EIH Ltd

NSE:EIHOTEL

Earnings Call Transcript 2023-Q1

[Operator]

Good afternoon, ladies and gentlemen. On behalf of Ambit Capital, we welcome you all to the 1Q FY '22 Earnings Webinar of EIH Limited.

We have with us Mr. Vikram Oberoi, Managing Director and Chief Executive Officer; and Mr. Kallol Kundu, Chief Financial Officer of the company.

Before we start the webinar, we would like to inform you that the management may make certain comments on this webinar that one could deem forward-looking statements, specifically the financial guidance and any pro forma information that the management will provide on this webinar are their estimates based on certain assumptions and have not been subjected to any audit, review or examination procedures. Please be advised that the company's actual results may differ from these statements, and EIH does not guarantee these statements or results, also is not obliged to update them at any time.

We will now hand over the webinar to the management for the opening comments, post which we can set the floor open for question and answers. Thank you, and over to you, sir.

[Vikramjit Oberoi, executive]

Can you hear me?

[Operator]

Yes, sir, we can hear you.

[Vikramjit Oberoi, executive]

Good afternoon, everyone. Kallol and I are here together but using 2 different laptops, so and 2 screens. But a very warm welcome. Thank you for this opportunity. I very briefly say that the Q1 of this financial year has been a very good period in terms of occupancies, rates and RevPAR at EIH owned and operated hotels. And probably just lesser extent with -- on leisure hotels which are EIH associated largely, although they have also most of them surpassed pre-COVID levels of '19-'20, so Q1 of '19. And in EIH hotels actually, not only are we past those levels, but even costs exceeded those levels prior to that and Kallol will give a presentation and talk about this.

A few things that are worth noting is that we've seen foreign travel, both corporate and leisure returning to India sooner than we anticipated, which is a positive sign. We've seen a strong resurgence of corporate business [indiscernible] as well as [ MICE ] and direct, continues to be -- continues to grow for us.

So really virtually all segments and all geographies are seeing an upturn. We hope, based on what we see today, but the winter months will be good months for all the hotels with strong demand even in overseas particularly at our leisure hotels. So Q1 in conclusion has been positive, far better than we had anticipated, with strong demand. We continue to focus on providing our guests with exceptional guest experiences.

Our whole philosophy of the organization is to place the needs of our guests [indiscernible] to focus on quality, to focus on personalized attention on the highest levels of service. And that is something that we have done and will continue to do. The other thing I wanted to just mention is that Oberoi Hotels & Resorts was recognized as the best hookup brand by travel and leisure. This was in the 2022 readers' poll where I believe about 9 million people -- there are about 9 million people, readers who participate, maybe all of them don't, but the database that they have made actually is over 9 million and amongst that all of us -- and I'd just like to thank our colleagues, although they are not here, for their dedication and commitment to our guests and to each other so that we are -- allowing us to receive this recognition.

So with that, I'll hand over to Kallol. Kallol will go through some of the numbers, and I will give you a more detailed flavor of what I already mentioned.

[Kallol Kundu, executive]

Thank you, Vikram. Good afternoon, ladies and gentlemen. We will begin with an overview of the hospitality industry, the source is HVS ANAROCK report on June 2022, there the report states that the average rates in the Hotel sector remained relatively flat in May 2022 compared to April and corresponding occupancies fell slightly. The domestic air traffic increased by more than 11% in May '22 compared to the previous month and nearly reached the pre-pandemic levels of May '19. Mumbai continued to be the market leader as per the report and this is, of course, representative of the whole industry as a whole, nearly reaching pre-pandemic levels and in some cases, crossing them, followed by Pune and Bangalore, although our performance is slightly in variance with that as we see.

The other important observation that the report had was while, I think, travel costs have yet to have a discernible impact on travel demand. Industries recovery, they feel may be hampered due to ongoing economic and [indiscernible]. So again, as per the same report, the Indian hospitality industry did a 6% to 8% increased ADR as compared to pre-pandemic, which is basically May 2019 and an increase of between 1 to 3 percentage points in terms of occupancies, effectively with our RevPAR growth of 10% to 20%.

I'm happy to share that our company has outperformed the market in terms of the industry as a whole, where in case of our -- if we consider our own hotels of EIH Limited as well as all the hotels that we manage, the ADR has grown by between 12% to 14% as compared to 2019 and occupancies have increased between 13 percentage points to 21 percentage points, and the RevPAR has increased from 38% to 47% as compared to what had been done in 2019. The RevPAR index for both our owned hotels as well as for all our hotels managed by us is way above 1. So it's 1.76 for owned hotels and 1.70 for domestic hotels.

So all in all, a good recovery to begin it. If we see the indices relative to competition, and this data is basically for all our hotels, including owned and managed, one would see that we have consistently maintained revenue growth index, which is higher than 1 whether it was during the COVID waves or after the COVID waves, market penetration has been on and off. But like -- and the way in which we have articulated our philosophy that our company does not -- we do not believe in just dropping rates because of certain events and, therefore, we would rather maintain our positioning than look at other factors.

Our outlook, we started off, you would recall with the 3-point agenda of enduring revitalizing and then flourishing. So when we talk of enduring, we continue to have a strong balance sheet. Our financial agility has been demonstrated well in the last couple of years. We've managed to maintain the highest standards of health and safety and an increased focus on energy conservation, which is actually going to increase going forward. In terms of strong balance sheet, our net worth continues to grow, except for the minor dip that we had seen on 31st March 2022 asset base continues to be strong, and this asset base basically represents our gross fixed assets. So a high component of our total assets is our asset base, which is well performing.

And the bank net debt has reduced substantially now to INR 193 crores from where before it was even in pre-pandemic times. In terms of financial agility, again, this is something that we are happy to share that even though total revenue versus quarter 1 of FY '20 increased by 18%, our total expenses reduced on an absolute terms by 2%. Our fixed costs reduced by 10%, and our variable expenses also reduced 1 percentage point in this quarter with somehow in some ways bears out what was mentioned in the HVS report as well.

So in terms of a breakup between the various segments of costs, payroll is down by 10% as compared to pre-pandemic levels. Power and fuel as well as consumption of provisions, wines and others have come down. There is an increase in repairs and maintenance because of a somewhat subdued maintenance during the COVID period because of nonavailability of [indiscernible] as well as hotels there. They have been in lockdowns across cities. Administrative and other expenses also is a reflection of -- it's a combination of many, many factors. One, of course is, hygiene expenses have gone up substantially post COVID, plus along with profits, there are provisions for directors commission, et cetera, which was not there in the first quarter of 2020, when in the first quarter, of course, there was a loss.

In terms of our energy conservation measures, we reported earlier on that 2 of our own hotels, Oberoi Udaivilas and the Oberoi Vanyavilas installed solar plants as well as in 2 of our managed hotels, hotels owned by EIH Associated Hotels Limited, which is Trident Udaipur and Trident Agra. This has helped reduce our average cost per unit from INR 10.9 per unit in these 4 location to INR 5.9 per unit. And we are roughly generating about 47% of our electricity across these 4 hotels through the solar power generation.

This is notwithstanding the fact that several of our locations, for instance, The Oberoi Gurgaon and The Trident Gurgaon, 100% of energy is through solar energy as well as we use a lot of other renewable sources of energy such as wind power in places like Chennai and BKC, Bombay, et cetera.

I think we are slowly moving on to a phase where we can say with RevPAR surpassing pre-pandemic levels where we see that the pre-COVID performance, the RevPAR was -- the first 2 columns, 6,506 for EIH-owned hotels and 6,313 during the first quarter of '19-'20, that has increased substantially to 8,850 for EIH-owned hotels and 8,219 for if you take all the hotels managed and operated by EIH Limited. So that's a substantial increase.

And of course, this chart will give you basically a trend through the COVID period, et cetera, as to how we've performed. This is reflected into our ARR and occupancy performance. At only our domestic hotels, we've give old for the mid domestic hotels here, which includes managed hotels. where for the quarter, we find that occupancies have gone up from 64% earlier to 72% now with an ARR earlier of 9,727 to 11,066. And of course, the breakup between the 3 months is there as in the chart.

If you look at it city-wise, Maharashtra like was -- on the ANAROCK HVS report, has done the highest -- has seen the highest revenue growth in terms of total revenues. But in our case, it is Delhi which comes next. And of course, Chandigarh, Simla, Bangalore, all of them have performed reasonably better than -- or way better than what it was in the quarter 1 of '19-'20.

Again, a different kind of slicing of the data, which really gives a perspective from our various kinds of properties that we have, which are Oberoi branded properties at metro locations, Oberoi leisure property, basically the Vilas properties, the Trident metro locations, Trident Leisure, Trident City and the others. And as you can see from the graph in almost all the cases, in fact, in all the cases, other than Trident Leisure, where we find that the occupancies as well as ARRs are significantly improved as quarter -- compared to quarter 1 of '19-'20.

Food and beverage revenue continues to get focus, and we've seen an increase in revenue in the quarter 1 by about INR 35 crores when we include all domestic hotels, including managed hotels. So where are we in terms of flourishing, like Mr. Vikram Oberoi articulated, we were voted the best in the world, with the 3 of our hotels getting rated as the #1 city hotel in Asia, Oberoi in Delhi. Oberoi Udaivilas was ranked the #1 resort in India and Oberoi Marrakech was ranked the #1 resort in North Africa and the Middle East.

Along with that, we are very happy to share that all our Oberoi and Trident hotels have received the highest safety and hygiene rating, which is platinum by Bureau Veritas, and that really gives a lot of confidence to our colleagues and our guests.

In terms of various segment-wise, performances...

[Vikramjit Oberoi, executive]

Kallol, could I just add on, all our colleagues and our hotels have also received the boost of vaccinations as well. So it's not only good for our colleagues, but of course, for our guests as well who stay at our hotels.

[Kallol Kundu, executive]

In terms of segments, we can -- strong tailwinds are visible in corporate as well as MICE and, of course, direct goes without saying, so it's not been singled out here. In terms of performance highlights, this is just a comparison of the figures for the last 8 quarters. And it's quarter-on-quarter essentially. So really how you need to see this chart is to compare the quarters versus each -- versus different years, versus '19-'20 and 2022. So as you can see, the revenues have gone up in quarter 1. The EBITDA, PBT, PAT and [indiscernible], all of them have seen remarkable improvement.

The same results we see in case of the consolidated results. And if I may just add here, the [ TCI ] that you see of INR 90 crores as compared to the [ TCI ] when we saw the stand-alone of INR 42 crores, the difference is essentially on account of the FCTR, the foreign currency translation reserve, and this is from our international operations because of the significant depreciation in the rupee, which has contributed to a higher [ TCI ] in the consolidated accounts. I won't repeat this because this has been published in the media as well as it's in the presentation, which has been submitted to the stock exchange and is also available on the website of the company.

So this is a stand-alone and consolidated. And for anybody who's tuning in for the first time, this is the corporate structure across our various entities. And this is the status of the number of hotels that we have. And around the world.

Thank you so much, and we are happy to discuss or take any questions that you may ask.

[Operator]

[Operator Instructions] So we have the first question from [ Baidik Sarkar ].

[Unknown Analyst]

Congrats on a very strong quarter. Before I move on to the questions, congratulations to you and then that team on recognition by Travel and Leisure again. Well, on one part, no surprises there, but it takes incredible execution to be at it, so congrats to being there. A couple of questions, and I'll state them all one by one so that you can answer them or your convenience.

First up, in your experience with Mr. Oberoi, how long do you expect this super cycle in pricing to continue? I understand it's probably returned to the industry after a decade. So directionally, how long is it expected to last and importantly, can rates accelerate further from here on as well given what the supply side equation is? Secondly, on the direct business, right? How much of this was driven by Oberoi Select.

I understand you've launched a version 2 of Oberoi Select this time around. Is there a broader vision of productizing little deeper? And is there a margin difference number probably you or Mr. Kallol could call out between direct and aggregate-based passive inflows.

And lastly, is there an accelerated competition in the managed total environment globally? Or was the exit in Dubai based on grounds that was not suitable to us?

[Vikramjit Oberoi, executive]

Great. Thank you very much. In terms of how long the cycle is going to last, I would say probably you have a much better understanding of that than I do. And maybe Kallol has an opinion as well. But I think -- there are still a number of concerns around the world, geopolitical. Now if you see what's happening in Ukraine, price commodity issues, pressure on inflation. The U.S. already has 2 -- has had 2 quarters of negative economic growth, although strong employment numbers, et cetera. So I think we are -- we continue to be cautiously optimistic. We haven't been impacted so far by any of these events. But your guess is as good as mine or your guess I'm sure is much better than mine on where the future lies both in -- for the rest of the financial year and in the medium and long term.

I'll just take 1 step back and give you my personal perspective. I opened Raj Villas. I was the Opening General Manager in 1997. In fact, let's say, '98. It opened in December. And at that time, we had -- in the first year, we had -- we did a 22% room occupancy with an Indian guest count was about -- it was under 10%, if I remember correctly, it was 8%. And that is only just 22 rooms. So that's less than probably a room a day.

What's changed substantially, and I think has changed even more as a result of COVID as people have traveled within India with boundaries being closed or borders being closed. And we saw this before COVID as well, but it's even been emphasized further after COVID is strong demand from Indian guest to travel within India. And Udaivilas, for example, even pre-COVID was doing -- nearly 60% of our business came within India, 40% came from outside of India, in fact just under 40% came -- 42% came from outside India. And I think this trend will only continue. So people have money to spend. I think as Indian, we're traveling, we're spending on experiences not just on physical purchases. And if we go by what happens in the rest of the world, this is just going to accelerate over a period of time.

So in the long term, I'm very, very optimistic of the domestic market, and it's a very large market and a growing market to sustain or enhance demand for both Trident and Oberoi hotels. The economy is growing. I think the Indian economy will continue to grow. And as far as corporate business goes, I think that will, again, just accelerate corporate travel and demand for city hotels, including ours. The other key aspect is [ MICE ], particularly social events, we had seen very high rates for social events at our hotels prior to COVID and during COVID, and that trend is going to continue going forward as well.

So all in all, I think we will continue -- the hospitality industry and the travel industry is very susceptible to any hiccups that are faced in India or globally. I think we face less of that in India. And given very strong -- the very strong potential of the Indian market, I, of course, am fairly optimistic about that, optimistic about the future.

Oberoi Select. This was a program we launched and it had one very clear objective. The objective was to give value to our guests not just in terms of price but also other benefits and, at the same time, get the larger share of their wallet. And we did very well during last year. If I remember correctly, it was about just under INR 45 crore worth of sales from Oberoi Select. Please don't quote me on that figure because I'm basing it on memory and we continue to focus on Oberoi Select. I think Oberoi Select needs to be changed a little bit, modified a little bit. But we should be really come on what the objective is. The objective is to get our guests to stay with us more often. And given the high levels of service we provide that I hope distinguish us from others in the market and our focus on our guest and on quality and on personalized attention. If we were to design the program, tweak the program, learn from the program adapted, it could be a large source of revenue for us. And hopefully not at the cost of diluting but a large part of it, if not all of it, should be incremental revenue.

So in terms of margins, Oberoi Select does work on rewarding guests who use us frequently and our pricing varies, but it comes in at a lower rate compared to our BAR rates. And you can see that if you go through the program and you see the rates that are available, the best available rates at our hotel and do a comparison with the number of vouchers you need to use at each location, at varies from location to location. But you will see that this is below BAR rates. But the objective is to look at getting a larger share of wallet from our guests. So it's a slightly different objective.

There was a third question, which was...

[Unknown Analyst]

On management contracts.

[Vikramjit Oberoi, executive]

I beg your pardon?

[Unknown Analyst]

On management contracts.

[Vikramjit Oberoi, executive]

Or was that consumer -- sorry.

[Unknown Analyst]

Yes. Sure, sure. The question was actually if there was accelerated competition in the managed total environment the world over, I mean given your exit in the Dubai market, I think we were replaced by Thai group? Or was the exit probably on grounds that were suitable to us. I'm just trying to understand how the environment is?

[Vikramjit Oberoi, executive]

So I'm just trying to understand your question, is your question specific to Dubai? Or is your question...

[Unknown Analyst]

The question arose because of probably your brands exit in Dubai. So I was just wondering if the managed brands are getting aggressive in terms of their pricing? Or are they uncorrelated? I mean I'm just thinking aloud here. I don't know if there is competitive intensity our city plan?

[Vikramjit Oberoi, executive]

It was -- they were totally unrelated. So this was a -- I'd just like to clarify, we had a very long association with the Aujan group that owns the hotel and a very good relationship. We decided mutually to separate, and we continue to have a good relationship with them. And also a friendship that you build over in many, many years where we were partners. So it's got nothing to do with more aggressive [ intones ] being offered by another competitor.

[Unknown Analyst]

Sure. So if I can just squeeze in one last question here. Is there a pipeline that we have that's exciting in terms of accessing your managed properties because clearly, supply is lagging demand now? Or do you reckon this conversation is perhaps 2, 3 years down the line for newer properties show up in our pipeline of -- with management contracts [indiscernible].

[Vikramjit Oberoi, executive]

What I can say is that we're very focused on growth, and it's an area of -- that is very important for us. And I believe if we give it our full attention, which we are 100% committed to doing, you will see results in this area in time to come.

[Operator]

[Operator Instructions] We will take the next question from Amit Agarwal.

[Amit Agarwal, analyst]

Congratulations for great results. My question is again, regarding the Dubai property only. So it's just because of the communal accident which had happened, we had in India 2 months back? Or is there some other reason? Because I can't filter out because the property was doing very well as far as my information goes. And what about the other Dubai property? Is it also -- was timing with us and later on a bit broken, the management contract in the other Dubai property or we have something in other property in mind in Dubai to be replaced by this property.

[Vikramjit Oberoi, executive]

So I'm just trying to understand, Amit. I think I've already answered the first part of the question. So I won't answer it again. The -- we have an absolutely excellent hotel. And if you haven't seen it, please go and stay. In my view, it's one of the finest Oberoi Leisure hotels that we have. This is the Oberoi Al Zorah. What's also very different about the hotel vis-a-vis Dubai is that it's -- the beach is completely natural. We hit the beach, you don't see skyrise buildings at the other end. And it's designed for a traveler who wants peace, tranquility, great environment, and excellent product and service that is in keeping with what we do at Oberoi, which is truly heart felt.

And we deliver on all those parameters at the Oberoi Al Zorah. And in fact, there is a second hotel, which the owning company is building adjacent to our site. And I'm confident that, that hotel will also be managed by us. So this is a hotel, which is in the adjacent site. It will be managed by 100% subsidiary of EIH. So we're very fortunate we have great owners at Al Zorah. They have confidence in what we do. And as a result of that, the second hotel will also be operated by us.

[Amit Agarwal, analyst]

Is there any property in Dubai that will be coming up that will be managed by us? City hotel, I'm talking about?

[Vikramjit Oberoi, executive]

I really don't want to comment on that question at this point. So if there is, I'm sure, at the right time, we will announce it.

[Amit Agarwal, analyst]

And my other question is a bit related to this. Like I think as a group, we are going a bit slow in expansion. I understand the COVID problems for the last 2 years. Other groups are going much faster than us. And we have been spending INR 60 crores, INR 70 crores -- INR 50 crores, INR 60 crores as per the balance sheet of last 2 years. I can't figure out where is the construction going on in Oberoi owned sites. Like I don't think there is construction going on Khajuraho or there's no construction going in Goa. So where is that money spent?

[Vikramjit Oberoi, executive]

Okay. So what is your question, Amit, on growth? Or is your question on where is the money being spent?

[Amit Agarwal, analyst]

Both the questions are a bit related to each other, but just -- so other companies are going bit faster. COVID is same for everyone?

[Vikramjit Oberoi, executive]

Yes. No, I -- COVID is the same for everyone. Well, I think the first thing I would say is that we are focused on providing or operating and owning exceptional hotels that provide the highest levels of servicing care, well I guess that is at the very core of who we are, number one. Number 2 is the point I made earlier is that do we recognize how important growth is? And is it an area of focus for us. And absolutely, it is. And beyond that, I don't really want to say anything because the proof of the pudding is in eating.

So when we announce things, that will tell our success in this area. And at least I'm confident that this is an area that we will focus on and we will produce results in this area. So beyond that, I really don't want the same thing as at this point. We -- what I will say is if you look at our annual report, there are a number of hotels which are under development, and you can see that. Rajgarh is also one of them in the Madhya Pradesh in Khajuraho, outside of Khajuraho. We're also renovating and upgrading our facilities. And although this may not involve hotel closure, it's important that we look after our assets, invest in our assets so that we continue to demand a premium price and demand for those hotels. So that's something that we continue to do. And that's where also capital expenditure is incurred.

[Amit Agarwal, analyst]

So can you -- next time in the presentation, can you give the sites where the construction is going of the new property? Because it's very difficult to judge when will they open up? It could be 5 years, 3 years or 2 years. So if we get a fair idea as investor like when will they start?

[Vikramjit Oberoi, executive]

And actually, that's all in the annual report. If you read the management discussion and analysis, it outlines the hotels that are being developed and when they are likely to open.

[Operator]

We'll take the next question from Nihal Jham.

[Nihal Jham, analyst]

A couple of questions from my side. The first one is, if I try looking at Slide 13 and 14 to dissect their performance. Would it be right to say that the city-based hotels, mainly say Mumbai and Delhi have seen an improvement in both occupancy and ARR versus pre-COVID, whereas our leisure properties are mainly seeing an improvement in rates, whereas the occupancies are more or else similar, is that the right way to look at performance versus pre-COVID?

[Kallol Kundu, executive]

Yes, absolutely. I mean Bombay, Delhi, Bangalore, all city hotels have done tremendously well as compared to what we had done in the quarter 1 of FY '19-'20. Leisure hotels have also done well, but the recovery that was seen -- [indiscernible] recovery, I would say, after they opened up, that has sort of stabilized a little. And therefore, I think the reflection is more on the results in the cities.

[Nihal Jham, analyst]

Understood. So the related question to that, Kallol, was that I'm guessing there's a benefit of IPL also for a city like Mumbai. And we've seen a massive surge in occupancy, which is traditionally, I think, not the case in Q1 quarter for our properties. So would it be right to assume that in the coming years, we'll go back to the 60% kind of occupancies for these cities. And if that is the case, do you expect these kind of high ARRs to sustain for the city orders?

[Kallol Kundu, executive]

So if you look at the chart that we had shown, I think, I highlighted and spoke about it on Slide #4, which shows the indices related to competition. So if you see our group's laws of your company's philosophy is to maintain the premium that we have, both in terms of service quality as well as that should be reflected in our rates.

So really speaking, whether it's one event of IPL or not, I don't think it should be correlated that way. Because if you see the last 3 years, we have been consistent in terms of our RGI. So therefore, from that point of view, I think it may not be so well related. Now about forecasting of whether the occupancies will go down or not, that's like Crystal using. So I won't really hazard a guess. I don't know if Mr. Vikram would like to add to that.

[Vikramjit Oberoi, executive]

Well, no, I just would like to say one other thing that I don't know if you look at reports and which hotels you put in each comp set when you subscribe to these reports if you do. But we define comp sets for each one of our hotels, and we monitor that. In fact, we look at it daily, some hotels don't report them daily. So we then look at it monthly. But many hotels, particularly the city hotels are in our comp set daily information, and we look at this every day, not only for that day, but also for month-to-date and year-to-date. And fortunately, thanks to the incredible job that our colleagues at our hotels do by really providing personalized attention and care to our guests.

We've been able to grow this both on occupancy and on average room rate, which is then reflected in RevPAR vis-a-vis the competition. So we continue to shoot well above our fair market share, both in rate and occupancy. And this is -- the incremental increases is a positive trend upwards. So what future demand -- or future demand is it's hard to predict. But what I can say is that we will -- our endeavor will be to continue to get a larger share and increase that over a period of time, like we've done in the past.

[Nihal Jham, analyst]

Sure. I want to take [ any more ] -- just 1 last question from my side was that -- so I'm just trying to compare the data that you've given for April and June occupancy. And there has been a 6, 7 percentage points reduction. I don't know what part of it is seasonal, but is it that currently as the trends are working, a lot of the pent-up demand is more or less what [indiscernible] literally and now we are seeing normalized trends if you compared to pre-COVID? And I just want to get a sense of how things are progressing from that angle even as we speak now?

[Vikramjit Oberoi, executive]

We continue to see strong demand. So it is -- you will see there are certain months that are better than others. But fortunately, our demand is still strong, and we expect that to -- certainly, we can look at Q2 quite closely already. particularly with leisure, we can -- we have visibility for Q3 in our city hotels where lead times are still shorter, but we are able to, particularly with some degree of accuracy what the next few months will look like and we see strong demand.

[Operator]

[Operator Instructions] We'll take the next question from [ Bharat Sheth ].

[Unknown Analyst]

Congratulation on a good set of number. Sir, just one on this occupancy -- how much do we really attribute that first quarter had high occupancy in cities, particularly in Mumbai due to IPL?

[Vikramjit Oberoi, executive]

We did answer that question, Bharat.

[Unknown Analyst]

Sorry, I was a little late in call.

[Vikramjit Oberoi, executive]

You go ahead.

[Kallol Kundu, executive]

Well, firstly, IPL ended earlier. So therefore, it's not -- of course, I did contribute, but it's not as if that it's only attributable to IPL. Because if you see the trend in other cities like Bangalore, for instance, which is seeing occupancies of above 90%. So obviously, there's no IPLs going on there. And the second factor that I would mention is that if you look at some of the charts that we mentioned in terms of segments, you'll see that it's very heartening to see that corporate business is also back to the levels that it was in 2020 -- 2019, 2020.

So I think while IPL was a factor for Bombay in the first 2 months, especially, it's not really the only factor that is contributing to [indiscernible].

[Unknown Analyst]

How do we see -- I mean, as Ms. Oberoi stated that due to travel restriction and all, I mean, still [indiscernible]employees, the way it should have been on desired level. So are we seeing incremental [indiscernible] to reach in Mumbai, I mean if you could provide [indiscernible] Tourism?

[Vikramjit Oberoi, executive]

Bharat, I'm so sorry but the line kept breaking, so we couldn't hear the question. I apologize. Could you repeat?

[Unknown Analyst]

[Technical Difficulty]

[Vikramjit Oberoi, executive]

No, no. I apologize.

[Unknown Analyst]

Sir, I mean in your opening remarks, you said that still we are not seeing a kind of a foreigner tourist inflow, whether corporate side or tourism side, so are we seeing incrementally some -- because again, the Q3 will be the major season for the tourism in India. So how are we -- what is our reading and the kind of a booking that we are getting or inquiry we are getting -- that is first question.

[Vikramjit Oberoi, executive]

Yes. Okay, I can answer that, Bharat. So in fact, Bharat, we are -- I would say it's actually the opposite. We had not expected international travel or foreign travel to India to really start at Q3 of the financial year, so come October. And we were surprised to see foreign travel come back more quickly than that. And this is applicable both the Oberoi Leisure hotels and let me not say that at our leisure hotels, whether it's Oberoi or Trident and also at our City hotels, whether that's Oberoi or Trident. And if that is an indication of what may happen in winter, we expect demand to be strong from international markets in winter as well. Whether it will be equal to or greater than pre-pandemic levels, it's difficult to answer at this time. But certainly, given where we are today, we have not anticipated international travel to be as strong as it has been for us.

[Unknown Analyst]

Okay. Sir, second question is related to the international travel. So currently, our rates are, I mean, our rates are in dollar terms or rupee term because in 2008, I mean, the whole year hotel industry, when rupee was appreciating, they have been convert everything into rupee rate. So can you give some color on that?

[Vikramjit Oberoi, executive]

Yes, absolutely, all our rates are in rupees as is all the other hotel companies, all the other hotels. Today, everybody charges in rupees, including ourselves.

[Unknown Analyst]

Okay. So that -- can it help I mean, the rupee has depreciated, I mean, as well as, I mean other countries are seeing more high inflation resurge. So India can benefit out of that?

[Vikramjit Oberoi, executive]

I think India can certainly benefit from that because in dollar terms or euro terms, we are obviously more attractive to those markets. But what we also have to factor is a significant rise in cost of travel. So from -- whether you're traveling from Europe, or from North America or really from any other part of the world, there is a significant increase in cost of travel of air fares. So that's something that we do need to keep in mind as well.

[Operator]

So we'll take the next 2 questions from can Achal Kumar and followed by Deepak Parma.

[Achal Kumar, analyst]

So I have 2 questions, if I may. First of all, just continuing your last question or your answer about the international inbound tourism. Of course, that has started to pick up, but it's far below the pre-COVID levels. And I understand that your leisure hotels, I mean, you had a very strong penetration in the inbound international tourism. So how -- what kind of growth you see or what kind of pickup you expect in your ARR and occupancy once inbound international tourism toss back? So that is my first question.

Secondly, I also wanted to understand your thoughts around the change in the passengers in the customers' behavior. Now of course, in terms of airfares, you can see the air fares are at very high levels. but that doesn't impact the corporate demand at all because that is least price sensitive. But in terms of leisure demand, of course, there is a significant impact, and that's why we can see that air traffic has actually halted. The growth has halted. And now industry is getting almost like 280,000 passengers versus they were carrying about 400,000 passengers, so there's a significant drop.

Now of course, I'm hearing that the leisure travel -- leisure passengers have started to avoid taking the flights and they are spending more on the hotels. So probably they are preferring to drive down to nearby locations and then spend more on the hotels. So that is -- so how do you see the trend? Also, I mean, so if I'm a leisure travel, any if I'm traveling, well, and I'm avoiding the plane. I'm just driving down. So I have a bigger budget for the hotels. So I can actually stay an extra night at the hotel. Previously, I remember that during COVID time, the length of the stay was much higher, has that come back? Or do you think that has increased now recently because of the higher fares? So overall, how do you see the picture? I would appreciate your thoughts on that.

[Vikramjit Oberoi, executive]

I should ask 1 question. The 280,000 passengers versus the 400,000 passengers. Where is that data from? Please forgive me. I don't know if which area or what geography you were talking about?

[Achal Kumar, analyst]

Sure, Mr. Oberoi. So Ministry of Civil Aviation, they report the domestic traffic on a daily basis. If you look at the website, they report that on the daily basis.

[Vikramjit Oberoi, executive]

So you're talking about domestic travel then. So I actually was just in New York, and I've made a number of sales calls to our partners there. And I've just returned from them. And the U.S., which is a very, very important market for us that comes #2 after India. And I'm talking about pre-COVID. People are traveling more than ever before. prices in Europe are at sky high levels. To get a room in a hotel anywhere in Europe, in a good hotel or for that matter, even in America, in a good hotel is you're talking EUR 1,000 plus or $1,000 plus. So I think relatively speaking, we are far more attractively priced in India and whether that's us or other fine hotels that we have in India and there are many fine hotels in India.

Also, people are traveling. So your question was what was about international travel, people are traveling. And the last point I'd like to make is that summer months historically or traditionally have been -- it's been -- it's hot in India. We have monsoon. The weather is very nice in Europe at that time of the year. And therefore, you will see the number of people from overseas markets traveling into India in the summer months, which is from April to October, is far less than what it is during the winter months. And so -- and if I look at where we are today with foreign travel into India and into our hotels more specifically, I actually think that we are doing very well because you said there's a sharp fall, that isn't a sharp fall or at least our numbers don't suggest a sharp fall. In fact, I think that some of our hotels, and I'm trying to remember which ones they are, but some have already surpassed what they were pre-COVID and these are hotels that traditionally attract foreign traveler, foreign visitors.

So I continue to be optimistic, and I'm also encouraged by the fact, I was talking to one of our travel partners and she was telling me that first-class tickets to Europe were $25,000 and rates are in Italy or in Tuscany are in excess of $2,000 a night or EUR 2,000 a night at some of the best hotels. And there is absolutely no hesitation for the luxury traveler in the U.S. to be hesitant about booking in those stays. Those are the same customers who come and stay at our hotels -- so I continue to be -- and maybe I'm firm optimist, but I am optimistic about international travel irrespective of airfares. And I think certainly for overall hotels, the sensitivity to price is far less than it is for other class of hotels.

So the luxury traveler will continue to spend, continue to travel on business of first-class fares, airfares would not be such an important consideration for them. Hotel prices are not such an important consideration for them. If they want to come to India, they want to -- they will come irrespective, I would say demand is fairly inelastic to price [indiscernible] as all hotels.

[Achal Kumar, analyst]

I'm so sorry, Mr. Oberoi, kindly ignore my limited knowledge. But what I was trying to say -- actually, there are 2 questions. So one, when I talked about the domestic demand. That was in reference to sort of the corporate versus leisure in the domestic market. So when I'm saying that the air fares are so high, that it doesn't impact the corporate demand, but the domestic demand, which has fallen. That -- I mean, how do you see that impacting the demand for the hotel? Or is it that -- or is that more positive because people are spending less on the flights and, hence, they have got budget to spend more on the hotels?

When I was talking about on the international side, my point was that when I was speaking to some of the big travel agents, including MS, I was talking to head of the MS. And he was telling me that inbound international tourism in India is still at almost like 30%, 35% of pre-COVID levels. And that is what I was asking that once that recovers, what kind of upside do you see to your ARRs, because I get -- because I understand you have a very strong penetration in the international inbound tourism. I mean, so they prefer Oberoi, the brand is such a big brand, I mean, you have -- so that was my question. So...

[Vikramjit Oberoi, executive]

Actually, I don't have the data in front of me, so I don't want to make a statement, which is in any way incorrect. But I would say that at Oberoi hotels, we're experiencing far higher levels than 35%. And I can look at the data and can comment further. So that's the first point. The -- like I mentioned, I think there are 2 hotels of ours that have already surpassed the numbers of same time in 2019 for the quarter. So that's my first comment. As far as people driving, but I can't answer that question. All I can say is that we have -- there is demand for our leisure hotels.

During Q1, Simla was extremely, extremely strong. And demand may also be because it's -- still there are issues around traveling overseas, air fares are high, average room rates are high or rates are high at hotels. And perhaps, I don't know, perhaps because of that, even the domestic leisure travelers are looking more to India, whether they're driving or taking airfares or flying, I really can't comment. I don't know enough to comment on that they gave you. So I don't know if I've answered your question and you're happy with what I've said. But that's my perspective on that.

[Operator]

We'll take the last question from [ Deepak Baruah]

[Unknown Analyst]

Congratulations on a much better result than what has been coming because of the environment so far. I believe your plan is in place. I had a very quick questions. One is, have we ever done a brand value exercise for Oberoi. It's an offbeat question as compared to a quarterly result question.

[Vikramjit Oberoi, executive]

The brand, as you know, or may know, is owned by Oberoi Hotels. So I don't know if I need to say more, but I will say, no we haven't done a brand value exercise for the brand value at Oberoi Hotels.

[Unknown Analyst]

No issues. Second, how is July looking for -- in terms of occupancy area?

[Vikramjit Oberoi, executive]

July is looking good.

[Unknown Analyst]

Okay. And third and last is Mr. Kundu may be in a better position to answer this. What has been our historical say, WACC and return on invested capital so far?

[Kallol Kundu, executive]

So our WACC -- I mean, historically, I don't know what period we should take by describing the history. But obviously, I can tell you about last year and this year. Our WACC has been in the range of 10% to 11%. And our SED has been in the range of 7% to 7.5%. Now of course, the cost of equity is going up because of the risk-free rate going up for -- you can see what has been reflected in bond yields, et cetera. And sorry, what was your second question?

[Unknown Analyst]

WACC and then ROIC, I actually couldn't get the difference between 10% and 7%. What are these 2?

[Kallol Kundu, executive]

No, I was saying the weighted average cost of capital is around 10% to 11%, but the [ weighted ] average cost of debt is 7% to 7.5%.

[Unknown Analyst]

Got that. The other one was about return on invested capital.

[Kallol Kundu, executive]

So if you are referring to a return on capital employed, and we don't -- we unfortunately don't give a guidance. But -- and I would say, if you really look at the figures after March, it would be really well. But traditionally, we have done ROCs, if you say, that's 5 years back or 7 years back, it has been in the range of 7% to 8%. This year, of course, is likely to be different, but we'll be able to comment on that only when we reach the year-end. I mean taking the quarter 1 figures and computing it on the total assets won't be fair.

[Unknown Analyst]

Sure. No, I didn't mean to ask it for recent period. I just meant historical. I meant ROIC, actually, not ROC, but you may not be having that number.

[Operator]

As there are no further questions, I'll now hand over the call to the management for the closing comments.

[Vikramjit Oberoi, executive]

Do you want to close?

[Kallol Kundu, executive]

Absolutely, if you please. Thank so much, all of you, for such a wonderful turnout and asking very important questions to all of us. Like Mr. Vikram Oberoi mentioned, we are all excited about the future. Of course, I would conclude by saying by really adding to what Mr. Oberoi said earlier that the hospitality industry is really, while it's doing well at the moment, there are so many imponderables whether it relates to inflationary pressures on cost. And at the same time, like I highlighted in our consolidated results, it has a positive impact on foreign currency translation results. So while on one hand, our import costs may be higher. But obviously, there could be a spillover effect from other sides as well. So it's very difficult to really comment on which sides the headwinds or the tailwinds are.

Having said that, I think we are currently sitting pretty. So therefore, wish you all very good luck, and thank you so much for participating.

[Vikramjit Oberoi, executive]

Thank you. And may I just say one thing that today, many people asked questions about -- that more hotel operations nature, we had an opportunity to talk also about our guests, about the company ethos when we look at our guests and our colleagues. And I just want to thank you, personally, for asking those questions. It's something that all of us feel so passionate about and our colleagues at all times put our guests [indiscernible]. So it was nice to be able to, in an analyst call talk about those softer aspects of our business as well. So I just wanted to say thank you for that.

[Operator]

Mr. Vikram and Mr. Kallol for taking out time and answering everyone's questions so patiently. So on behalf of Ambit Capital, I wish you all the very best. And thank you, everyone, for joining the call. You may now disconnect your lines.

[Kallol Kundu, executive]

Thank you.

[Vikramjit Oberoi, executive]

Thank you so much. Thanks a lot, Karan.