselves against our competitors. And that's why just a deeper understanding of who the comp set is, is always useful. Then you can really see are these really your true competitors or not. I just wanted to add that to what Vineet was saying.

Thank you. So coming on the next slide, which talks about the RevPAR growth of Oberoi brand. So Oberoi brand falls in the luxury segment and luxury segment saw a growth of 13.2% on RevPAR while Oberoi Hotels saw a growth of 8.2% in Q1. This was -- our Oberoi brand growth was lower than the industry, mainly because of Oberoi Rajgarh, which got added last year, and that is still in the ramp-up and the stabilization stage. If we exclude Rajgarh, our RevPAR growth was 11.4%. And considering that we are already working on a very higher base, the growth of 11.4% was still substantial versus last year. So RGI...

Sorry. Please, Vineet go ahead.

So coming on the next...

Yes, Vineet, can I just add one thing for Oberoi then also and it applies to a lesser extent to Trident. But in Oberoi Hotels also attract a higher percentage of foreign business, and that was impacted because of the West Asia crisis. So it's Rajgarh, of course, but it's also the West Asia crisis and the decline we saw in people coming from overseas markets. Of course, we saw buoyant domestic demand, but international rates typically or international guest propensity to pay is higher than it is domestically.

So the next slide reflects about the Trident. So Trident brand, which falls in upper upscale segment. For Q1, this segment saw a growth of 9.2% for the industry, while Trident Hotels had a growth of 13.8%, both on account of occupancy and ARR. Our hotels in Mumbai, both TMP and BKC, did well in terms of both occupancy and ARR, which reflected a good growth versus the industry for our brand. And if you look at RGI, we were at 162% versus 155% last year. So looking at the Q1 occupancy trends for the month, occupancy was higher than last year. Last year got impacted, especially May -- got impacted by Operation Sindoor where that resulted in an occupancy degrowth or almost going down to 62%. So we saw a good occupancy as well as ARR growth in Q1, and that was in spite of the fact that we got impacted by the Iran-U.S. war, mainly because of foreign tourists. But because of good buoyant domestic demand and good trends, we were able to offset that. And overall in net, our RevPAR grew from INR 11,352 to INR 12,801. This is for all hotels, including managed. When we look at only the own hotels, same trend. We were able to see a good occupancy growth both for May and June. Also the ARR increased in all the months, which helped us increasing our RevPAR from INR 13,000 to almost INR 15,000 at the end of the quarter 1. So looking at the RevPAR growth by city, all cities showed a healthy trend of growth. We saw the biggest increase happening in Shimla and Chandigarh, mainly again because of last year, they had got badly impacted by Operation Sindoor. Mumbai had a good domestic demand on account of MICE activities, which resulted in a good RevPAR growth for the city. Jaipur got impacted because of lower foreign tourists and foreign bookings. While Hyderabad, we had hosted the Miss World event last year, which had resulted in a good occupancy as well as RevPAR for us last year. So current year, that was lower in comparison to the last year in Hyderabad. Looking at the room revenue trends, we are almost seeing similar trends to last year, no fundamental change, same percentage, same trends, nothing to comment further. We'll move to the financials for the quarter. So we continued to grow our revenue as well as our EBITDA and PAT. For the quarter 1 FY '27, our sales revenue was at INR 698 crores as compared to INR 609 crores of last year, which was a healthy 15% growth in revenue. We also grew on EBITDA from INR 195 crores to INR 207 crores. On PAT, the growth was much more higher, but maybe last year was not comparable because we had a onetime impact of Mashobra, which came in last year June. If you don't consider that on a year-over-year trend, our PAT continues to grow year-over-year and we ended up the year -- we ended up the quarter at INR 120 crores of net PAT. Same trends for stand-alone performance. Same numbers in terms of growth, revenues as well as EBITDA and the PAT, mainly in line with our consolidated numbers. If you look at our cash flow funds position, we continue to have healthy cash balance and funds at the end of the quarter and it gives us good cash position, will enable us to support our long-term growth plans in the coming next 3 to 4 years. Looking at the consolidated funds movement for the quarter. The cash flow from operations was INR 183 crores. We spent -- out of that INR 148 crores got spent on CapEx and the projects which we already -- which were in line. In net, we increased our cash flow, our funds by almost INR 23 crores for the quarter. So looking at the financial statements, as I mentioned before, we ended up the quarter at INR 698 crores as compared to INR 609 crores of last year, which was a healthy growth of 15%. EBITDA grew from INR 195 crores to INR 207 crores. It was not in the same line as revenue growth because of a couple of impacts we had. One is we had Oberoi Rajgarh got operational in Q3 of last year, which is still in the ramp-up stage and stabilization phase. So that is impacting our EBITDA percentage for the quarter. On top of that, we also had a few expenditures, which we had done. We had done a higher marketing expenditure to make sure that we have our domestic bookings take care of the occupancy in Q1. At the same time, we spent a little more on IT in Q1 to support our automation and AI drive. And also at the same time, we had some write-off because of renovations which we had taken in our Mumbai hotels. So due to those reasons, our EBITDA was not in line with the revenue. And if you look at the PAT, not comparable to last year. We ended up our PAT at INR 120 crores. Not comparable to last year because we had last year impact of INR 110 crores on account of Mashobra. Same for standalone is exactly the same, nothing different. The same impacts in terms of numbers. So I will not talk -- I will not -- it's in the same line as our consolidated numbers. Looking at awards and accolades, we continued to get awards for our hotels all across India. In particular, the highlight this quarter is the number of awards which we have got for our Rajgarh Palace. So almost 5 awards we have received on account of new Rajgarh Palace in this quarter. Vikram, do you want to mention?

Yes. I'll just add to that. I mean Rajgarh opened in November, and it already has received considerable recognition. And these awards and accolades are important not only to promote the hotel in the domestic market, but equally in the international market. So we continue to receive very, very positive feedback on Rajgarh Palace.

Okay. So coming to our expansion plans, these are our 7 properties owned as well as through associates, the 7 hotels which are in the pipeline expected to -- with the expected year of opening. Most of them domestic, except for 1 international, The Oberoi London, which will be -- the expected year of opening is 2028 for that. For Hebbal, just to highlight on top of the 2 hotels which we're going to have in Hebbal, both Oberoi and Trident. We also have a retail and F&B space of almost 7.63 lakhs, which will come along with our hotels in Bangalore.

And the total developable area for Bangalore is over 1.3 million square feet.

So looking at the pipeline summary for managed hotels, total number of hotels which are in the pipeline, both Oberoi and Trident is 23, with number of keys of 1,833. There was a reduction of 1 property in this pipeline, which has gone beyond 2032, has got delayed, which was -- and because of that there is the impact of 1 hotel as well as 60 number of keys, which has been postponed beyond 2032. So we have not covered that in this list, because we were only covering the hotels which will be in operation in the next 5 years. So these are footprint of total 3,801 keys in India and 408 keys international. Except for last year, which we added Oberoi Rajgarh and Bandhavgarh, most of the additions will be coming in next 2 to 3 years' time. And that's it. I'm through with the presentation. I'll leave the time for any questions.

Thank you, Vikram. Thank you, Vineet. Friends, we now open the floor for the Q&A session. Anyone wishing to ask a question, please raise your hand and we'll take it up. We take the first question from [ Deepak Saha].

Just a couple of questions on the existing quarter. So if I see Q1 numbers, 14% RevPAR growth, but EBITDA growth, obviously, you highlighted. But just trying to understand, did we have higher share of flight services business, which also impacted the margin? And a follow-up on that, how should we look that revenue and EBITDA gap from a full year point of view because you mentioned renovation expenses, then ramp-up of Rajgarh, right? Should we kind of model out these things to persist in the upcoming quarters? Or the expenses are more likely to moderate in the coming quarters from a full year point of view? These are the first 2 questions.

But on renovations, I'll first address your point on renovations. India business is seasonal. Occupancies fall between April and October and then rise in the winter months. That's more prevalent in leisure locations, less prevalent in city locations. But our endeavor always is to minimize any revenue loss and therefore, renovations are done during these months. In Mumbai, both at The Oberoi Mumbai and Nariman Point in Q1, the renovations of rooms has taken place and that will be complete for the month starting October. So come winter, there will be no impact. You also saw strong growth in Bombay. The Trident, Nariman Point is a large hotel with 585 keys. So really, the revenue loss at that hotel is negligible, if at all. And similarly, at the Oberoi, Mumbai, and similarly with other renovations that we do, the objective is always to ensure that there is no really -- no revenue loss, and we block out and take out areas accordingly. On Rajgarh, again, Rajgarh is an Oberoi leisure hotel in Khajuraho. And the first -- the summer months are very slow months for 2 reasons. One is generally the hot climate in Madhya Pradesh, which attracts less guests and -- both domestic and international and also the fact that it's a new hotel. We expect the winter months starting October to do considerably better. I think those were the 2 things you had asked. Oh, you also asked about the flight kitchen business. The flight kitchen business absolutely has shown strong growth over last year as well, again, driven by good performance on the domestic airlines that we cater to and also to the international airlines that operate directly from Europe and North America into India.

Got it. That's helpful. My second question, when I look at quarterly numbers, 14% RevPAR growth, but May and June indicates together 22% kind of a RevPAR growth, right? So just trying to understand, do we see this trend persist both in the month of June and May, the kind of trend on the RevPAR side we have seen. How are we looking for the remainder of the year? Is this trend kind of persisting? Or is there any one-off on those particular quarters? Because 22% month growth rate that we have seen, very strong.

Yes. We typically, Deepak, don't make forward statements. But -- and it's impossible to really give you a fair picture of particularly through Q4 because we really look at business on books today vis-a-vis the same time last year. What I can say is for the next quarter, which is Q2, business on books vis-a-vis the same time last year is very positive.

Just one follow-up on that, Vikram, sir. If we see last year, I mean, we have the BRICS Summit next quarter, right? And this quarter, we have BRICS Summit. And if I see your Q4 number, despite 6% RevPAR growth, February month, you delivered almost 22% RevPAR growth, and we had AI Summit in the same quarter, right, from Delhi. So can we expect similar kind of advantage or tailwind for this quarter as well because I think Delhi is almost 10% of the total owned keys. So just -- I'm not looking for a guidance, but directionally, how should we look into that?

I think when there are large events, and there are 2 events, there's also an event in Bangalore, which is the aircraft -- the air show. And that has a ripple effect across other cities as well because people coming in from overseas may not just limit their travel to Bangalore. They will travel to Delhi, possibly Bombay as well, one or both of those cities. So there is a ripple effect across. So any time there's a big event, it has a beneficial impact for the city, as well as for other cities as well.

Got it. Got it. One last question before I fall back in the queue. On the Kolkata Oberoi side, if I...

Okay. Go ahead.

Yes. So on The Kolkata Oberoi side, now the revised time line, right? If you can just help us understand what is the nature of this delay and how firm the revised time line is, because 2029 seems to be a little far and how firm these revised time line is and what exactly led to this kind of delay versus our earlier expectation of, say, 2028 when we are expecting the -- all the phases to get complete and open that particular hotel.

So Kolkata is an unusual hotel because it's a very old historic building. And any time you're doing a restoration of an old building, there are unknown factors. Now, what we need to ensure is that the building is completely compliant to safety regulations of today. And when we opened the building up to really see the state of the building, considerable work was required to ensure that it complies with today's safety regulations. This isn't just fire safety, but this is also structural safety. And you can appreciate how old the hotel is and the need to ensure that that's done. So that was one factor and a large contribution to the change in time line. Also, I don't know if you're aware, but there was about 2 months ago, just over 2 months ago, an incident that took place in Calcutta where 15 people tragically were killed and all construction in Calcutta was halted. Now when an event like that happens and construction is halted, it may seem -- or you'd say it's only 2 months, but there's demobilization, mobilization again, ramp up again, and that's also caused a delay. This stoppage in Calcutta is still there today. And the authorities are assessing individual building by building and then giving approvals to start work if they find that there are no safety-related issues. Obviously, at our site, there are no safety-related issues. So we hope to be able to start with the work again. So these are the 2 main factors. The first one is obviously the most significant one, but delays because of things that are beyond our control also have led to a delay. But what I can assure you is that Calcutta is going to be a very special hotel and will set a new benchmark for historic hotels, not only in West Bengal, but also in the nation. And it's something that we, as a country and as an Indian company, are very proud of.

We'll take the next question from Vaibhav Muley.

My first question was on flight catering business. It was a follow-up to the previous participant's question. How much was the impact of the change in revenue mix in favor of flight catering business on our operating margins in this quarter? And we also generally provide the revenue number for the flight catering business, if you can help with that as well.

Vineet, I don't have that number with me. We're not sitting together.

For OFS business, we had a very healthy growth in the quarter. For Q1, OFS business and OFS segment recorded a revenue of INR 154 crores.

And how was this driven by mainly due to new additions in terms of our clients or from higher volumes from the existing clients?

This is also because of new flights which were added in the operations and also because of higher business, which we got from international airlines who are mainly running direct flights out of India.

Okay. And regarding the mix change impact on the margins?

So our OFS business was profitable. I would not say it's impacted much on the margins.

All right. Second question on the growth in our brands. Trident has actually seen a very strong growth of 13.8% RevPAR compared to relatively lower growth in Oberoi. So what was the driver for higher growth in travel for this quarter?

So first of all, hello, Vaibhav. And I think I mentioned that in the beginning, but I'll say it again. One is that Oberoi does receive a larger percentage of foreign travel and foreign travel was impacted. That's one reason. We also have seen very strong demand in Bombay. And this is actually even includes the Oberoi, Bombay in addition to the 2 Tridents. So I know you're referring to the Trident numbers. And the 2 Trident Hotels in Bombay have a large key count. I mentioned Trident, Nariman Point has 585 keys and the Oberoi and Trident, Bandra Kurla has 430 keys. So these are large, large hotels that have done very well.

Understood, sir. Just lastly, if I can add on The Oberoi Rajgarh piece. We have seen relatively subdued performance in the summer markets. Can you provide some color in terms of how much time will it take for this hotel to stabilize going forward? And what kind of growth can we expect in the winter season? That's it.

It typically takes hotels 3 years to stabilize and leisure hotels typically take a longer time. If you're in a city hotel, if the market is very buoyant, it will take -- it could take well under 3 years. We saw that with The Oberoi, New Delhi that ramped up very quickly. It was an existing hotel. My guess is The Oberoi Grand will be similar because it's an existing hotel in a city location, a prime city location. Leisure hotels depend on our travel partners also promoting the hotel and the destination. And that takes a longer lead time. So I would -- to answer your question precisely, I would say that it will take 3 years for the hotel to stabilize.

We take the next question from [ Amit Agarwal ].

My question was...

[ Amit ], you need to speak louder.

My question was regarding Wildflower. Have we bid for that? And can you throw the number, what was our bid?

[ Amit ], I'll try and answer that question. The date for the qualifying bid has been changed from 26th of August to the 10th of September. And that's really all I can tell you at this point.

So that day the winner will be announced or that's the date?

No, this is the -- there are 2 parts to it. One is a qualifying bid and then there's a second part, which is a live auction as well. So those are the 2 parts.

Okay. And my second question is regarding Grand hotel. How much of the work is complete there? Because it's been under construction for 2 years now almost.

Yes, I couldn't give you the answer to that question. And I'll tell you why that's a very difficult question to answer. I think we -- the hotel is scheduled to open in September 2028. So that will give you an indication of where we are. But civil work, structure work is much quicker than interior finishes. Interior finishes take considerable time. So it's very hard for me to say X percent is complete and Y percent is left. But we're hopeful of the hotel opening in September of 2028.

And can you throw the number of rooms we'll be having in that hotel?