EIH Ltd

NSE:EIHOTEL

Earnings Call Transcript 2023-Q3

[Navin Agrawal, analyst]

Good day, ladies and gentlemen. On behalf of EIH Limited and SKP Securities, it's my pleasure to welcome you to EIH Limited's Q3 FY '23 Earnings Webinar. We have with us Mr. Vikram Oberoi, MD and CEO; and Mr. Kallol Kundu, CFO. [Operator Instructions]

This meeting is being recorded for compliance reasons and during the course of the discussion, there may be certain forward-looking statements, which must be viewed in conjunction with the risks that the company faces. We will have the opening remarks and a presentation by the management followed by Q&A session.

Thank you. And over to you, Mr. Oberoi.

[Vikramjit Oberoi, executive]

Good afternoon, everyone and welcome. I'll just quickly cap on a few important or touch a few important points. As a company starting with our Founder, we've always focused on our guests and our guests continue to be our primary focus. We measure guest satisfaction using Net Promoter Score, and fortunately, we continue to deliver high levels of personalized care and attention for which I would like to thank our colleagues.

As a result of the loyalty we have from our guests in all our locations -- virtually all our locations, we are well above our RGI, we exceed market share and since pre-pandemic levels that has grown further and Kallol will talk a little bit about that and margins, et cetera in his presentation that he will make. In most locations also at least as far as Oberoi Hotels is concerned, we are STR 1. So not only have we increased our market share over our comp set, but we also ranked 1 on STR.

With that I think I'll -- or maybe last thing I'll say is, quarter 3 has been a very good quarter for the industry and equally for us and Kallol will cover that in his presentation, as well. So I would pass it on to Kallol to make the presentation, and then we'll be happy to answer any questions that you have. Thank you.

[Kallol Kundu, executive]

Thank you, Vikram, and good afternoon to all of you. It's a pleasure to be back. I hope my screen is visible and I'm clearly audible. So to start with, some of the key highlights has been articulated by the HVS ANAROCK report for the 3 months, October, November and December. So 3 key highlights as pertaining to our industry and to our company, is in these 3 months November '22, the Indian hotel industry recorded its best ever performance since the pandemic began with occupancies ranging from 68% to 70% and with average room rates exceeding INR 7,000. The domestic air traffic in India as we all know has increased by 2.5% in November [Technical difficulty] compared to the previous month and increased by 9% in December '22 over the previous month.

I hope we are audible, Navin, if you can just confirm?

[Navin Agrawal, analyst]

Sorry, I'm not sure if we are audible and visible here.

[Vikramjit Oberoi, executive]

Yes, you are very much audible, Mr. Kundu.

[Kallol Kundu, executive]

Thank you. Thank you so much. So, Mumbai was the market leader in November '22 and December '22 with [Technical difficulty]. We have some good news to share here. With respect to the hospitality industry, EIH has performed really well. We've measured this through 2 parameters: one is the relative RevPAR growth of EIH as compared to industry. So as you can see here the industry grew by between 3% to 4% versus pre-pandemic levels in October. 1% to 3% against pre-pandemic levels in November and 12% to 14% in December. Vis-a-vis these numbers, EIH domestic hotels have grown by -- the RevPAR of EIH domestic hotels have grown by 19% in October pre-pandemic -- versus pre-pandemic, 17% versus November and 34% in December versus the pre-pandemic levels.

The other interesting thing to note here is, if we were to consider the top 5 hospitality companies in India by market cap, which as on 31st December totaled to about INR 75,000 crores, the median PAT margin after exceptional items and this is for consolidated accounts was 20.8%. The average in quarter 3 was 15.9% and EIH is the highest at 24.9% in this comp set of 5 companies that I just mentioned in terms of market capitalization. The same trend is visible in the 9 months where the median is 13.1%, the average is 12.2%, EIH is 17.2%, again this is a PAT margin excluding exceptional items and this is for consolidated accounts.

The reason why we believe our positioning in terms of our RevPAR growth as well as our profitability is high -- is clear in this slide, where you would notice that our -- we are a ARR focused company or a price-focused company and a quality-focused company and therefore we make sure that our average room rates are relatively higher than industry, which is visible from the continually high ARR index right from April 2019 to December 2022. So this is essentially the orange line.

The Market Penetration Index, which is a ratio of the occupancy of EIH domestic hotels or the Oberoi domestic hotels versus the competition may be lower but as -- but that doesn't really matter to us, because as a result of the high ARR, we continue to have a high RGI, which is consistently above 100 except the single month of June 2020 since the period April '19 and up to December 2022. This clearly shows our focus on rates is yielding and this is actually making us the most profitable company. As we move on, just to remind everybody that we were voted as the best hotel brand in the world at the Travel + Leisure's World's Best Award 2022 and even the previous one, we were voted the best. So in terms of quality, in terms of regions preferences also, we continue to be #1.

From a balance sheet perspective, I think we have a strong foundation. As you can see, and this strong foundation has only strengthened over the quarters. Going from December '19 up to December '22, our balance sheet strength has continued to evolve and improve with our debt-equity ratio now as on 31st December is as low as 0.05, with our net debt only at INR 60 crores. So we are well poised for all growth initiatives that we are going to take, which will ensure that we have adequate internal funds, as well as we have a sufficiently good capacity to borrow if need be. The current ratio is also healthy at 1, which will give a lot of comfort to our creditors as well. The weighted average cost of debt as on 31st December, '22 was 7.8%.

If you see in terms of financial agility, EBITDA margin has improved from quarter 3 of FY '20 to quarter 3 of FY '22 by 4 percentage points from 33% to 37%. Payroll as a percentage of revenue has come down from 26% to 22% in the same period. And the total expenditure as a percentage of revenue has also come down from 67% to 63%, using the same periods. Financial agility is also demonstrated in this chart, where you can see the consumption of provisions, wines and others has gone up by only 2% power and fuel has increased only by 3%. Repairs and maintenance has increased by 26%, but that is primarily because, as a company, we believe that it's important for us to ensure that our upkeep of hotels is absolutely in pristine condition.

Administrative expenses have also grown by 17%. Payroll and related expenses have grown by only 1% this quarter. So overall, the total expenditure has grown by 10% when compared to quarter 3 of FY '20 whereas the revenue has grown by 17%. So, definitely, I think the operational efficiencies that we achieved during COVID is kicking in. Q3 performance, as Vikram highlighted, has been stellar. So if we were to consider the EIH owned hotels, as well as EIH domestic hotels, the Q3 RevPAR is at the highest at INR 13,332 for EIH hotels and at INR 12,805 for all hotels -- all domestic hotels taken together. And the 2 asterisk would show the comparison between quarter 3 of the normal year, which was FY '20 versus the current quarter. So from INR 10,473 to INR 13,332, a RevPAR increase of almost 30%.

The same is reflected when we break it down into monthly occupancy and ARR, when we look at it month-wise. So from October, November to December, November obviously has been an excellent month -- was an excellent month, but December has been even better. So going up from 67% in October to 79% -- sorry, this is -- so yes, 79% and going up to 83% in FY '23 October, November and December. The same scenarios in case of the monthly ARR, where the average room rate has gone up from INR 15,167 to INR 16,568 to INR 18,107 and effectively, this is the quarterly occupancy in ARR, which is shown in the slide on the right.

If you were to look at it city-wise, the highest growth in our case has come in -- when we compare it vis-a-vis FY '20 and all our comparisons are with the normal year, because we believe that it's important to note how we are performing versus what it was normal before COVID. So Shimla has -- Shimla and Chandigarh has registered a 60% growth in RevPAR, followed by Bengaluru at 35%, followed by Udaipur, Jaipur, Mumbai and Delhi. Hyderabad and Bhubaneshwar has been slightly lower at 18% and 15%. Kolkata is 2% and Agra unfortunately, there's a RevPAR degrowth of about 7%.

If you were to divide the performance that we just saw in terms of the various categories of hotels that we have, so in Oberoi Metro, Oberoi Leisure, Trident Metro, Trident Leisure, Trident City and others. So the best performing segments have been the Trident Metro and the Oberoi Metro properties, which is something really positive for all of us. Oberoi Leisure is also good, but it's really heartening for us to see that the metro cities have been performing, because a large part of our inventory is in the metro cities. The average rates are here, I would leave it to you all to see this chart in detail when you do your analysis. There are strong tailwinds in almost all segments with the highest tailwinds coming in terms of direct business, followed by corporate, but in December as we see or in the quarter 3 of FY '23 as we see even leisure and MICE has caught up.

Now trend of foreign room nights, this is a question normally generally people have, as to what part of foreign room nights have come back. So the bold lines are the ones which relate to the months in the current financial year. And the dotted lines are the ones which relate to FY '20 of the corresponding months. So if you were to look at all our hotels in the month of December, for instance, while 60% of the room nights for foreign room nights in December -- in FY '20 it's 44% as of now, if we take the Oberoi Hotels. If we take all the hotels, it was 54%; now it's 37%. And if we take only Trident Hotels, it was earlier at 50% and now it's at 32%. This really gives us a lot of reason to -- of encouragement, because with foreign travel going up, we can expect the performance to be even better.

Looking at food and beverage revenue, very positive news again. While our hotel F&B revenues have grown by about 18% as compared to quarter 3 of FY '20, the one positive news that we have for our flight catering and airport lounges is the revenue in this segment has grown by 57% when compared to quarter 3 of FY '20. We continue with our carbon footprint initiatives and we will come up with more in the quarters to come as we progress. But this is just a snapshot, wherever we have implemented our solar plants, our average cost of electricity has come down from INR 10.9 per unit to INR 5.9 per unit, and there too, it's not as if it's 100% solar. So there are -- this shows that there is indeed a long way to go for all companies in India. The hotels which consume renewable energy is listed out here or Oberoi Gurgaon, Trident Gurgaon, Oberoi Bangalore, Trident Chennai and so on and so forth.

The performance highlights you would have already seen as our results were declared. We ended the quarter 3 standalone with PAT of INR 104 crores, including exceptional item of INR 21 crores. And here I must state that the management has been really aggressive in terms of making sure that we are conservative in our accounting and we continue to strengthen our balance sheet. But despite that, our PAT has grown from FY '22 quarter 3 of INR 32.6 crores to INR 103.9 crores.

As we see quarter-on-quarter revenue has grown, again standalone results from INR 449 crores in FY '20 to INR 525 crores in FY '23, quarter 3. EBITDA has increased from INR 146 crores in quarter 3 of FY '20 to INR 193 crores. PBT before exceptional items has gone up from INR 99 crores in FY '20 to INR 157 crores. PAT has gone up from INR 75 crores to INR 104 crores and total comprehensive income from INR 73 crores to INR 111 crores. Consolidated results also reflect what we saw in standalone. Our revenues up from INR 534 crores to INR 603 crores. EBITDA, up from INR 178 crores to INR 226 crores. PBT up from INR 136 crores to INR 187 crores before exceptional items. PAT up from INR 103 crores to INR 149 crores and TCI up from INR 100 crores and INR 157 crores.

On expansion plans, we already had mentioned of this in the previous quarter, and as we go along in further quarters, there will be many more announcements to come, but as we speak, we had promised a club opening, which has opened in November 2022 in Mumbai. There is a restaurant that is under -- its nearing completion and will be opened in Mumbai, it's a standalone restaurant in March '23. The hotels which are scheduled to open in FY '25 are Rajgarh and Bandhavgarh, with 48 and 24 keys respectively. And Bardiya in Nepal with -- it's a managed hotel with about 18 keys. The Oberoi Rajgarh is of course owned. In FY '26, this hotel in Kathmandu, Wadi Safar, Saudi Arabia and Trident Tirupati has been signed up -- the lease has been signed up by our subsidiary -- our 60% subsidiary, which is Mumtaz Hotels, which will be managed by EIH Limited. In FY 27, hotels in Goa and a second property in Al Zorah, but of course under active discussions, there are 3 Oberoi Hotels, 7 Trident Hotels and 1 service apartments, and we will articulate these more as we go forward.

Just for everybody's information, the business footprint, this is more from an information point of view, so I won't delve into this much. And as a snapshot, we have 24 hotels and resorts in India, with 3,750 keys as on date, and 497 keys across the globe.

With that, thank you from my side and we look forward to any questions that you all may have.

[Navin Agrawal, analyst]

Thank you, Kallol. That was quite exhaustive. We'll just wait for a couple of minutes and we can start our Q&A session thereafter. [Operator Instructions] The first question is from Tarang Agarwal.

[Tarang Agrawal, analyst]

Congratulations for a stellar performance and rather elaborate presentation. Just a couple of questions on the trends and how you all are seeing it. Firstly on occupancy, historically, how high can the occupancy number go from the current levels?

[Vikramjit Oberoi, executive]

Well, theoretically, they can go up to 100%.

[Tarang Agrawal, analyst]

And have you seen that happen any time in the past?

[Vikramjit Oberoi, executive]

We've seen that happen in the past many years ago. If I remember correctly, the Oberoi New Delhi did a 100% or very close to a 100% occupancy. I mean, I'm going back a long time. But you can certainly run occupancies into the 90%. We're doing that currently at the Oberoi Bangalore, where the hotel is running well into the 90% occupancies.

[Tarang Agrawal, analyst]

Okay. Now, the second question is, I noticed that the foreign travel is not back yet, and a large part of your occupancy is actually being driven by domestic tourism. I mean, just wanted to gather a sense on, what is the longevity of this, because there is a reasonable amount of latent demand that might have perhaps shown up in this quarter. So perhaps assuming if foreign travel doesn't come back soon, how are you seeing this -- how are you seeing it in your current quarters and maybe if you could give us some sense on how do you see this trend that we've seen in Q3 moving forward?

[Vikramjit Oberoi, executive]

Well, everything that we see and we look at our data regularly, both business on books we project future occupancies by hotel. And all those trends continue to be very, very strong. I think that will be augmented with foreign travel, which is going up and hopefully will continue to go up. So, I think across all segments, if I were to just summarize, we're seeing strong growth in our forecast that is continuing, and we have no reason to believe that will not continue into the future.

[Tarang Agrawal, analyst]

Got it. Just a couple of more. In terms of all the plans of opening new hotels, whether through management contracts or your owned properties, a ballpark CapEx estimate from here on would be helpful for say FY '23 and FY '24. That's one. And second, I think you've done a tremendous job in terms of pruning your employee expenses. But when I see it on a relative basis to other players operating in the industry, I mean, even today EIH is significantly higher than players, and that would, perhaps -- I mean that's how the business model is. But what I wanted to understand, is there a scope to prune further or is this a good number that we should look at going forward from here?

[Vikramjit Oberoi, executive]

Okay. No, actually, Tarang, that's a very, very good question that you ask, and our industry has been plagued with very long working hours across hotel companies and across hotels. And our commitment is to address that fully. So, and I think what would be interesting to know is, what attrition levels are at hotel companies. The higher the attrition, the lower the productivity. So in the short-term, we have made a commitment to reducing the number of at work hours the people work, looking at work-life balance, which continues to come year-after-year on surveys. Our Concentrix surveys, we're committed #1 to addressing that. #2 is with attrition, hopefully that will bring down attrition substantially and increase productivity substantially. So I think in the long run, we will see greater efficiencies. And we certainly are committed to doing that.

[Tarang Agrawal, analyst]

And the number of capital outlay for the next 2 years?

[Vikramjit Oberoi, executive]

I don't have that with me. I don't know if Kallol has that readily available, but we can certainly include that going forward.

[Kallol Kundu, executive]

I think, Tarang, I would rather refrain from discussing CapEx at this stage, because we are just beginning our -- just completing our budgeting exercise as we go along. So the regular CapEx that we will have in hotels will be similar to what we used to have in pre-pandemic levels about INR 40 crore to INR 50 crore. But for the projects that we have listed out, there is only one project at the moment, which is owned project, where we are spending money. And that shouldn't be anything substantial. As you can see that our debt levels are at INR 60 crores only as, on 31st December and I would urge you to look at that number again in 31st March. So therefore, it's not really too much of a concern for us. But having said that, we will be in a clearer position to tell you, maybe in the last quarter when we have already completed our budgeting exercise.

[Vikramjit Oberoi, executive]

And I just wanted to add one further thing that for us, our focus on growing the number of hotels we have, is our biggest priority and we work -- not a day goes by when we don't work on this. So I'm confident that that will yield results in time to come.

[Navin Agrawal, analyst]

The next question is from Saket Kapoor.

[Saket Kapoor, analyst]

Sir, firstly, just as you concluded to the earlier participant that -- sir, I am audible to you?

[Vikramjit Oberoi, executive]

Yes, sir, absolutely.

[Saket Kapoor, analyst]

Sir, as you have just answered the earlier participant that you are always in the foray to increase your count of hotels. So sir, this being a hugely capital intensive sector and also the refurbishment and the remodeling, if I may, use for hotels and other restaurants and all requires a continuous -- is a continuous process. So, how good is capital allocation in the segment that gives you this understanding that it is always correct to be -- to increase your hotel count, sir?

[Vikramjit Oberoi, executive]

So Saket. Actually, we are -- there's one hotel project, which as Kallol mentioned, which is an EIH project. But the other ones are through management contracts. We're also looking at partnerships, and hopefully in due course, we'll be able to talk about that as well. But growth doesn't always require the hotel company, in this case EIH to invest in the asset. Growth can take place in other ways. And probably for our industry management contracts, the model that many hotel companies follow, and we are no exception to that. So this continues to be -- is a focus and I hope in time to come, we will be able to share further details with you, in addition to the details that Kallol has already shared today.

[Saket Kapoor, analyst]

Sir, a small point, again, how has this industry shaped up post this pandemic part? And as people have spoken about the latent demand -- in our demand, sir, we have seen that in all the cases, although it is not about likewise comparison, but wherever these aspects of inherent demand or [ inner ] demand everything has plateaued out over a period of time. So how different can you compare a hotel industry with other business aspects, wherein they have returned -- the main revision has happened. And herein, we are speaking of -- you are seeing more signs of green shoots rather than any flattening of demand. So what gives you this understanding that, for a hotel industry, which is a discretionary product, these kind of numbers would continue even in other aspects where they -- where we are seeing recession -- not recession exactly, but things are tapering down, sir, that is what my understanding is.

[Vikramjit Oberoi, executive]

So we can only go by what we see and what we see based on even future reservations, is demand continues to be strong. But there are 2 things that drive our results. One is a growth or demand, but also equally, we would like to increase and have been increasing our market share across hotels by location vis-a-vis our competitor set, and our efforts will continue to get a larger share of that pie, whether it is bigger or smaller.

But like I said, everything that we look at today suggests that demand will continue to be strong, based on information we have today. And in fact, we have no reason to believe that foreign occupancy will not come back, and when it does the benefit to EIH will be substantial, because like Kallol shared in that slide on foreign occupancies, we appear to be -- at least based on historic data, a natural choice for foreign travelers coming into India, whether that's on business or on leisure.

[Kallol Kundu, executive]

And if I may also add Vikram, I think, what needs to be also seen, Saket, since you are mentioning or you're talking about potential, if you see in general in India, what is the average room rate that one traveler pays, versus what is the rate that a traveler pays in other countries, including not only in Western countries, but also in other developing economies. So if you see the differential there, then you will know, what is the potential that is there for India. We just hope that the industry has a whole place to that, as we do definitely believe ourselves, and in which case the sky is the limit.

[Saket Kapoor, analyst]

2 small points, sir. Sir, then what are they key...

[Navin Agrawal, analyst]

Saket, may I request you to join the queue?

[Saket Kapoor, analyst]

Yes, I'll come in the queue, sir. No, issues.

[Navin Agrawal, analyst]

The next question is from Nihal Jham.

[Nihal Jham, analyst]

Am I audible? Hello?

[Navin Agrawal, analyst]

Yes, Nihal. Please go ahead.

[Nihal Jham, analyst]

My apologies for that. I had 2 questions, Mr. Oberoi and Mr. Kundu. First was, if I look at your month-wise performance that you've given in the presentation, October we are aware had the impact of Diwali, but November in terms of occupancy was similar to what it was pre-COVID. However, the December month has seen a significant improvement in the occupancy for this quarter versus pre-COVID. So what has changed specifically that has led to such a strong spurt in occupancy for December. Maybe I'll take my next question after this one, if you're fine.

[Vikramjit Oberoi, executive]

Yes, I see that. Nihal, I cannot answer that question as I sit here and I don't want to say anything, which is not factually correct. But I -- we can certainly take this offline and happy to look at each market segment, each hotel and come back to you. But I would encourage you not only to look at occupancies, but please also look at ARRs and RevPAR.

[Nihal Jham, analyst]

Absolutely. Even on the rate side, I think I see that spurt, but maybe I'll connect offline if you want to have this discussion.

[Vikramjit Oberoi, executive]

Sure. Happy to do that.

[Nihal Jham, analyst]

The second question was on the foreign tourist data that you shared. Appreciate you're giving that disclosure. Just as an observation that as a number has stayed constant for the last few months, while it has seen a strong improvement from the month of April. So any specific reason or reading and given you have the visibility on business on books, are you expecting that number to significantly improve in the Jan to March quarter?

[Vikramjit Oberoi, executive]

So, one area -- one market, which is a very -- so let me actually take one step back. The U.S. market and the U.K. market are the 2 most important markets for us in terms of foreign travel. In the U.S. market, we've seen a full recovery in fact over full recovery. The U.K., unfortunately, we have not seen that. We believe that may be to a large extent influenced by all the Visa-related issues, you couldn't get e-visas. That has now been resolved. So we hope that we'll see a recovery and this is despite the issues that sadly the U.K. faces with its economy. But we -- time will tell, but we believe the U.K. will recover, because it was just very, very difficult to travel from the U.K. to India. And those are our 2 most important foreign markets.

[Nihal Jham, analyst]

Got it. Could I take up one more question or I can come back in the queue?

[Navin Agrawal, analyst]

Please go ahead.

[Nihal Jham, analyst]

Thank you so much. Just on the mix of business that you have given, corporate seems to be slightly lower versus pre-COVID, but we've seen an improvement in the direct booking. Have you seen a trend where the increase -- or there has been a shift in terms of how people are booking, maybe the corporates are going via the direct route or still corporate travel is to see full recovery?

[Vikramjit Oberoi, executive]

I think there's probably some overlap between direct and corporate. So I would say what you're saying is correct. To the extent that is, is, I'm not entirely sure. But corporate is an important segment. We have good relationships with our corporate clients. We have an active engagement with them, and again our endeavor will be to, at the right price, get a larger share of this business. I mean, I'd just add one other thing, which is important, is that RFP accounts typically book on base rate. And as occupancies pick up and corporate lead time is short sometimes you have availability constraints. So please also keep that in mind that, this materialized room nights, but hotels are running very high occupancies during the week and sometimes on weekends as well, depending on the location. And therefore demand -- corporate demand may be suppressed because of a lack of availability.

[Navin Agrawal, analyst]

The next question is from Vikas Ahuja.

[Vikas Ahuja, analyst]

This is Vikas from Antique Stock Broking. Sir, firstly, congratulations on getting voted as the best hotel brand again. And my first question is related to this only, [Technical difficulty] probably one of the best hotel brands in India. And being the best why don't we have a strong strategy in getting rooms added aggressively through [Technical difficulty] route. Because when I look at your competitors, they are being very aggressive and even getting more aggressive in adding more and more room through [Technical difficulty]. That's my first question, and I have a follow-up also.

[Vikramjit Oberoi, executive]

Okay. So to answer your first question Vikas, #1, you're correct. And #2, we are pursuing this very, very actively, like I said. So that should bear fruit in time to come and we will be able to share that with you in time to come. But this is a very important area for all of us, and we're working very hard towards that.

[Vikas Ahuja, analyst]

Yes. And just one suggestion, if there is any strategy which can be laid out to investors, so it would be very easy for us for the modeling purpose? Secondly, rates I assume this quarter will be all-time high or maybe higher since [indiscernible]. So my question is regarding the pricing, how sustainable it is. Do you think the supply will catch up fast in maybe next 2, 3 years to check on the rise in the rates? Also in October, November, December, we have seen rates rising from INR 15,000 to INR 16,000 to INR 18,000. Do we think the INR 16,000 kind of an average sustainable in Q4, especially because the managers were pretty strong which can offset some slowdown, which is related to corporate bookings?

[Vikramjit Oberoi, executive]

So, I had trouble hearing everything you were saying Vikas, but I heard most of it. And if I were to just summarize, you're saying will these increase in rates be sustainable in Q4 and possibly beyond that as well. I believe they will be sustainable as far as we're concerned. And if you look at SDL and we look at that data every day, we are well above market on our ARR vis-a-vis our comp set. And that differential, although I can't say with absolute certainly, I don't have the numbers in front of me is growing even bigger. And certainly, what I can say with confidence is between pre-COVID and now, it absolutely has grown. So, we continue to focus on rates.

We are -- we believe we have a differentiated product that guests are willing to pay a premium for. And they're willing to pay a premium for the service, the care, the personalized attention and generally the upkeep of our hotels and that allows us to demand or achieve a higher average run rate. And all those aspects of service differentiated product is something we continue to focus on. The last thing we want to do is compete on price because then there's no end to it. It's really a commoditized product. And if you're a commoditized product, your margins over a period of time gets squeezed. That is not the area we want to play in. We believe we give our guests a great experience. And based on that, they number one, appreciate that value that and are willing to pay a premium for that.

[Vikas Ahuja, analyst]

And one thing I missed, it's regarding the supply catching up to maybe next 2, 3 years. I mean, historically, we have seen higher prices need to supply also coming up in next maybe you can take 2 years or 3 years as a trend, are we seeing that trend also coming up? And I also have a follow-up, but I will go back to the queue. Maybe have other participants ask.

[Vikramjit Oberoi, executive]

So, I'm sure -- I mean, the hotel industry hasn't seen much increase in supply recently. There was a big spurt after the boom in 2006. Hotels are long lead times for development. But I'm hoping that actually prices remain high, not only for us, but for others and that leads to further development of hotels. The more quality hotels they are, the better it is for the industry. And both will also stimulate demand. So, sorry, so I believe that's a good thing.

[Navin Agrawal, analyst]

The next question is from Sumant Kumar. Sumant, can you hear us? I guess there's some issue.

Let's take the next question from Rajiv Bharati.

[Rajiv Bharati, analyst]

Sir, my first question is on Note 8 in your result sheet, which talks about some property tax maybe. Can you clarify what's this? Is there an incremental number also coming through after this quarter?

[Vikramjit Oberoi, executive]

No. That's the -- that will be the final number. This was property tax related to Bombay. And I maybe request Kallol to explain this in detail with numbers if we have that with us. So, we can give you further information on that. But this was a one-time -- there was a legal case. This went to the Supreme Court. And as a result of that, hotels and others saw a substantial rise in property tax. And Kallol, do you want to explain that further?

[Kallol Kundu, executive]

Yes, Rajiv, so this pertains not only to us but to every other hotel and many other non-hotels as well in Mumbai. As you would probably know that in 2010, the rates -- the methodology of calculation of property tax was sought to be changed, which was challenged by a very large range of affected parties. And this is not something that we have not disclosed before. This has been there in our contingent liability. We have been depositing 50% of the increased amount that was asked from us post the high court decision and as per the high court decision. And now that the Supreme Court decision has come, this was not pertaining -- the case was not -- it was not pertaining to us. But since the decision came out, in general, we took a prudent stand to account for it. And therefore, you see those exceptional items there.

[Rajiv Bharati, analyst]

So, if you can quantify what is the total quantum so far, in the sense over the years?

[Kallol Kundu, executive]

It's INR 19 crore is the additional amount, which is -- I don't know if it's clear from the exception of the notes to exceptional accounts, but yes, it's INR 19 crores.

[Rajiv Bharati, analyst]

So, INR 19 crore is for FY '23, but what is the...

[Kallol Kundu, executive]

No, no. This is the accumulated one. This is not FY '23. The exceptional items is only for the arrears.

[Rajiv Bharati, analyst]

Secondly, in terms of your subsidiary performance, so if I simply do C minus S, there is a degrowth in the subsidiaries. So, which particular subsidiary is basically causing this on a 3-year basis?

[Kallol Kundu, executive]

You're looking at degrowth on which parameter Rajiv?

[Rajiv Bharati, analyst]

If I do -- I mean, actually, it's degrowth across parameters in terms of, let's say, if I do consolidated sales minus stand-alone and compared against Q3 FY '20.

[Kallol Kundu, executive]

Yes. So, I'll start with the PAT first, the PAT would be on account of Mashobra where you would recall that in the last quarter, there was -- there were exceptional items in terms of the judgment that we have received. But in terms of revenue, our subsidiary is generally Mumtaz and Mashobra have done well. It is international, which is just picking up because hotels has -- they have started opening up during the course of the year. As with other chains as well, it is international, which is really -- which needs really to perform as good as India is.

[Rajiv Bharati, analyst]

Safe to assume is it, bulk of it is Indonesia?

[Kallol Kundu, executive]

Yes. So, our owned properties are Indonesia and yes, the 2 hotels in Indonesia and Mauritius is a joint venture. And also on the consolidated accounts, if you see the share of profits coming in from our other hotels such as Marrakech and Sahl Hasheesh.

[Navin Agrawal, analyst]

We once again try to take Sumant Kumar.

[Sumant Kumar, analyst]

So, my question is regarding corporate rate hike, currently, we have taken. And also the demand side of corporate, we have seen a good improvement in Q3, but how you have seen in the month of, say, Jan and Feb and considering some slowdown in the corporate earnings? Do you think that the current mix of corporate in total booking is going to sustain? And also the direct booking, we have seen significantly improved in this quarter. So, do you think this mix is going to sustain going forward?

[Vikramjit Oberoi, executive]

Can we talk about future? Is it okay?

[Kallol Kundu, executive]

Not really.

[Vikramjit Oberoi, executive]

Not really.

[Kallol Kundu, executive]

So Sumant, as you know, we don't give guidances, but you can give, I mean, if there are trends that we wish to discuss that, certainly yes.

[Vikramjit Oberoi, executive]

So, I'm not sure, Sumant, how to answer your question. I mean the first point I'd like to just mention is that some of corporate business has occupancies fill up does trickle into direct. And corporate demand is strong. At least, I'm not aware of any event that is causing that to change. So, I don't know if I have given you enough information to answer your question.

[Sumant Kumar, analyst]

So, any price -- can you talk about the price increase in the recent month we have taken for a corporate side or negotiation of what we have done?

[Vikramjit Oberoi, executive]

And again, can we talk about price...

[Kallol Kundu, executive]

The ones that we have done, Sumant, is roughly between -- we have mentioned this before. It's roughly between 10% to 15% that have already been contracted, but there are quite a few contracts yet to happen.

[Sumant Kumar, analyst]

Now the industry is talking about dynamic price for negotiation going forward. A few hoteliers has indicated they are going for dynamic price negotiation. So, can you talk about your side, how you think it is going to work out going forward?

[Kallol Kundu, executive]

So Sumant, if you heard Mr. Vikram Oberoi, he already mentioned earlier on, that the contracting happens for corporates only for the base category routes. So, the balance part of the demand obviously comes automatically under the dynamic pricing because if corporates want to travel or if somebody wants to travel and the base category of rooms is not available at the contracted rate, then the next obvious thing to do is to book at the next higher category at the bar rate, which is available on different channels. So, even if it's not consciously done, it will automatically happen.

[Sumant Kumar, analyst]

And then lastly, can you talk about the mix of the -- in the corporate side, the larger corporate and mid level and the smaller level, the new upcoming new industry is going to contribute more to hotel side because the larger corporate contribution to the hotel industry is going to reduce. The new age technology is going to contribute more. So, your price negotiation is higher side.

[Vikramjit Oberoi, executive]

Sumant, I don't know if it would be right for me to talk about which sectors we're looking at because that would be information that we'd like to keep to ourselves on where our focus is just strategically from -- for our corporate clients and across segments. So, I hope you understand that.

[Navin Agrawal, analyst]

We'll take the next question from Swalik Patwa (sic) [ Saurabh Patwa ].

[Saurabh Patwa, analyst]

Yes, I'm audible?

[Navin Agrawal, analyst]

Yes, Swalik.

[Saurabh Patwa, analyst]

Actually, it is Saurabh, I don't know why it is showing Swalik.

[Navin Agrawal, analyst]

My apology. Saurabh, please go ahead.

[Saurabh Patwa, analyst]

Yes. So, while you have highlighted your bullishness on the industry and how you outlook in your previous comments. But when you see the hotels, which you've announced and which are under construction or at planning stage, what we see that in India, what we've actually -- what we are right now working on is largely something may have been working pre-COVID also, say like Goa, because that was something which was there or also in Bandhavgarh. And what others are in Nepal or Middle East. So, I just wanted your thoughts on what we seem to miss here is like any hotel in upcoming luxury locations say like Andaman or Lakshadweep given our success in Bali or maybe something in Northeast. So, would you care to share some thoughts over here. And why I'm asking this is because this question become more pertinent for EIH, given our strong balance sheet and brand, which actually suits many of these locations. Care to share some thoughts here.

[Vikramjit Oberoi, executive]

Saurabh, I really don't have much to say other than what I've already said is that we -- this is an area where there is considerable focus and anything that you focus on and apply your attention to yield results. And we'll let the results speak for themselves in time to come. So, that's really all I have to say for the moment. And as soon as we're able to share that information, we absolutely will.

[Navin Agrawal, analyst]

We take the next question from KK, Mr. Krishnakumar Srinivasan.

[Krishnakumar Srinivasan, analyst]

Congrats on a great of numbers over the year and the third quarter, particularly. Sir, I just wanted to take your perspective on this G20 meetings that happen in India over the next 12,24 months. How is our hotel placed vis-a-vis the other large competitor to have a presence in this business and what kind of market shares we've had in the events that we had in the last 2, 3 months, if you could share some trends, your expectations on this impact of G20.

[Vikramjit Oberoi, executive]

Could I request -- it's a very specific question, if I could request that we take that offline, and we'll be happy to have a dialogue on that with you.

[Navin Agrawal, analyst]

We take the next question from Jinesh Joshi.

[Jinesh Joshi, analyst]

Am I audible now?

[Navin Agrawal, analyst]

Yes, Jinesh.

[Jinesh Joshi, analyst]

My question is on foreign travel, although this was addressed before, but I just want to kind of take it forward. In response to the foreign travel recovery, you mentioned that U.S. has seen a full recovery, but in U.K. because of some visa issues, the recovery is still not back. And E-Visas are now available. So, is there any other roadblock apart from this? That is question one. And secondly, if I break down the foreign travel recovery in business and leisure, where are we currently vis-a-vis pre-COVID levels? And how long will it take for the foreign travel to be back to the pre-pandemic levels? So yes, that -- this is my first question.

[Vikramjit Oberoi, executive]

So Jinesh, I just like to remember all your questions, sorry. Your first question was on the U.K. And I'm not sure -- first of all, my assumption is Visa has played an issue. What I can say with absolute certainty is that we saw a sharp decline from pre-COVID levels from the U.K. What I'm assuming is that, that may have been a result of the difficulty to get Visas. The other point I mentioned is that the U.K. economy is going through troubled waters. And you can see this vis-a-vis its growth compared to other European or EU countries. Now, whether that's playing a role or not, I don't know, in suppressing travel to countries like India, whether it's for work or for leisure. But I think the U.K. will continue to face economic concerns is at least my understanding based on what I read. So, that's as far as the U.K. goes.

In terms of recovery, business versus leisure, I don't have that information present with me right now and I don't want to make a statement, which is in any way incorrect. Your third question was where do you see a recovery in foreign travel to pre-COVID levels. And my response to that will be, I don't see any reason why it will not recover. I think we need to look at 2 things. One is not only the percentage, but also the actual numbers. So, if the total volume of business goes up and the growth of foreign business is disproportionately lower, obviously, the percentage comes down. So, I think we need to look at both actuals and percentages to really understand what is happening with foreign travel. But at least from my point of view and this is personal to me, I believe our foreign travel will continue to recover. And we'll see an upward trend in room nights generated from foreign travel in time to come. That's my personal point of view.

[Jinesh Joshi, analyst]

Would you like to put a time line to this as to when the recovery will be fully back? That is the only last question which I have.

[Vikramjit Oberoi, executive]

And I'm not saying this for EIH. I would say that by typically demand from overseas visitors is strongest in the October to March period and I would expect that to be the case this coming October, leading on to March as well. So, that's how at least I see it.

[Navin Agrawal, analyst]

The next question is from Rajiv Gala.

[Rajiv Gala, analyst]

Am I audible?

[Navin Agrawal, analyst]

Yes, Rajiv, you're audible now.

[Rajiv Gala, analyst]

Compared to other players, Q4 is usually stronger for EIH. Is that because of foreign tourists?

[Vikramjit Oberoi, executive]

Yes. Is that the question, Rajiv? Is it because of foreign tourists?

[Rajiv Gala, analyst]

Yes, you have got it right.

[Vikramjit Oberoi, executive]

Sure, Rajiv. Rajiv, I'm not sure what the numbers are for others. I can't comment on whether we're stronger or they're stronger as far as foreign travel goes. I know what our numbers are and Kallol will share those percentages with you on the presentation. So, that would be my first response. But really going beyond that, it's really a function of demand and supply. And we've seen strong demand for our hotels across locations as well. And as a result of that, we've been able to drive price. So, that's what's led to the results for Q3 that we've seen.

[Navin Agrawal, analyst]

Vikram, we have a couple of questions on the Q&A board. If you permit, may I take them?

[Vikramjit Oberoi, executive]

Sure.

[Navin Agrawal, analyst]

Manu Shroff. How has the foreign room nights increasing in Q4 versus Q3? Hence, is it fair to assume better Q4 RevPAR versus Q3? And can we maintain cost structure of Q3?

[Kallol Kundu, executive]

Well, cost structures are uniform. So, whatever had to be factored in has been factored in, but we won't like to make a forward-looking statement on Q4 foreign arrivals.

[Navin Agrawal, analyst]

Another one is from [ Bakhtawar Lavi ]. What according to your assessment is the ballpark expense in percent of incorporating green practices in operations, apartment from green structures at EIH? Too many questions in one question.

[Vikramjit Oberoi, executive]

Maybe just take the solar. You shared that, that our prices have come down per unit from 9 to 5 or 10 to 5.

[Kallol Kundu, executive]

Yes. 10.9 to 5.9. But really speaking, the initiatives are being planned out as we speak. And we have a whole year in front of us. You'll find a lot of that being reported in the BRSR, which becomes mandatory from April. So, I think to answer that in a short call will be very, very difficult.

[Navin Agrawal, analyst]

We have a follow-up question from Tarang Agarwal from Old Bridge.

[Tarang Agrawal, analyst]

A couple of follow-ups. One, if I go through Slide 13 of the presentation, which talks about occupancy and ARR performance. The -- this is only for the domestic business, right? It's not for the international business, correct?

[Kallol Kundu, executive]

Yes. This is domestic, but includes our managed hotels as well.

[Tarang Agrawal, analyst]

The second is, if I look at the leisure villas, the occupancy is lower versus its peer set. So, is it because it's more indexed to foreign travel than other class of hotels?

[Kallol Kundu, executive]

It's not. Yes. The occupancy is up from 58% in quarter 3 of FY '20 to 62% in quarter 3 FY '23.

[Tarang Agrawal, analyst]

Correct. But it's still significantly lower than a Metro or Trident Metro or Trident Leisure, right?

[Kallol Kundu, executive]

Okay.

[Tarang Agrawal, analyst]

So, is it because you get a lot more foreign traveler visiting the villas? Or is there some other reason to it?

[Vikramjit Oberoi, executive]

So, this -- I think when you look at data for a number of hotels, it may not give you a true picture. So, this includes The Oberoi Amarvilas, which is 100 -- just over [ 100 Ks ]. So, it's the largest of Oberoi leisure hotels. And Agra is a destination, which is -- has a very, very high occupancy on travel. And Kallol in his presentation mentioned Agra is one location where there was a decline in RevPAR. If you remember, if I remember correctly, it's about 7%. And Amarvilas is extremely dependent on foreign travel and in pre-COVID, this would be -- if my memory serves me correctly, [Technical difficulty] 80% of total arrivals at the hotel.

So, I wouldn't just look at that figure in isolation. I think you need to look at it and factor in Amarvilas, which is very dependent on foreign travel. Sadly, I think I wish more of us went to places like Agra, we would benefit from that, but it's not a destination of choice for people from India, Agra. It's got very good connectivity with a very good road from Delhi now.

[Navin Agrawal, analyst]

We have time just enough to take the last question. It's from the line of Hari.

[Hari V., analyst]

Like 2 questions. Does the management see any gaps to be fulfilled both in the domestic and international luxury leisure circuits? Can you please throw some light, sir?

[Vikramjit Oberoi, executive]

I mean I think for Banaras is a great leisure destination. And today, we don't have a hotel present in Banaras. But I think this -- I mean, I think our country has so many great locations and un-spoilt locations that would be very, very appealing to leisure travelers, both domestic and international. In terms of Oberoi hotels and Trident hotels, there are also locations where we should be present and we're working on those as well. And these are city locations. So I think there's a lot of work to be done, both in city and in leisure locations, both for Oberoi and Trident. And rather than -- and we view that as an opportunity going forward.

[Hari V., analyst]

And the last question is regarding this Mandarin Oriental alliance. Like how is it contributing to us, sir? Any quantifiable benefits we are getting from the alliance, sir?

[Vikramjit Oberoi, executive]

Actually, there's a lot happening in terms of exchange of ideas, best practices, good promotions, et cetera. It's very hard to exactly quantify the number of room nights because guests pick various channels to book and they maybe Mandarin Oriental guests or Oberoi guests are going to stay at Mandarin Oriental. But they may not come through the -- by referring it to Mandarin Oriental. And even if you go to our website, what it does is it takes you to, it brings you back to the Oberoi website. And if you make a reservation through that, you're actually coming through the Oberoi system.

You're not going to Mandarin and making a reservation at Mandarin. But I think if I were to answer that question another way, Mandarin Hotels has a presence in key locations in Europe and North America in locations that are important from an overall guest perspective. And the exposure that Oberoi gets as a result of this alliance will help drive business to our hotels. They may book through various channels.

And if this is leisure business, leisure, because of the complexities of India, you go to multiple destinations. You need airline, domestic airline flights. You need guides. So, it's much easier for somebody to go or a guest to go to their travel agent who can book everything for them rather than coming directly to multiple hotels in multiple locations plus ground transfers plus air transfers. So, that's just the nature of business when you're going to a country where you're visiting many, many locations. Average length of a visit is approximately 10 days for international travel -- actually from the U.S., it's slightly longer, from the U.K., it's 10 days for leisure and with multiple locations.

[Navin Agrawal, analyst]

Thank you very much. That was the last question. And before I hand over the call back to Vikram, I'd like to congratulate Vikram, Kallol and the team on once again being awarded the best brand. Over to you, Vikram.

[Vikramjit Oberoi, executive]

Thank you so much. And Navin, actually, it's -- I really genuinely say this that credit doesn't come to me. Credit goes to all our colleagues who look after our guests every day when they come to our hotel, who follow the values of our organization that are articulated in our Dharma, they're really the true heroes. Our job is to give them the support they need and help them to flourish.

So, if anybody deserves credit, they do more than any one of us at corporate office, they are true heroes. And we thank them for doing this day in and day out with our guests and also supporting each other. We -- it's very important that we have people who enjoy what they do. If you enjoy what you do, you do it well. So, the culture we try and create within the organization and at our hotels is one where we hope people really enjoy what they're doing and therefore, make a meaningful difference.

[Navin Agrawal, analyst]

Thank you very much, Vikram. Mr. Kallol, you wanted to add something?

[Kallol Kundu, executive]

No, I just wanted to add that finally, it's the questions that we used to hear earlier analyst calls of whether rates are going to go up. So, we hope we've been able to answer some of those this time and obviously going forward. And as I said that this is only green shoots because if you look at the number of tourist arrivals into India, that is far less than other countries. So, there's a lot of potential there. The rates that is currently that prevails in India is way less than what it is in other countries. So, we do have reason for optimism to believe that India as a country should move much, much ahead in the times to come. Thank you.

[Vikramjit Oberoi, executive]

And maybe I'll just add one thing to what Kallol said, is hotels in India are actually relative to whether it's the developing world, whether it's the Middle East, whether it's Europe, are significantly cheaper. To get a quality of hotel that you get in India in the luxury segment is at a fraction of the cost of what it would be elsewhere. And if you go to a city like London or New York, and I'm not saying we're at London and New York, and you stay at a leading luxury hotel there, you'll be paying upwards of in New York, upwards of 14 -- $1,200 to $1,400 a night. And in London, you'll be paying upwards of GBP1,200 to GBP1,400 a night. So, we are really, really good value. And I hope all of us, whether it's us or it's our competitors, give our guests, an incredible experience that is hard to replicate in other markets. So, I think there's significant upside on ARR. And I hope we all benefit from that.

[Navin Agrawal, analyst]

Thank you very much, Vikram. It's always a pleasure hosting you and Kallol and we look forward to hosting you for your future interactions with investors and institutions. Thank you very much, ladies and gentlemen, and have a lovely day.

[Vikramjit Oberoi, executive]

Thank you so much. Thanks, Navin.

[Navin Agrawal, analyst]

Bye-bye.

[Vikramjit Oberoi, executive]

Thanks. Thanks, [ Naresh ]. Bye-bye.

[Navin Agrawal, analyst]

My pleasure. Bye-bye.

[Vikramjit Oberoi, executive]

Thank you.