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Chalet Hotels Ltd
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Ladies and gentlemen, good day, and welcome to the Second Quarter and Half Year Ended FY '23 Earnings Conference Call of Chalet Hotels Limited. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Sanjay Sethi, MD and CEO of Chalet Hotels Limited. Thank you, and over to you, sir.
Thank you, Rochelle. Ladies and gentlemen, good evening, and season greetings from all of us at Chalet. To begin with, the presentation has been uploaded on our website. You may want to refer through it during the call or afterwards. I'm sorry, there's 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.
So quarter 2 has shaped that we expected it to, with a decent July, followed by a challenged August, and an excellent September. August had 4 mid-week holidays spread over 3 weeks affecting business travel and the month ended at an occupancy of 69%, and an average room rate of INR 7,425. However, September had a brilliant rebound with occupancies coming back to 72% and a very strong average room rate of INR 9,070. The highest this year, and one of the best September for the company. This accentuates the back to normal sentiment for the hospitality business.
The portfolio F&B revenues continued to grow at a healthy pace, backed by increasing demand and revival of non-resin business in our restaurants. F&B revenue for the quarter was up 18% higher than Q2 of FY '20, in fact, September F&B numbers were 32% higher than September of 2020.I'm glad to share that JW Marriott at Sahar, Westin Hyderabad, 4 Points Sheraton, and Novotel Pune have exceeded the revenues and EBITDA of Q2 of FY '20. During the quarter, Westin Powai had 120 rooms and it's wall room under renovation and hence did not meet the FY '20 numbers.
The revenue and EBITDA for hospitality division for the quarter was INR 2.2 billion and INR 0.8 billion, which is 9% and 8% higher respectively than Q2 of FY '20. For the quarter, consolidated revenue was at INR 2.5 billion, with an EBITDA of INR 0.9 billion, a growth of 4% and 1% over FY '20 numbers, respectively. Our H1 numbers indicate good growth over FY '20, with EBITDA higher than 14%. Our H1 revenue was higher than the same period of FY '20 by approximately INR 190 million and the corresponding EBITDA was higher by approximately INR 200 million, indicating a greater than 100% flow-through to margin.
Our employee-to-room ratio remained stable throughout the quarter and was 0.9 at the end of September. This includes all employees including contract employees. On the expense front, payroll costs have been maintained at 14% of revenue as compared to 15% for full-year of FY '20. The Q2 FY '20 payroll cost percentage was 16%. And our utility expenses have been stable at 7% of revenue.
Some key highlights of our ongoing projects Westin 2 in Hyderabad, with 168 rooms and the commercial tower at Powai are on track for completion in Q4 of the current financial year.
The new commercial tower in Bengaluru has already received part OC. Municipal approvals and RERA amendments are awaited for the residential development at Bengaluru, we expect them soon. Our work is on site at whatever approval we received till date. The project of additionally the 8 rooms at Pune and the conversion of mall at Bengaluru are delayed briefly due to supply chain issues. The rooms at Pune are expected to be completed in the current quarter. Conversion of Bengaluru mall to office space will be completed by end of the financial year.
On the office leasing front, the Orb at Sahar is now 94% leased out. At Bengaluru, we've already have an LOI in place for a tenant for 1.5 lakhs square feet. This bodes well on the leasing traction and the rate as I mentioned earlier, seems to be better than Bengaluru than we'd initially expected. 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. Improved connectivity is expected to generate higher demand for commercial office space in Whitefield. I'm happy to share that the license agreement with the Delhi International Airport Limited for the new hotel in Delhi had been executed. Initial design work is on schedule. This marking adds in hotel assets is expected to be completed by financial year '26.
We continue to make steady progress on our ESG goals. I'm proud to share that we are well ahead of our committed goals with Climate Group. As part of our EV100 initiative, we now have EV charging stations operating at all our hotels. I'm also happy to share that the company improved the renewable electricity ratio to approximately 80% of total consumption in our hotels for the first half of the year. Another Federal and Capital report, Chalet Hotels has been listed amongst India's Top 10 Best Places to Work for Women in 2022 by the Great Places to Work India. We've also been recognized as Best Workplaces in Asia in 2022 in the mid-size category.
Ladies and, gentlemen, overall I'm happy with the quarter-on-quarter progress of our performance. We expect further improvement in business traffic soon. That combined with the culmination of some significant CapEx initiatives, will have the company make strong strides on P&L and balance sheet front in the coming quarters.
Before I hand over to Milind, I take this opportunity to wish you and your dear ones a very Happy Diwali. Milind, over to you.
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 INR 2.5 billion, which was higher by 4% as compared to quarter 2 FY '20, on the back of strong recovery in areas and healthy F&B revenue. As we all know, quarter 2 is seasonally the weakest quarter for the hospitality sector and current performance showed the strong recovery for the industry. Consolidated EBITDA was at INR 0.9 billion, up by 1% for the same quarter of FY '20. The EBITDA margin for the quarter was at 35%.
Profit-after-tax was at INR 157 billion, higher by 53% from Q2 FY '20. The hospitality segment contributed to 89% of the total dividend Q2 FY '23. Revenue from the hospitality segment was at INR 2.2 billion for the quarter and EBITDA was at INR 0.8 billion. The segment reported margins of 36.3%. 2 of our major cost heads for hospitality, payroll cost was at 14% of the revenue in Q2 as compared to 15% in FY '20, and utility costs as a percentage of revenue was steady at 7%.
The food and beverage segment reported healthy growth. Revenue grew by 18% in Q2 FY '23 to INR 743 million versus INR 632 million in Q2 FY '20. It increased its contribution to total revenue to 33% from 31% in the pre-pandemic period of Q2 FY '20. The rental and annuity segment contributed to 10% of total revenue for the company. The revenue and EBITDA from the segment were at INR 244 million and INR 198 million for the quarter respectively.
First half of FY '23 consolidated revenue was higher by 4% over pre-pandemic levels, led by strong performance by the hospitality segment. Effective cost management has resulted in EBITDA growth of 14% in H1 FY '23 over H1 FY '20. Credit rating agencies, that is India Rating and ICRA, during the quarter have revised upward our long-term credit rating outlook from negative to positive and stable respectively. This indicates confident and visibility of strong revival of the industry and our company.
Completion of the ongoing projects along with our asset management capabilities are likely to result in higher totals from the hospitality segment going forward. Net debt of the company from March '22 to September '22 was marginally higher by INR 0.6 billion to INR 2.3 billion -- INR 23 billion. While the company spent INR 2.3 billion on the CapEx during H1 FY '23, it was largely funded by internal accruals. Hence, I would like to highlight that, interest cost for Chalet as of March '22 was at 8.04% with some external borrowings on books. The interest cost as of September '22, has moved up by 14 bps to 8.18. And the company has repaid all its ECB loans. This is against the backdrop of an upward policy rate division of 1.90 bps by RBI during the same period.
The company has CapEx plan of around INR 6.5 billion to INR 7 billion till FY '24, that is for the next 18 months for its capital work-in-progress. This excludes CapEx on proposed second commercial tower in Powai, where we are still seeking approvals. Business is well-funded with internal accruals and available lines of credit. Considering all under-construction projects, the company has INR 10 billion of capital work in progress across hospitality and rental assets as on September 2022. These investments are expected to generate revenue over next 3 to 4 quarters at [indiscernible] the balance sheet.
We have cash and cash equivalents of INR 0.8 billion as of September '22 and INR 5.7 billion available lines of credit for general corporate purposes at planned CapEx. There has been no new subscription from promoters, on 0%, non-convertible redeemable preference shares during the quarter under review. The total subscription now stands at 2,000 million as of September '22. Before we open the floor for question, let me wish everyone a happy and prosperous Diwali. Over to you Rochelle.
[Operator Instructions] Our first question is from the line of Archana Gude from IDBI Capital.
I have 2 quick questions. Sanjay, can you help us with the revenue mix for Chalet in terms of domestic leisure, domestic corporate, and industrial travel for this quarter?
Certainly. You're referring to the quarter, so let me just pick up the sheet for the quarter. So, I'm going to give this to you in 2 ways. One is, how many room nights were occupied by Indians and foreigners for the quarter and then compare that with Q2 of FY '20. So our mix for Q2 FY '23 right now is 67%, 33% favoring domestic. Indian -- our domestic guests recovery to FY '20 numbers is 156%, so that's 56% higher than FY '20. The recovery of foreign guests is at 64% to FY '20 numbers. So we're still short of 36% there.
The other way to look at the business as a market segmentation, and there we more or less returned to normal. Pre-pandemic, the transient segment which is the short-stay corporate segment, used to be 76%, we are at 75% now. The group segment, which is basically MICE and [indiscernible] and others was at 14% pre-pandemic, it's at 17% and the contract which is largely airline crew was 11% pre-pandemic, it is at 8%. In general, the segmentation is back to where it used to be. The gap on the foreign travelers is still there.
I was looking at the airline data a little while earlier today and while air traffic passenger load for the first 5 months, which is April to August for domestic passenger is up 91% to pre-pandemic, the recovery is at 91%, the foreign traffic is at 75%. We expect this to improve significantly coming November, December on the back of 2, 3 things. The season typically for foreigners starts in November into India and second airline connectivity is improving as we speak. Direct flights to US have been now been announced in November from Bangalore, Mumbai and Hyderabad, which will help all these 3 cities in future.
Sure, that was pretty helpful. My second question is, so when I look at the hospitality segment, the growth is primarily driven by the higher ADR, while there is decline in occupancy. I do understand last quarter we had IPL which aided the occupancy. How we should look at this growth in ADR going forward given that Q3 and Q4 we should have further growth in occupancy?
Yes, I think Archana, one way to look at this is that what's the trend on the ADR. If you look at the ADR month-on-month trend, so if you look at month-on-month ADR trend, I'm going to read you all right from April onwards because it'll give you a sense of how things are going. April, the AD or ARR was INR 7,100. May it was INR 7,600, and June it was INR 7,600. July it was INR 7,300, August it was INR 7,400, September it's climbed to INR 9,070, which is a massive jump.
And this is basically indicator of things coming back to normal on corporate travel side, and we're seeing similar rate, in fact slightly better rates in September in October on a month-to-date basis. So largely we're trending towards INR 9,000-plus ADR and in H2 this should be clearly going upwards from here onwards, which means that we'll probably be well ahead of ADRs of 2020 -- FY '20 levels. So looking good on the ADR front.
Sure. Sanjay you spoke about maybe expanding leisure segment earlier and -- of course we are happy that now we will be north as well. But nothing per se came up in leisure segment to expand for Chalet?
We have few opportunities that we are pursuing. We will announce them at the right time.
Sure. Lastly one question. Let's say if we're spending INR 250 crores for this Delhi hotel, what kind of ROS we're expecting there?
I'll let Milind answer that. But basically we look at 2, 3 parameters on this, Archana. We look at IRR on a project basis, IRR on equity basis, and the net present value of the project. We also look at ROCE on a year-on-year basis to see whether it meets our investment criteria. On all 4 fronts, Delhi has a pick. I'll let Milind give you reference numbers.
Sure.
So Archana, on IRR front, projected IRR we are looking at close to 17%, 18%. Equity IRR is north of 20%, and ROCE stabilized will be closer to 12% to 13%.
Milind since we have close to INR 700 crore CapEx lined up, is it fair to assume that our debt figure by FY '24-end will be close to INR 3,000 odd crores?
Not really, Archana. I mean, we expect our debt will pick out at INR 2,750 by FY '23 and then we'll start earning rentals and EBITDA from our commercial assets.
There will be some debt repayment you are thinking in FY '24?
Yes, there will be internal accruals generated, which will…
Basically, we see debt bearing down from the next financial year.
By internal accruals as well as the fact that the projects will come to combination.
Our next question is from the line of Vikas Ahuja from Antique Stock Broking.
Happy Diwali to the management and everybody on the call. Sir, 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 margins, second half is normally, if you look at history, it's 500, 600 basis point higher than first half. Are we going to see same seasonality this time as well? That's 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 yet to receive till-date? Finally, my third question is on the sharp drop we have seen in occupancies of Mumbai in Q2. Partially I know IPL was there and secondly it could be largely because of rains as well. Have you seen especially for the Mumbai market, have you seen the pickup back to Q1 levels in October?
Vikas, thank you for your questions and thank you for Diwali greetings. Very quickly on the margins front, Q2 as Milind mentioned earlier, typically it is a little more challenged because of the revenue side of it, and it is pretty normal for Q2 to be weaker than Q1 that's a natural cycle for the segment that we operate in. So therefore that played out and that's why you see this revenue is going down and occupancies also automatically go down on account of demand going down during the monsoons in Mumbai. Mumbai did have a lot of rain, so did a couple of other cities, including Bengaluru and that affected but it's pretty normal for this time of the year. So occupancy was lower on account of the regular annual cycle of occupancies. It was lower than Q1 because Q1 was padded up with the IPL business, true.
On the margin side, driven by revenues for a bit and number two, we did have a couple of cost bunching up during this quarter, this is one-off costs. They're not regular costs, for example, sprucing up of our hotels in preparation for the H2 that's coming up. And second thing is there were some bunching up of cost on account of negotiations that we did with the unions in 1 or 2 of our hotels, and it got bunched up from April to September in 1 quarter. Nothing to be concerned about, as I said, they were one-off costs. Going forward, we don't give forward-looking numbers normally. Let me say that, H2 is always better than H1 quite significantly and, if things go the way they look right now, we should have a very good H2.
Occupancies for most of good month and typically the good month in H2 are November, first half of December, last 3 weeks of January, whole of February, and most of March. So we've got a fairly long period of good months ahead of us, and very confident that we will do well. On pricing and occupancy, going forward, I don't want to give any indicative number. But you can benchmark them to previous cycles.
Also keep in mind that I do want to highlight 1 thing here, that in Q2, the Powai Hotel had 120 rooms out of action for renovation and occupancies and when we calculate occupancy we still count them in inventory. These are the renovations that are going on for the balance second half of the hotel plus the banquet hall, the main ball room was out of action for 39 days. So that's all coming back in the near future and that will start playing out in H2.
I'm not looking for guidance on margins on second half, just directionally what we have seen in the past the kind of improvement we see, this time it would be, there is nothing exceptional that first half had lot of pent-up that's why margins were better, so it's a structural improvement?
Yes, there will be improvement, and the only thing I can say is that, you can look at the Q1 margin which are 41% in the hospitality division, and take a reference point from there, typically H2 is better than that.
And one last question on this payroll cost, which was around 13%, 14% in 1H. Now even your staff-to-room ratio in the presentation it mentioned it has come to 0.9%, but assuming second half occupancies are going to be much higher, do you think this ratio going up and we might see some challenges especially on the payable cost? That's about it.
Target of 1.92% at the peak that will go up to. There is always some gaps in hiring, et cetera, that causes this to be at 0.9% or 0.89% at some point of time. But 1.92% is the optimal target that is kept in our mind. We don't see that going up. Beyond that, keep in mind that whilst I said that our payroll cost was 14% in this quarter, it was on a lower revenue base, and that's what probably affected from Q1. Secondly, compared to Q2 of FY '20, it's still 200 bps lower. Please keep that in mind.
[Operator Instructions] The next question is from the line of Anshuman Maheshwari from [ Auronova ].
So we have a question regarding the commercial leasing business. We would like to understand what the visibility around the commercial power...
I'm sorry to interrupt Mr. Maheshwari, your voice is breaking up in between, could you please adjust your phone and use the handset?
Is it better now?
Yes, it is sir.
Our question is regarding the commercial leasing business, which is part of Chalet. Specifically, what would be the visibility around the project which are coming up in the commercial tower in Western Powai and the commercial tower in Whitefield, Bangalore?
Anshuman, thank you for the question. I'll give you a brief update on this and then maybe Milind can 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's pending, we should be getting that out-of-the way by -- maybe by third week of November. The clients that we've already signed up for the 3 floors will start their fit outs at that point of time, and they have a 6 months rent-free period, which is in line with what we had on our plans. Once we have the building completely sealed on the final site, we expect leasing traction to pick up. We've already got 2 more clients signed up.
Just to give you a sense that 1 client that we signed up consumes about 25% of the new IT building this year. Then there is the mall that is being converted to office. Between the mall and IT building, it's about 0.9 million square feet, and we believe that we should be able to lease all of this out in the next 3 quarters or so, 3 to 4 quarters maximum. The rates are better than we expected it to be, about ranging from 7% to 10% better than what we expected for the year.
Milind, is there anything else to -- sorry, I'll complete it, speak to you about Powai also. Powai is roughly around 760,000 square feet leasable space. We will complete this project by end of next quarter. The interest is high on the project. Once the building facade is up and the building is enclosed, we expect to start signing some deals. Right now we are making sure that we optimize the rental yield as against rushing into signing at a discounted price. But whatever the rental indications that we're getting, it seem to be better than what we had expected earlier.
So, Anshuman, the only thing I would like to add here is, infrastructure is getting upgraded. However, we will get connected with metro in next 3, 4 months. Infrastructure around Powai is getting upgraded. The rentals could be higher than what we have considered in our financial visibility.
And for Powai, would you expect to make any announcement regarding maybe clients that you may be trying out…
I don't see us making those announcements till next quarter.
So would you expect to lease certain proportion of the area before the building is completed? Or you planned to...
We expect to lease some part, get couple of anchors in place before the building is completed.
Final question is regarding a point that you mentioned earlier in the call. I think you mentioned at the start of the call at 64% vis-a-vis FY '20, you're seeing international travelers coming in?
Yes.
What is your outlook on foreign travelers for the second half of the year?
I think we should be back to around 90% to -- between 90% and 100%. Anshuman I'll tell you what was driving this slowdown, one was the airline capacity. Airline capacity was taking the rates up So between those 2 people who are finding it difficult to come in. Second, we had a bit of a Visa glitch in UK and couple of other countries in the last few weeks. You may have read about that. That's been sorted out by the Ministry of External Affairs and we've actually pushed that Ministry of Tourism to -- pushed MEA to get this expedited, and it is getting sorted out.
Our next question is from the line of Sumant Kumar from Motilal Oswal.
So the occupancy for Q2 FY '20 was 73%. And despite of lower inbound, we have shown a 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 FY '23 we have sold in the [indiscernible] site, the next year, the Q2 '23, we can surpass the occupancy of 73% with the recovery in inbound travel? In Mumbai I'm talking about.
I don't give forward-looking numbers, but there's no reason why we won't cross those numbers. I won't put a number to it, but it's pretty natural for second half to have better occupancy. And I think the year...
No, no I'm not talking about second half. I'm talking about the...
Next year also.
Yes the off-season number because you can't compare the Q1 number with Q2 and Q1 had the higher occupancy because of IPL also. So I'm talking about the Q2 FY '23, if the inbound would happen, the hour occupancy could surpass outbound because we have a higher foreign customer also.
True. On a same-store basis, that's probably a reality.
And I think there are some renovation is also going on, Powai has also impacted our ARR side.
It impacted occupancy and rates, both because of -- wasn't available.
So this is adjusted...
It has taken on one segment couldn't be occupied or used optimally.
Okay. And this is adjusted occupancy correct, 71% on available rooms?
No, it's on full inventory.
Okay. So this is on full inventory not adjusted inventory occupancy?
That's right.
Okay. So then in that case, the occupancy would have been higher also?
That's right.
That is also a key reason for that. And now talking about the Bengaluru side, we have seen a significant ARR decline compared to pre-pandemic, still we are lower, okay? Is 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 and maybe because of some other reasons, 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 quarters?
Actually, Hyderabad is higher.
I'm talking about, compared to pre-pandemic.
Yes. Hyderabad is...
No, no, it is not higher. It is 72% in Q2 '20. And currently, in the Q2 '23, we have 69%.
No, you're talking about occupancy or average room rate.
I'm talking about occupancy.
Yes. So occupancy in Hyderabad is -- right. I was actually referring to average room rate because, we mentioned average room rate in some part of the conversation. See Bangalore and Hyderabad was slow to pick up compared to the other cities. They have picked up now. And I can confirm to you that September and early part of October have been good.
Okay. So have we surpassed pre-pandemic number in the current month?
I don't want to give current month, but I can share with you, September. So September, the reason I can't give current month because I've not made it public as yet. But September, Westin occupancy was 72%, and the rates were INR 9,729.
It is higher than pre-pandemic or at the level of -- that of pre-pandemic?
It's significantly higher on RevPAR basis.
[Operator Instructions] The next question is from the line of Rajiv from DAM Capital.
This may be a repetition. But on the employee cost front, I remember we discussed this in Q1, and we discussed that as compared to let's say, Q2 of FY '22, we have had a salary hike then and the INR 33 crore run rate is the going rate now. I'm just feeling to understand from INR 33 crores to INR 37 crores, there is an increase here, but this wasn't -- we discussed this earlier. Is there something one-off is it here?
So one minute, I'll just give you the operational numbers first. So the operational numbers at hotel level, the staff cost in Q2 FY '20 was INR 320 million, in Q2 FY '23, INR 306 million. And this is in spite of addition of 1 hotel, Pune Hotel. So there is a reduction of 4% when you look at the P&L on that front. And if you would now minus Pune, the reduction is even greater. Okay? And thereby, our payroll cost to revenue percentage is 14% versus 15% in FY '20, 200 bps lower. What you see in your numbers probably includes the P&L attribution of corporate costs, including, I believe ESOP costs would have been added this quarter, right?
So Rajiv, Milind here. Few senior management employees have been granted ESOP. And cost pertaining to that, which is required as the prevailing accounting standards have been accounted there. And on hospitality front, our cost has gone up by around INR 1 crore also.
Okay. So this 37% is a sticky number or the...
Quarter 1 versus quarter 2. And as compared to FY '20, it has gone down.
Right. But Q1, that INR 306 million, as Sanjay mentioned, what was the Q1 number there? I mean, the equivalent number?
As Milind said, it is up by about -- is a INR 30 crores.
And similarly, on the other expenses side, the let's say, Q-on-Q swing, what would that attribute to largely?
So Rajiv, we have Marriott payables, which are restated on account of changes in dollar rate. So there is some hit on that account. And others are -- there will be some brand change cost for Powai which has been accounted.
And as I mentioned earlier, there was some leasing of the hotels that we did, and therefore, there was some cost attributed to that on the repair and maintenance side.
And...
What's that now being shifting in.
And the last 2 of these, which is brand change and repair and maintenance, these are one-off or these will be again...
Repairs and maintenance sort of one-off because we want to spruce out the properties before the coming season. And we've sort of had a couple of areas shut also in 1 or 2 of our hotels, we reopened them. So there was a onetime cost of opening and reopening them. So basically, if you want to term, it is like a little bit of pent-up repair and maintenance. The number is not very large Rajiv. So we don't need to be worried about it.
Sure. And sir, back to the KPI thing, so in Hyderabad, when we see that on a Q-o-Q basis, INR 7,000, INR 6,900 has gone to INR 8,900 versus let's say, Bangalore, where the occupancies are largely similar as compared to Hyderabad, but the jacking up of rates is not of a similar quantum. And while I think the industry is working with the mindset of keeping the rates or getting the rates higher as of now at least.
I missed, when I also mentioned the rates in September, I mentioned only Hyderabad. I can share with you the Bangalore rates also in September was INR 8,819.
Okay.
You're seeing the combined quarter rate, but the trend is going upwards very sharply. So Bangalore actually costly cover 800 rates in September.
Sure. And sir, on the ALC thing, the ALC, have we got the, let's say, sign up from the Board -- approval from the Board to convert into rooms?
Yes. So look, in principle, we have a sign up. We've -- we're working with some designers now to design that. We are looking at now adding 141 rooms to the existing 391. So this will make it a 532 room property, which would be fairly large. The demand seems to be there with the recent weeks that we've seen. This is about a project that will take anywhere between 12 to 15 months.
Our next question is from the line of Prateek Kumar from Jefferies.
My first question is on foreign tourist travelers. So you mentioned for the quarter 2, we are short by around 36% versus normal run rate. How would that stack up for specifically for the month of September?
I don't have the month-wise data with me. But as I said, I think H2 we should be around the 90% mark recovery which means 10% short.
So this is based on -- I mean for expectations of 90% is based on forward bookings?
In recent months the -- movement in the recent months, plus the improvements in the available flights that are coming into these 3 cities, Mumbai, Hyderabad and Bangalore.
Also from some of your forward-looking bookings in your hotels?
Forward-looking bookings we get a visibility as far as individual travelers are concerned of only around 2 to 3 weeks. But the groups have a longer horizon. But of all indicators, the interaction that we've had with bookers, and the admin heads of companies indicate that the foreign travel will be back very soon. As I mentioned, there were 2 or 3 bottlenecks to foreign travel to happen. One was flight seats that's getting resolved. We're getting now direct sites to Hyderabad, Bengaluru and Mumbai from U.S. In fact, Hyderabad and Bangalore are from the West Coast which is the primary target market for us. Mumbai is expected to be in New York as well as West Coast. So that will help immensely and flights to U.K. have also increased.
We had the first 380 of Emirates land in Bangalore last week. That's becoming now 3 times a big flight, 380 brings a lot of people at one shot. So all this will help improve business. Bangalore is also opening a second terminal. Terminal 1 was literally bursting as it seems right till now. By January, we expect the opening of the second terminal in Bangalore which will again encourage more airlines to bring in more flights into the city. So all that will help. Visa was a bit of a bottleneck. We are pretty sure the Ministry of External Affairs will sort of sort that out pretty soon, e-Visa's included.
My second question is on your cost line items. So are there any cost line items during COVID internally you have not activated still and are there some other maintenance cost or some other one-off costs which you anticipate over the next 6 months for our business?
I don't think anything material. As I said, we full stopped the properties in the last quarter because we couldn't do that in quarter one because occupancies were so high. We took the opportunity of slightly lower occupancies to spruce up the hotels, that's happened 1 or 2 outlets were shut, we opened them, work is happening on them right now as we speak. I don't think there's any major cost that will come up, that will be material in nature. And I don't see any pent-up costs from COVID time coming at all. All of that has been accounted for.
And lastly on ADRs versus occupancies. So anything you feel like during festive season. Some of the corporates in terms of -- some of the segments or consumer discretionary segments have indicated off some kind of slowdown in terms of festive season expectations. Is it something which can also have an impact on demand destruction at higher prices for hotel segment?
So 2 things happened in our portfolio that we have, because the primary business-driven travelers have come to hotels. We do get affected when there are holidays, especially the mid-week and I did give an example that in August we had 4 mid-week holiday spread over 3 weeks, which did disrupt the business, and that's why the occupancy in August was down to 69%. But then it picked up in September when we had no holidays. Similarly in October, we have Dussehra and we have Diwali coming up, we will get affected by those holidays and all of them are mid-week, to long weekend sort of holidays. But November looks completely clean, looking very strong, first 20 days of December is looking very strong.
The 8th, 9th January onwards -- for January looking very strong, whole of February is looking very strong and most of March looking very strong. That'll help occupancy and rates spruce up. I think one thing that I can share with you, I think I did touch upon it last time when I was asked this question on rate, that the general goal that we're working with like our hotels is to quote about 40% higher than last year on the RFP accounts.
We may end up closing it about 25%, 30% higher, but the first quotes have gone out at 40% higher than the last years accounts. And those RFP accounts are the big concept we have. And we believe that will give material push to the ADRs in the coming year. And these are January to December cycle. So quarter 4 of this year will also get the benefit of that. And then 3 quarters next year.
Would that likely be -- some of the competition in your markets?
I mean that's the general line of pricing that most hotel companies are following.
Our next question is from the line of Vikas Ahuja from Antique Stock Broking.
I just have couple of follow-up. Firstly, any color on price negotiations with corporates. Or is it too soon now to ask that? And when you talk about the contracts with our global customers, are they largely in UIC terms and we keep the currency benefit fully or in the contract there is a flaws where we need to pass it back to the base?
I just spoke about the price negotiations that we are working on right now. We are now at the beginning or almost middle of the RFP negotiation period. And the hotels have gone out with 40% increases on the RFP course that we've given. We may close lower than 40% but it should be, as I said, a 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 has stopped doing dual pricing I think about a decade back. We quote in rupees, basically. And that gets converted to dollars [indiscernible]. There's no benefit or any adverse effect expected out of the dollar pricing.
Sir, just one last thing. I think Sumant also asked the same question on the Southern market.
Sorry on the...
On the Southern market, Bangalore, Hyderabad, it's like all of your hospitality revenue. When we are talking about comparing the occupancy with forward level, maybe that number was 72, 73. Maybe next year, isn't that number is going to be materially higher because considering when we talk about old type ecosystem that is still following it from home and there is a huge pent-up demand especially in terms of travel, especially in these tech companies. Is it a fair understanding maybe next year we may see a very strong demand, especially places like Hyderabad and Bangalore, what we are seeing currently in leisure or maybe in Mumbai?
Vikas, I don't want to give you forward-looking numbers, but your logic is sound and Southern markets will do well as the IT business kicks in again. It's already kicked in as I said pretty sharply. It hasn't kicked in at from foreign travelers coming into those cities, but that was driven not by the intent upcoming, it was driven by the bottleneck of travel on the airline and sea. That's getting sorted out. We see that picking up pretty sharply.
Thank you very much. Ladies and gentlemen, that was the last question. I now hand the conference over to the management for closing comments. Over to you, Mr. Sethi.
Thank you so much ladies and gentlemen. Thank you for taking time off on a 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.
Thank you very much. Ladies and gentlemen, with that, we conclude this conference call. Thank you for joining us, and you may now disconnect your lines.