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EIH Ltd
Earnings Call Analysis
Q3-2024 Analysis
EIH Ltd
Representatives from EIH Limited, including the CEO Vikram Oberoi and CFO Kallol Kundu, addressed a virtual gathering to discuss the financial performance of the third quarter for the fiscal year 2024. The company delightedly shared the robust quarterly results, as well as the strong 9-month performance, attributing this success to their unwavering commitment to the quality and exceptional service at their hotels.
Vikram Oberoi emphasized the company's strategic attention on upgrading their properties to surpass competitors and enhance guest experiences, a decision that has yielded dividends in customer loyalty. Aligning with this, the management shared ambitious plans to further expand its hotel portfolio with an additional 50 hotels by 2030, which includes recent developments of three new properties in Tirupati, Vizag, and Gandikota.
A Horwath report highlighted the prosperous period for the Indian hotel sector, with high average daily rates (ADRs), growth in room supply, and increased demand. The company distinguished itself with a RevPAR (Revenue Per Available Room) growth surpassing the industry, signaling the brand’s strength, especially in the Oberoi and Trident segments. The company has witnessed considerable revenue and EBITDA growth in this quarter, boasting the highest they've seen in history, indicating a robust financial performance.
The company announced an EBITDA of INR 309 crores with revenues of INR 680 crores and a profit after tax (PAT) of INR 187 crores for the quarter. Furthermore, the consolidated funds position reached INR 684 crores as of December 31, 2023, demonstrating a significant improvement in the company's balance sheet since the challenging COVID period.
EIH Limited is on the verge of launching two new hotels that are nearing the end of their construction phase. This is part of extending the company's footprint and catering to the growing demand for accommodation in prime locations.
While employee costs have risen marginally, the company stressed that this increase reflects the initiative to ensure employees have a healthy work-life balance rather than significant wage inflation. Additionally, the higher room rates have favorably impacted EBITDA margins, and other expenses have increased moderately, covering necessary business supports like repairs, maintenance, legal compliances, and marketing efforts. The management is committed to sustainable growth without compromising their service quality or financial prudence.
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Good morning, ladies and gentlemen, and thank you for attending this virtual meeting. It's my pleasure to welcome you on behalf of EIH Limited and SKP Securities to EIH Limited's Q3 FY '24 Earnings Webinar.
We have with us Mr. Vikram Oberoi, MD and CEO; and Mr. Kallol Kundu, CFO. This meeting is being recorded for compliance reasons. And during the course of this discussion, there may be certain forward-looking statements. These must be viewed in conjunction with the risk that the company faces. We'll have the opening remarks and a presentation by the management, followed by a Q&A session. Thank you, and over to you, Vikram.
Navin, thank you very much. And ladies and gentlemen, it's still morning. Good morning to everyone, and thank you for joining us today on this call. Our quarterly results, as you would have seen, have been very positive. And for the 9 months, they are also very, very positive. Our focus has really always been on quality to provide our guests with exceptional levels of service and care and to maintain our hotels to a very high standard. And with those -- with that focus, we have been able to drive premiums in our average run rates relative to our competitors and also drive strong occupancies, which are reflected in the numbers that you see in our quarterly results. This has always been our focus. This will continue to be our focus.
We're also spending quite a lot of time and attention to upgrade our hotels so that they can continue to be successful, continue to distinguish ourselves from our competitors, again, with the focus on our guests, on our quality. I really would like to use this opportunity also to thank our colleagues. Our colleagues at all our hotels put our guests above all else and do whatever they can to provide our guests with exceptional guest experiences and that also seems to pay the dividends or is paying dividends with guest loyalty towards both our brands. If you see our STR data, we're primarily STR 1, in some locations we are 2 with overall hotels, but most of our hotels within the Oberoi brand are STR 1 and Trident also in many locations are STR 1 or STR 2. So really, that was what I was going to say.
I'll now ask Kallol to make a presentation, and then we can take your questions. But thank you all for attending this call today.
Thank you. Thank you, Vikram. Good morning, ladies and gentlemen. We have uploaded a presentation on our website and have sent it to the stock exchanges. But may I request Navin to please put it up on the screen as well. Thank you. So going -- Navin next slide, please. Yes.
May I just add one more thing because I don't think we have -- I mean, I think this has been covered in the apps and in the press. And we, of course, also did the stock exchange filings, but since our last call, there are 3 more hotels that we have announced that are already now under development. So we're doing a Trident in Tirupati. It will start with 125 keys and we have a very nice site and we can expand that hotel further based on demand and occupancy. We've got a very nice site in Vizag, very close to the new airport. We're also there doing a Trident hotel of a 125 keys. Again, expandable into the future based on demand.
And then I don't know if you are familiar with an area called Gandikota, which is really a beautiful pristine area in India, the Indian Grand Canyon, and we've got a lovely site there where we're doing an Oberoi Leisure hotel, a small hotel of 25 keys, again, expandable in the future. So these are, I think, 3 hotels, we didn't cover this in our last call, and I thought I'd mention those as well. And like I said last time, we remain focused on the target that I shared of 50 new hotels by 2030.
Thank you, Vikram. Good morning, ladies and gentlemen, once again. So we'll start with the commentary by a recent report from Horwath on the Indian hotel sector, which really -- the report really calls this stage to be like an Amrit Kaal. The all India ADRs are at INR 7,500, with 3 markets with ADRs of over INR 10,000, and this is for all segments of the industry within the country. There are 8 markets, which have a 5-digit luxury upper upscale ADR. The supply growth is -- has grown by INR 14,000 rooms, the highest in any year and the net pipeline is up by 23,000 rooms.
The GDP is expected to grow between 6.5% to 7% over the next 3 years. The current pipeline inventory has crossed 250,000 rooms with more than 2,500 hotels and more than 400 destinations. Rooms demand per day has gone up by 65% and 19%, respectively, as compared to 2015 and 2019. And the sectoral market cap as compared to 2015 has gone up by INR 1,282 billion as on 31st December 2023.
Navin, yes. As per the same report, foreign traveler arrivals for India during January to November were 17% above the January to November '22 period, but they still remain below the pre-COVID levels, where arrivals were more than 10 million tourists in India, creating future demand potential from a complete revival and a subsequent growth. Our 2023 ADRs is ahead of 2019 ADRs in each segment, but the gain has been the maximum in the Luxury Upper Upscale segment where the gain is 36%. And as you will see from the table, the others are slightly lower at roughly 32% for the others.
The Leisure segment continues to expand and contribute positively, 55% of the national room nights is from the Upper Upscale and Luxury segments, whereas it's 34% from Upper Mid-scale and 11% from the Mid-scale and Economy. The other thing to note is, and so far as room revenues are concerned, 36% of all India room revenues is earned at the 3 major metros: Mumbai, New Delhi and Bangalore, which have a 26% supply share. And of course, aiding all this is are the 4 new convention centers that have been established in the last 2 years in Mumbai, Delhi and Jaipur. These centers, the report hopes, will drive new demand and opportunities for hotels in the respective cities.
If you look at the industry statistics and compare them with the Oberoi and Trident hotels, which includes EIH owned hotels and managed hotels, the RevPAR growth at Oberoi and Trident hotels have been consistently higher than industry and the chart is here, so I won't elaborate on the numbers here. Next please, Navin.
EIH owned and managed hotels continue to demonstrate RevPAR leadership over the STR competition set. What I mentioned in my previous slide was in respect of industry in India, in general, and this is a more specific competition set. And as you would be aware that STR collects data from individual hotels, where a single hotel has to provide 4 hotels as their competition at a minimum. And when we use that and we compare the data from 2019 onwards, EIH managed and owned hotels have consistently been above the competition set with the overall RevPAR leadership being at around 27%. So that's about 27% more than what the industry average or the competition set average is.
This is basically a positioning to show how the various segments within our business has performed vis-a-vis in the current quarter, in the quarter 3 of the current year versus the same quarter in last year, where almost every segment has grown substantially. But the highest growth has been seen in the metro cities. So if you see on the right-hand side, Oberoi Metro and Trident Metro have grown by 27% and 29% over the same quarter last year. This is followed by other brand hotels, which we have maintenance, et cetera. And this is followed by the Oberoi Leisure locations where the current year quarter 3, RevPAR has grown 18% over last year.
The trend in international locations is also healthy; however, I must point out here that the hotels or the resorts that we have in the MENA region, they have been affected by the -- due to the Gaza conflict. And therefore, the lower -- the decrease in occupancies that you see in places like Morocco and Egypt is essentially because it's been affected by -- to some extent by the ongoing conflict. But otherwise, we've managed to hold on to our rates. And of course, Indonesia is doing extremely well in terms of occupancy with similar ARRs that we've enjoyed in the past.
The blue line here represents the hotels owned by EIH, and the yellow line represents all domestic hotels, which are owned and managed by the EIH. The RevPAR in both cases, have grown. In the first case by 27% and in the second case by 23% when we were to see year-on-year.
Getting into a breakup of the month-wise occupancies and ARRs, ARRs have been really strong in all the 3 months of October, November and December as is evident from the bar charts. Occupancy was slightly lower by 1% in November, but it has held on -- it has increased, of course, in October. And in December, it's held on to very high occupancies of 84%. So overall, in quarter 3, the overall occupancy was high 79% against 77% with an average room rate of close to INR 20,000 as compared to INR 16,700 in the same quarter last year.
City-by-city positioning. Agra has really rebounded back with the 39% RevPAR growth and this is primarily with the influx of foreign tourists back. Mumbai is -- this is followed by Mumbai, Calcutta, Hyderabad, Udaipur, Delhi, of course, and so on and so forth. Shimla and Chandigarh continued to be affected because of the negative environment conditions. And international, although in general, it's a healthy trend and most of our locations have done well, but the RevPAR has slightly de-grown because of the impact of the Gaza conflict or the Middle East conflict on the various hotels around that region.
Direct segment continues to have strong tailwinds. Corporate has also picked up from where it was in the past. And Leisure and MICE also is seeing a pretty steep upward trend. The flight catering and airport lounge business has selectively -- these are collective numbers for both the catering and the lounge business. And this is a substantial improvement and it's a strong bounce back with strong margins of about 35%.
So we move on to the financial numbers. As you can see, this is the strongest quarter in the last many years. In fact, the strongest quarter that we've seen in the history of the company with an EBITDA of INR 309 crores for the quarter, revenues of INR 680 crores and a PAT of INR 187 crores. Consolidated performance for the quarter has also been extremely strong with total revenues of INR 770 crores, EBITDA of INR 353 crores and PAT of INR 230 crores. The standalone funds position continues to improve. And as you can see from the COVID days up to here, the journey has been really remarkable. The same is in case of the consolidated funds position. If you can move on, Navin.
So the consolidated funds position is about INR 684 crores as on 31st December 2023, which really places the company in a good -- in a healthy position so far as the balance sheet is concerned and, obviously, provides access to funds for future growth ambitions of the company.
So this is -- I will not read out these numbers because these have already been published and it's the same numbers. These are trends in the revenue, EBITDA, PBT and PAT from quarter-on-quarter. And for all our friends who are interested in following trends, these charts may be relevant. These are the consolidated performance highlights. Same quarter-on-quarter trends from quarter 1 of FY '22 to quarter 3 of FY '24. Of course, all the performance that has happened is in terms of -- it's not only in terms of financial success, but the awards that the company and the brands have really garnished. We've also been awarded by the CII DX Awards for digital transformation. So this is a list for everybody who is interested to have a look. The business footprint is for informative purposes.
And with that, I will end the presentation here. We are happy to, of course, take any questions that you have. Thank you so much.
Thank you, Kallol. Thank you, Vikram. [Operator Instructions] First question is from Nilesh Saha.
So yes, I think, last quarter, you gave some color on the expansion path that you have in mind. We did some numbers basis that and one of the things that we probably understood. Then you sort of indicated adding 50 hotels and 4,500 rooms by FY '30, and which basically indicates adding about 8 hotels per year. But the -- and also indicates probably slightly smaller hotels of 80, 90 rooms per hotel, which is where I wanted to understand how your thought process is shifting on the market because what we see on the market is that really in the big metros, the demand is really focused a lot around MICE. And that typically requires bigger hotels.
Now from your point of view, how do you see what is the size and scale of the incremental hotels that you're planning? Do you feel there is room for you to have multiple hotels in the main metros like how you have in Bombay? And do you think that the kind of ARR and occupancy, you would like to be, you can, with that in mind, what is the right kind of size and format that you're planning? And is there a way that you could also capitalize on the MICE opportunity that we see in metros?
Thanks, Nilesh, that's a great question. Really, the size of the hotel or the number of keys that you have really is dependent on the location that you're going to open a hotel in. Now in leisure destinations, where we're going to see quite a lot of our growth, there will be smaller hotels. And if you see Oberoi resort hotels, they have a very high rate and a very strong RevPAR. And I think Kallol had showed some of that in his chart today. So in city hotels, inventories will be larger. But again, probably in the region of, let's take the overall Bombay, we're sitting at the overall, Bombay. This hotel has 220 keys. And we will -- they're 20 suites that are currently under renovation really to cater to long-term guests, and the inventory will go up to 240.
So our hotels in order to provide customized service to provide a guest experience that is second to none. Inventories, a smaller inventory really helps and that's our focus. Our focus is on quality. Our focus is on service. And what we've seen is the -- with our Indian guests, the propensity to spend on premium hotel experiences has significantly increased. And at least our analysis suggests that this will become even stronger going forward. and we need to be well placed in order to cater to that business, which is a high rate, high margin business where guests are really looking for quality. So that's the first thing I'll say.
The second thing, on your point on MICE, again, very, very valid question on MICE. MICE typically, particularly leisure MICE is, if you have a unique product, you can command a significant premium on average room rates or rates and this is a very important market that we see and we want to play in, not only for the high rates that we get but also these are typically lifetime experiences in a families. So for example, a wedding or a celebration of an important family event. We want to be the hotel of choice where these events take place. So that when people look back, they associate their family's important events either an Oberoi or a Trident hotel. Now I mentioned we are opening hotels in Tirupati, in Vizag, and we're ensuring that we create adequate MICE space to really cater to this segment in a very effective and unique way. So I hope I've answered your question.
Yes. Just I think one small clarification. Now you spoke about adding 50 hotels and 4,500 rooms. And then you also spoke about leisure destinations. And in fact, if I'm not mistaken, the 2, 3 hotels that you have announced between last call and this call are all in the leisure side? And is it the shift that you are -- I mean, you have always been in leisure, but the question I'm asking is, is predominant addition, are you doing on the leisure side instead of the city hotel side?
If I had to say where the larger number of hotels will come, it will be in leisure. On rooms, not be the case because our city hotels will absolutely be larger. Just want to add one other thing that for a city hotel, if you want to be successful, you need to be in a premium location. I mean, location is critical. You can build a very hotel, but if you're in the long location, you will not generate unit costs that you need to generate. And with prices of land in city hotels being more -- really the only model in our mind for expansion in city locations is a mixed-use model and, absolutely, we are looking at that, too.
Oh, you are looking at that, a mixed-use market. Makes sense.
And we will be making some -- we will have hopefully in the not-so-distant future...
So sorry, I don't want to take up too much time, but just one small clarification I wanted.
Can I just add one other thing, Nilesh. And we will be announcing in not-too-distant future initiatives around that.
Okay. Just one small clarification. In the current quarter, we are seeing a certain combination of ARR occupancy and margin. Now that is a function of a certain mix that you have between business hotels and leisure hotels. If you are incrementally doing more leisure hotels on a round-the-year basis, in the leisure hotels, you could argue that your ARRs could be higher, but maybe the occupancies on a year-round basis, I would probably imagine that they are lower. And in that sense, could you comment on how we should think about that and the margin profile as you shift incrementally towards leisure? That's the last question.
So Nilesh, our margins in Oberoi Leisure hotels: Number one, our rates are significantly higher. Number two, you're absolutely right, the occupancies are lower because it's more seasonal. But our margins are the highest in Oberoi Leisure hotels. I don't know if I can give specific hotels, I can't, but our margins are significantly high in Oberoi Leisure compared to Oberoi City, Trident City, and they really are at a big premium over the other hotels. So expanding in Leisure will actually support our margins rather than detract from our margins. Thanks, Nilesh.
Nilesh? Yes, I think there's some connectivity issue.
No, no. That's all from my end. Thank you so much for your detailed responses.
No, my pleasure, Nilesh. Thank you very much.
We take the next question from Saket Mehrotra.
Just had a question on the Note 5 in your earnings. There was a mention of a vacant freehold land in Gurugram being converted to PPE. Is there -- are we planning any development on this? What's the rationale behind this? Just if you could tell us something about it?
This land is in Sohna. And I -- it's too -- it would be premature for me to comment on what our plans for that are. It's a lovely land in a very good location, very close to Gurgaon. But I don't want to say anything beyond that at this point, if that's all right.
Okay. And is it closer to that bit where you have Grand Bharat and all these other resorts, is it in that stretch?
Actually, it's probably better located than that. It's not far off of the new highway, so it's probably -- I mean, from Gurgaon, it will take you -- from the heart of Gurgaon, it will take you 25 minutes.
We take the next question from Sanjay Kohli. Sanjay, please unmute yourself and go ahead. Okay. We take the question from Vikas Ahuja.
Congratulations on a strong set of numbers. I have a couple of questions. Number one is related to, we have been witnessing our INR 20,000-plus kind of ARRs now for, I think, second consecutive month. So if I talk about from November, December, taking it to January and February, are we seeing this trend holding up as we are progressing in the reach of INR 20,000.
Sorry, Vikas, your voice is tweaking a bit, but I think you're saying if I've understood you correctly, your question is, will we continue to see -- are we seeing these strong rates going into the future in the months of January? While January is already over and February as well, the answer to that is yes.
Yes, yes. I mean, I was just trying to understand if this INR 20,000 is holding up. Secondly, if I look at the overall RevPAR of Mumbai, especially 34%. And if I look at some of your peers who have reported numbers, they reported Mumbai RevPAR was more like in mid-teens. So what led to this strong performance compared to maybe even your larger peer in terms of market cap?
So again, I can't talk about the competition Vikas. But what I can say is, again, the very basic stuff. We focus on the basics, that's looking after our guests. It's maintaining our hotels. It's providing service and care, really heartfelt service. That's what we are committed to doing. And being the hotel of choice and, hopefully, if -- or not hopefully, but guests value that and therefore are willing to pay a premium for it, which is reflected in the numbers that you see.
And also, you have talked about adding 15 hotels by 2030. Is it possible to give some maybe rough color on how much is going to be on managed, how much would be owned? And maybe in terms of what would be the leisure versus the corporate hotels? If any color around that would be great.
So Vikas, as and when we have information to share, we will absolutely share it. And if you could -- if we could leave it at that, I'd be really grateful. Like I said, we've announced 3 hotels. Hopefully, we will have more news to share and we'll continue to share that with you and, of course, along with all compliances in form of stock exchange, et cetera.
Maybe Vikram, I'll just add one bit to it.
Yes, please.
These 3 hotels that we're speaking about are completely new hotels. But two of the other hotels, which were already under construction and are scheduled to open, they are absolutely on track. Maybe Vikram want to elaborate on that?
No, no, that's...
So therefore, effectively in the current year, we're going to have 2 hotels coming in, which is already in advanced stages of construction and completion.
Sure. That's helpful. One final question I have is on margins. And this time, there was a very, very strong execution there. Employee cost, I think it's gone up 11% Y-on-Y. But what we are hearing that the employee cost overall for the business is kind of going up. So do you think there is a risk of this number accelerating going forward? And secondly, in other expenses, what led to -- because that has not increased, so if you can just maybe quantify if what was -- what led to other expenses being where it is?
On employee costs, this has been a -- we've really -- one of the things we do is conduct Aon employee engagement survey. And one of the things that has come out in that and it's an industry-wide phenomenon is really the balance between one's working life and one's personal life. And we've made a commitment to our colleagues that we will do our best to ensure that they have that balance. So that's really a reflection of that. It's not so much a reflection of huge wage escalation, so that was the first thing I'd like to say. On the other -- on consumption, et cetera, I don't. Kallol, do you want to?
Yes, consumption has obviously improved as a percentage of revenue because with growth in rates the flow-through to EBITDA is obviously much higher, then the growth would have happened through only increase in occupancy. But there are a couple of things for which the other expenses are slightly higher and those are all supporting the business. For instance, repairs and maintenance. As an organization, we've never shied from carrying out the repairs and maintenance and renovations that are due. That's slightly high there. We have also, over the last several years, been very attentive to ensuring that our compliances and our legal sort of cases, et cetera, come down and they're getting resolved one by one. And of course, there's some attention towards that; therefore, some consulting fees towards those expenses have also gone up.
And the other increases are generally in respect of, let's say, marketing efforts, et cetera, where we believe that our positioning needs to remain where it is and improve further. And therefore, there's a lot of impetus that we are currently giving on our marketing expenses as well. So yes, by and large, that is what it is. But on the other hand, we are also saving costs. For example, in several of our hotels, we have introduced the solar power, which has effectively -- although it has an initial upfront cost, but it gives advantage over several decades. So I think all in all, it's more or less under control and we don't see it going out of control in the foreseen future.
I was actually looking for the savings because when we look at the Y-o-Y increase in revenue, it's 26% and other expense is only 8%. So I understand power was one of the -- which led to...
So Vikas, I answered that in the first answer is when -- if your flow-through is better because of increased rates, which has always been our endeavor. Of course, occupancies are also 80% plus. So therefore, that really ensures that even if your costs would go up, margin it doesn't really matter.
And also the fact that it's -- a large part is fixed cost, so when you drive incremental revenue...
Take the next question from Sanjay Kohli.
Fantastic results. Congratulations. And it's wonderful to have seen these results come and the markets have also given you a thumbs up. Great quarter.
Thank you, Sanjay. Thank you.
Mr. Oberoi, my question was on some of these destinations where we don't have a presence currently and how you are viewing them if you were to sort of look at it from a point of view of religious destination or resort destination. I suppose a religious traveler also probably views it as a resort destination. But when looking at cities like Goa, Amritsar, Varanasi or some of the possibilities of sudden Indian resorts, how would you sort of prioritize?
Sanjay, we need to be in locations where our guests travel to and that will be our effort to -- whether it's a religious destination, a leisure destination or a city destination, our focus should be in opening our hotels in locations where guests who are loyal to either of the brands can stay with us in those locations. And that's the focus of our -- will be the focus of our expansion as well. Now in some leisure destinations, they may be destinations that guests don't travel to now because they are -- they may not have suitable hotels. And again, we want to be in those locations as well.
These are pristine, beautiful locations where one can really escape from city life that we all face, have peace, tranquility, beauty, natural beauty. And that will also be another focus, provided it's reasonably easy to get to. So within a 3-hour drive of an airport, those locations will -- 3 hours or less, those locations will also be an area of focus for us.
Okay. Great. And sorry about the technical problem with the audio.
We could hear you loud and clear, Sanjay. Thank you so much.
We take the next question from Saurabh Patwa from Quest.
First of all, congratulations for the great set of numbers. Just 2 questions, sir. One is on the current quarter numbers, they reflect a very sharp improvement in Mumbai specifically. Is it also to do with -- have we been able to do some brownfield CapEx here, which has now started -- which has led to higher rooms or I think these are to open the banquet, which was closed for some time. Has it opened this quarter?
Yes. So we actually -- we've done just to highlight some of the renovation we've done in Bombay, we renovated the main function room and the adjoining rooms. With that, we've also renovated the lobby and the lobby bar area or the Bobby lounge area. We brought in some F&B there as well. And our banqueting room, which has been renovated, has been extremely well received. I've actually attended some functions there, and guest response has been very, very positive. I had a -- I was talking to a couple who said the a member of their family was getting married and they were absolutely going to hold it in Trident Nariman Point in our banqueting area because in many ways, it's unique, the way we designed it and the way food is served and presented.
So I think that will yield results. And we've also renovated the bar area at Trident Nariman Point. We will be doing the restaurants as well in the future and we're also doing the 20 suites at the Oberoi Mumbai, which are designed really to cater to guess who want to stay longer. The beautiful suites that will be, in fact, that come on stream 1st April and 15th April. 10 will be made available for sale on the 1st of April and another 10 on the 15th of April. And these really are designed to cater to guests who want to stay longer, so they're very residential in their design. They also have a kitchenette, which is well suited to guests staying for a longer period of time.
And also the 4 floors.
Yes, I forgot. Yes, we've also renovated at Trident Nariman Point 4 floors. These, again, have been very well received by guests. So guests are not only giving us very positive comments, but also willing to pay a premium for the renovated rooms on the 4 floors, and we'll be undertaking that again going into the future.
Okay. So coming to FY '25, would really new more renovations, properties, which are under renovation, are there any large properties like Oberoi or Trident in Mumbai, which would come on -- will be back on stream in FY '25, apart from brown -- greenfield, which you've already highlighted, what else?
So we will continue to do. We have, for example, at Vanyavilas, we will add some additional tents. So there's work happening in a number of locations and we will continue to ensure that the hotel product is hopefully best-in-class.
Great, sir. Just one last question from my side, which is, so in the beginning of the call, you highlighted something on the mixed use. Will it be in lines of the Oberoi Mumbai where you have sort of some detail or is it something entirely different?
No, it will be entirely different. We don't have any mixed use today by the definition that we give towards mixed use.
We've announced Hebbal in the past.
Yes. We've talked about Hebbal. And Hebbal in Bangalore, it's overlooking a lake. It's an 8-acre site. We can develop 1.2 million square feet approximately and we'll do -- the idea or the thought process is to do commercial as well as a luxury hotel. And hopefully, we progress that and be able to share further news on that development in due course.
Big congratulations once again.
Thank you so much.
We take the next question from Amit Agarwal.
Sorry for joining the meeting late. Just wanted to know how confident are you about retaining Wildflower, Shimla? I just want your true opinion.
So Amit, I would prefer not to answer that. But if you read our UFR or what we published and the note from Wildflower Hall, it will give you all the facts that explain how confident we should be. So if you haven't read that, I'd really suggest that you read that.
No, I've gone through that. I just wanted your opinion, how confident you are, like -- how strong is our case, if you can say that.
It's as strong as what is written in that document.
Okay. And because many new properties are coming up and we are just managing the properties, so can you give some -- what is the managing revenue per quarter as a segment?
Yes, Kallol, do you want to...
The total management fees in a year, I would say, is roughly around INR 60 crores to INR 65 crores, as of today. But obviously, with new management contracts coming up in the years going forward, it will be higher.
And what is our gross margin for this INR 65 crores?
Everything, it's all flow-through to EBITDA, 100%.
100%. Okay.
We do spend -- I mean, 100% in the sense that there's obviously management time, effort and all that goes into it and a fair bit of advertisement, et cetera. But yes, but generally, management fees are taken to flow through to EBITDA almost in entirety. And that's not uniquely for us, but for everyone.
And what -- and if we add one more hotel for management services, so how much revenue that particular hotel will add?
Well, you can -- the number of hotels that we manage today are what they are about -- we have our own hotels and the total number of hotels is about 30. So if you take that away, so out of -- so on an average, somewhere it will be higher, somewhere it'll be lower, but on an average, we would earn about INR 3 crores, INR 3.5 crores a key per hotel. So -- but that's a very average figure, Amit.
Actually, I might just add, Amit. So Amit, different hotels have different terms and conditions for managing hotels for an owner. And that information is proprietary to each of the hotel company. All I can say is that we, number one, run very good hotels, very profitable hotels and at very competitive terms. And that, we hope in the future, will be attractive to potential owners to partner with us for management. So -- and these typically are there's a percentage of GOP, a percentage of top line, et cetera. So that's how these management contracts are structured.
My next question is regarding...
Amit, may I request you to join the queue again because there are a lot of participants waiting. We take the next question from CA Vikas Vijayvergiya.
My side, 2 questions are there. What is our sustainable EBITDA margin in next 2 to 3 years?
What is -- I'm not sure that means?
I think what you're asking is whether we will be able to sustain the margins that we have?
Yes.
We're confident of sustaining those margins, yes. Vikas, we're confident of sustaining those margins into the future.
Whatever in the current quarter is there?
I would say, please look at the 9 months rather than the quarter because it is -- rates and occupancies are much stronger in quarter 3 and quarter 4.
Understood. And regarding of these 3 Reliance co-managed properties there, one is Mumbai, Gujarat and another one is the U.K., what is our current status is there, sir?
I really don't want to comment on it other than the press release that was issued by Reliance. So I'd just urge you to look at that. I'm sure you've already looked at it and that's the position.
We take the next question from [ Bharat Sheth. ]
Congratulations Mr. Oberoi and Mr. Kundu.
Thank you.
We would like to, I mean, some of the greenfield that we have already announced like in Andhra and as well as some of the -- so can you give some color when we are expecting those to become operational and size of those hotels?
Yes. First of all, it's nice to have you online again, Bharat. I hope all is well. The Tirupati hotel will start with 125 keys. We've got a very large 20-acre site and if demand is strong, which we expect it to be, we will then add additional rooms. And because the way -- the layout of the site, we will be able to add more rooms without causing any disturbance or disruption to guests who are staying in the hotel. Same position is at Vizag. In fact, the site at Vizag is larger. It's a beachfront site with beautiful ocean views and that will also be 125 keys, expandable as well.
Both hotels and large banqueting facilities to not only cater to buyouts or guests staying in the hotel, but also to other demand as well. Gandikota or the Indian Grand Canyon is a smaller hotel, although we have a large site, and that also we will be able to expand as the destination gains prominence.
Mr. Oberoi, is it possible to give some time line when those will become...
Yes, certainly. We'll absolutely open in less -- in under 4 years, all 3 hotels.
Less than 4 years?
Absolutely.
And is there any color you would like to give on this Morocco and Egypt property, is their normalization is coming back or how are we seeing?
So the -- I'll start with Egypt. Egypt typically, we have the Nile cruise and we have a hotel in an area, it's called Sahl Hasheesh. It's not far from Hurghada Airport. And these hotels and the crews typically the -- let me start with the cruise. It does a well over $1,000 average room rate per cabin and occupancies are into the 90%. But since the Gaza crisis and it's largely dependent on the single largest destination from where our guests come is the U.S. and with the Israeli-Gaza crisis, demand has been severely impacted. I'm hoping this talk of a ceasefire and possibly an extended ceasefire, hope that happens. It's really tragic to see what's happening in Gaza with so many civilians losing their lives, women and children.
So I hope peace will -- there will be a piece agreement. Hostages will be released and we expect business to resume thereafter. Marrakesh has also been impacted by the prices in the Middle East and also Marrakesh was sadly impacted by an earthquake prior to that. So again, I think, once peace and stability returns, Marrakesh is such a incredible destination, very close to Europe, beautiful weather. So we hope that once stability returns, we'll see occupancies pick up. The hotel does a very, very good average room rate of over $800, but occupancy needs to pick up and we hope that will happen.
Is it fair understanding that Egypt is affected in Q4? Until Q3, Egypt was working normal?
No. It's -- Q3 was also impacted. I mean the crisis in Gaza is now coming up on probably close to 3 months. I don't -- I can't remember exactly, but it's probably roundabout 3 months. And there was talk even -- or actually, no, when the hostages were taken, I think, the Israelis reacted quite quickly. So it's about 3 months and absolutely was impacted in Q3, large, large amount of cancellations.
We take the next question from Ashwini Damani.
Congratulations for a very good set of numbers. Sir, just wanted to understand a few things. If we look at the average room rates, which is closer to INR 20,000, this translates to an approx U.S. dollar rate of around $240. We were looking at some datasets from Hotelivate. And in the past, this has peaked at around the same levels. Do you think that there will be enough and more pricing power or -- I understand that these rates are similar to what these rates were in 2007. But do you think that there will be a breaking point beyond which you may not have a pricing power?
So Ashwini, I think it's a great question. I mean I really thank you for asking this question because my personal view and my perception is that India, and I'm not only talking about our hotels, we have, as a country, very good hotels. Whether it's Oberoi, Leela or Taj and others. High-quality hotels, good service, but we're -- relative to what hotels, a quality of a hotel like this would cost elsewhere, we are extremely underpriced. And it's not -- I mean, I would say there is no reason why our hotels even in city locations, our leisure hotels do rates of close to $1,000 a night. But I don't see any reason why our city hotels cannot come close to that over a period of time.
I think with India, moving in the direction it is, with disposable incomes going up sharply, with people looking for quality experiences, with people willing to pay a premium for quality, I see substantial upside in average room rates. And I will still maintain we are extremely underpriced right now and there's no reason why that will not increase over time.
So just a counterquestion to that. There were newspaper reports also and as a traveler myself, I sometimes feel that the hotel rates in India restrict our traveling. Probably, sometimes it's cheaper to travel to Southeastern countries than travel within the country for the same experience. So if I could go to a Goa, it's costlier than going to, say, a Thailand or something or even a Vietnam. And hotel rates are paying a key role, air fares too, so how would you address that?
Yes. I think -- again, I think I covered that Ashwini, but again, a really valid point that you raised. Oberoi Leisure hotels, like I mentioned, have rates of close to $1,000 a night, certainly in winter and it's a little bit lower in the summer months. So they are comparable to other hotels around the world for that quality.
So if you stay at let's say, I'm just trying to pick a city. If you travel to Thailand and you stay at one of the leading hotels in, for example, Phuket or if you travel to the Maldives, they're frightfully expensive than Maldives. But Phuket, you'll be paying for the top hotels, the [ Aman ] is a very nice hotel in Phuket. It would have rates of well over $1,000. And there's no reason why our hotels are any less. In fact, I would like to think that not specifically talking about [ Aman, ] but in general, Oberoi leisure hotels are certainly at par if not better than any other hotels around the world of that caliber. So -- but our city -- our leisure hotels are in that price range already where we're not [Technical Difficulty].
Please just hang on for a minute. I think, there's some connectivity issue. Please just give me a minute. I'm just -- I'm speaking with the management.
Navin, I don't know if you can hear me.
Vikram, yes, we can hear you.
Sorry, Navin, the line -- I don't know what happened. But just to finish, I don't know if Ashwini is still online, but just to finish the question you had.
Sure, sir. I am here.
Sorry about that Ashwini. I don't know what happened. But I think the real opportunity lies in our city hotels where rates are very low. I think the upside in Oberoi Leisure hotels is limited. It may increase maybe not significantly, but the opportunity really lies in city location [Technical Difficulty]. Can you hear me?
Yes, sir. I think I got your answer. Your answer gives us a lot of confidence.
I take the next question from Rajiv Bharati.
With regard to Slide 11, where you have given market-wise data in terms of RevPAR. And then if I collaborate this with, let's say, last year same quarter data and compare it against, let's say, pre-COVID number. So your Bombay RevPAR has grown at close to 14% CAGR versus let's say pre-COVID versus, say, rest of the market, especially Delhi is still at 10%, and there are markets like Cochin, Kolkata are 7% CAGR growth as compared to pre-COVID. So what would it take for -- I mean, is it possible for everybody to catch up on Bombay in terms of, let's say, I mean, versus pre-COVID we have 72% higher?
This is the -- so again, it really, Rajiv, will go city by city. I can't give you an answer that says everybody is going to catch up. It really varies from one -- actually on the hotel itself. So actually, you talked about Cochin. Cochin is unfortunately one of our worst performing hotels and the growth you see is on a low base. So really, I can't answer that question. If you -- is there a potential for Delhi to improve substantially, there is. Calcutta is a little bit more price-sensitive. Bangalore, there's some headroom. So it really depends from location to location.
That helps. But my question was, for example, last -- I mean, if you compare Q2 data, Delhi was, let's say, in terms of recovery versus pre-COVID, it was, let's say, the top performer in your portfolio at 16% CAGR. And now it is Bombay, which is at 14% CAGR. And you explained partly that you've opened some facilities in Bombay, which helped. So will it take -- would you have to invest in other properties for this rates to catch up in other markets as well?
So our experience has been when we invest in a hotel, the improvement in performance is substantial. The Oberoi New Delhi is an example. The Oberoi Mumbai is an example. The renovated floors at Trident Nariman Point are an example. New restaurants in Bangalore, we renovated the F&B in Bangalore a few years ago, we saw a substantial improvement in those restaurants' performance. We're doing that in Bombay at Trident Nariman Point again later on in this coming -- in this financial year.
So we are absolutely committed to improving hotel performance. And if we believe that requires investment? Absolutely, we will make that investment. And we are extremely thorough in our analysis, in the diligence that we do. We don't base it on -- we all are passionate about what we do. We love what we do. We -- it's our life, right? But at the same time, we don't mix passion with fundamentals and with analysis. So we need to ensure that we spend our money wisely and we get a return for the money that we are spending.
And sir, on Slide 8, particularly, the Indonesia part, you have seen substantial improvement in occupancy. Is there something to read there? Have you made some progress in...
I think there's really -- we made some -- I wouldn't say anything -- we made some fundamentally changes to how we were positioning those hotels and we were much more vigorous in monitoring, adjusting bar pricing, working with travel partners because it's all leisure business. Working with travel partners, even basics like the contracts, ensuring that it's a win-win for the hotel and for our travel partners. So no real rocket science. What we do is quite simple, but we try and execute well. And as a result of that, we've seen that improvement.
Look, my question was that asset...
And in Lombok, it's been -- sorry, please go ahead, Rajiv.
Sorry, please, continue.
No. And I was going to say in Lombok, the improvement has been substantial.
I was under the impression that those assets require some renovation because of which the occupancy was low. And I was wondering whether we have made some progress on that front.
So the hotels do or actually -- so let me take Lombok. Lombok is even though the hotel is not a new hotel, it is -- the product doesn't need anything major. The rooms are exceptional. The hotel is really first class. And it's maintained. If you go to the hotel, it looks brand-new. We've maintained the hotel. So really nothing substantial needs to be done at the Oberoi Lombok. At the Oberoi Bali, there's an opportunity to really reposition that hotel to take it to a rate of -- in keeping with other Oberoi leisure hotels. So anywhere between $800 to $1,000, and that's where the opportunity lies.
And if we want to capitalize on that will involve really upgrading the hotel product. We believe that's the right thing to do. We believe that the hotel could be a market leader. It's got an amazing location, very nice beach. It's a unique product, and it just needs a product upgrade in order to drive those kinds of average run rates with a strong occupancy. And our analysis has shown, we looked at, I think, probably the last 15 years of date for the comp set in which we currently operate. We also looked at the comp set where we want to operate. And clearly, the numbers and the growth is coming in the concept that it want to operate in the premium, premium segment. So that's where we believe the opportunity lies.
We take a question from Dhruv Agarwal.
Congratulations on the very good set of numbers, sir. Sir, what are the expecting plans going forward like in, say, 2 to 3 to 4 years. And along with that, what would be the CapEx that would be required for the site expansion, sir?
Dhruv, you really have to forgive me for this because I'm not going to answer the question the way you want me to answer it. So please forgive me. But we are committed to growth and as and when we have details to share with you on individual hotels, we will share that information with you. But other than that, I think the proof of the pudding is in the eating. So let us make -- let us work hard towards growth and let's continue to make those announcements as and when they happen. But please rest assured we are absolutely committed and focused on driving growth and we are financially in a very good position to do that.
Okay. Sir, as on date, what would be the bifurcation between number of rooms between like business hotels and the leisure hotels? And going forward, what would be the ratio between these business hotels and leisure orders would be?
Yes, Dhruv, I think these information are already available in a number of our presentations. If I can request you to just go through the presentation in detail, it has the detail.
Okay. Okay. And so the last one...
And towards the last slides, you'll get in detail.
Okay. Sure. And just last 1 question, sir, like what kind of RevPAR growth or like ARR growth we can expect going forward in the occupancy level, sir?
I don't see any reason why demand will not continue to be strong. India is in its golden years of growth, and we see that continuing. And therefore, we see demand will reflect that for hotel accommodation. And Kallol also shared in his presentation, really growth is coming in the premium segment, which is where the segment where we play and where we would like to continue to make.
Okay. Sir, can you please quantify some percentage? Like if you give some color on that going ahead, what would be the percentage growth in ARRs or like occupancy levels?
Dhruv, I haven't prepared that number and I don't want to just give you a number. All I can say is that it's going to be very strong. And I'm hesitant to give a number without doing proper analysis.
Kallol, do we have time to take just one last question and a few other Q&A board.
Maybe just one last question, Navin.
We take the last question for the afternoon, Udit Sehgal.
Sir, I wanted to know a bit about the airline catering business. I mean, are we doing domestic and international and what is the trajectory we see going forward on that?
So we are very positive about that business. We are -- our focus has been and will continue to be on international, although we are doing some domestic as well and we have a strong domestic airline partner that we work with, and we will continue to work with them and nurture that very important relationship we have as we have with our international airlines as well. Kallol and I have both -- and the gentlemen who heads that business are very positive about the future of that business. And that's reflected in the numbers that you -- that Kallol has already shared with you.
But sir, what is the scope of scaling that up? And I'm sure there could be operating leverage at play as well. I mean we could expand the margin...
Yes, Kallol can answer that question.
Yes. So Udit, we are already -- we still have a lot of capacity to utilize because our kitchens have been built to be very modern and contemporary. We've just renovated our Bombay kitchen. So we have plenty of capacity. So therefore -- and you know that there are several airlines, even within India, which are amongst the highest purchasers of aircraft in the next several years. So therefore, we don't see a dearth of capacity and we have the capacity to fulfill that as well already.
One last question, Mr. Oberoi. You had said in the starting, you see certain areas where we could further improve. If you could just share that with us?
I can't remember the exact context in which, Udit, I said that in, so if you can just remind me then I can be more specific in my answer.
Somebody was congratulating you on the results and you said I think there are some areas we can still improve further.
We can improve in every area. We cannot be complacent. I mean we have to strive for perfection in everything that we do and perfection is a moving target. So that's one. But I think maybe -- and I'm not sure, you have to forgive me, I don't remember exactly the context in which I said this, but I think there is opportunity to look at any hotel, any area of our business that could be performing better and really drive or create a plan that helps improve that performance. And so that's one. The second one is that when -- if we continue to upgrade our product or our hotels to really be at a premium level, that always yields results and we've seen that on multiple, multiple occasions. So we will continue to do that as well.
Navin, thank you. Thank you so much and...
As we've run out of time completely, Kallol, can we take the questions on the Q&A board or should I mail them to you?
Yes, I think if you mail the questions to us, like in the past, we will be more than happy to address them. And of course, from time to time, we keep meeting investors through various channels. So we are happy to answer any questions going forward.
Since we run out of time, I'd like to hand over the webinar to Vikram for any closing remarks.
No, Navin, just other than thanking everybody for participating and thanking you other than that, nothing. And I enjoyed speaking to all the participants and doing my best to answer the questions along with Kallol. Thank you for all your good wishes. We really appreciate that very much and it gives us additional inspiration to continue to do the best we possibly can.
Thank you.
Thank you very much, Vikram, and Kallol for taking the time out, and I look forward to hosting you again for the full year results now. Thank you and have a nice day.
Thanks, Navin. Thanks, so much. Cheers.