Indian Hotels Company Ltd

NSE:INDHOTEL

Earnings Call Transcript 2022-Q4

[Operator]

Good day, and welcome to the Indian Hotels Company Limited Q4 and FY 2021/'22 Results Call, being hosted by Mr. Puneet Chhatwal, Managing Director and CEO, IHCL; and Mr. Giridhar Sanjeevi, EVP and CFO, IHCL. [Operator Instructions] Please note that this conference is being recorded.

At this time, I would like to turn the conference over to Mr. Puneet Chhatwal. Please go ahead, sir.

[Puneet Chhatwal, executive]

Good evening, everyone. Apologies for the delay of 30 minutes as there was some technical glitch and the interface with the systems, not necessarily at our end. But here we are and ready to walk you through our Q4 and full year results.

Let me start by the picture of Taj Exotica Resort & Spa that we opened on The Palm last month in Dubai, with maybe the longest pool in that marketplace, a 75-meter pool. This is a 325-room property, making our total number of hotels in operation in Dubai to 3, totaling 800 rooms, all on management contracts, with the fourth one scheduled to open in a couple of years, which is the Deira Waterfront Development.

Moving on, some awards that Travel + Leisure recognized our newly opened Taj Wellington Mews in Chennai. Some of you will recall this hotel is run by all the women professional from General Manager to back of house to front of house to food and beverage to the security services to everything possible. Recently, the HICSA took place in April, the first week of April, the Hotel Investment Conference-South Asia. In luxury and upperscale hotels, Taj Lakefront Bhopal was declared the winner for the best new hotel. In the upscale, the Vivanta in Pakyong in Sikkim, and the Ginger in Vishakapatnam in the budget and economy segment. So 3 recognitions in all 3 important segments that we operate in.

Moving on to some macro views. There are certain challenges on the global GDP growth estimates, especially with the tension in Russia versus Ukraine. However, India still continues to be strong, and we are expecting GDP growth north of 8% in India. So I think that is quite good, definitely, for our industry not forgetting where we are coming from.

As for STR, the performance has come back in -- towards end of March and early April above the 2019 level in terms of the RevPAR recovery. Leisure markets continue to outperform. There is strong recovery in business demand, especially led by both the national capital of Delhi and the commercial capital of Mumbai, followed by Bengaluru. And as of each wave, we will see that the recovery is faster. The first wave, the recovery, as we remember, was followed by a lockdown for over several months. The recovery took some time. With the second wave, the recovery was faster. It has gone into like a V-shaped mode. And so was the case after the third wave with Omicron as we popularly call it. And within this, IHCL continued to outperform the industry on the RevPAR level.

The industry is leading the rates and occupancy recovery at the moment, and also IHCL is still continuing to outperform. Our average rates have already reached on the domestic level, on the same-store basis for hotels that were opened until '19, '20. We're at a 94% recovery in average rate. On the rooms per day, our occupancy is 81% recovery. On the RevPAR, it's 76% versus industry, which stands at 65%. This is data which we have taken from sources like STR.

Industry leading recovery also in various key markets with the exception of Rajasthan. We are leading in all markets. On all India basis, as you saw, at 65%, and we were at 76%. At Goa, we're at 100% of pre-COVID level, and even places like Chennai are doing well. However, it is important to note the 3 key cities, which have a huge impact in the industry getting to the pre-COVID level as of April are performing at like Delhi at 121%, Mumbai at 118% and Bengaluru at 102% in terms of the forecast or the expectation for the actual April numbers as we get close to that in the next few days.

On the industry-leading benchmarks, which we will be taking you through in this call, one of the -- besides the RevPAR recovery where we are the industry leaders, I think we are also leading the industry in terms of building our pipeline for 2 consecutive years based on data published by HVS. So both on signing a number of keys and number of hotels for 2 consecutive years, I think Indian Hotels has been posting industry-leading figures, with the last year getting us 19 hotels and more than 2,000 rooms added to our pipeline.

As I said just now, 19 hotels were signed, but also 13 were opened. And of these 13 openings, there were 3 with the Taj brand, 2 with SeleQtions, 5 with Vivanta and 3 with Ginger. In Q4 itself, we had 5 signings and 5 openings. And we are very proud to also share that today, Indian Hotels with its hotel business and not the home stay, along with its hotel business covers more than 100 locations in India, more than 29 states and union territories and has a total portfolio of 215-plus hotels.

If I want to add home stay with all our brand, then we would be north of also 215 locations in India. So we are ideally positioned and poised to support the Dekho Apna Desh campaign, which we had supported 6, 8 months ago, and we are hoping to relaunch it -- or we are planning to relaunch it in the next 4 to 6 weeks.

In terms of our pipeline, which I just mentioned, we have 60 hotels totaling 7,500 rooms. This is also industry-leading on the Indian subcontinent. And as we can see that other brands are continuing to grow. More importantly, via management contracts, as 74% of our pipeline is driven by fee-based business, 26% is non-fee-based business. That does not mean, and I want to highlight this that these are investments. Note this 26% includes a couple of investments, but it's mainly the Ginger operating leases because that is our model -- preferred model for Ginger is to do operating leases as they drive higher margin and give us higher share of the revenue versus a management contract for hotels, which would be having reasonable or not that very big top line.

In terms of by brand, I think all brands are growing and growing very strong. Obviously, Ginger at the moment on the pipeline is strong. And that is absolutely in line with our strategy. We want to stay very exclusive. We want to stay luxury focused. We want to be very selective when it comes to the crown jewel of the nation, and that's the Taj brand. And at the same time, we want to get to very quick scale with the Ginger brand. So 40% of our pipeline with Ginger is very good. And definitely, this year, the openings in Ginger in this financial year should cross a double-digit number. So if that's a guidance we can give, yes, we're giving this guidance that we will definitely cross a double-digit number in Ginger for the number of hotels opened, obviously, subject to no more COVID and the waves and the lockdowns or any other kind of event beyond the reasonable control of the management.

Moving on. Also, we are industry-leading innovation through new businesses. As you're all aware, of course, Ginger is a name that we have had for a long time, but the whole -- the entire brand has been reimagined, the logo, the look and feel, they're what we call the Lean Luxe positioning. And Ginger actually posted in Q4 a 96% recovery of the top line. Our aspiration is to quickly get to 100 to 150 hotels. And having said that, I think also our 2 new brands, relatively new brands, both born almost during the pandemic, one 3 months into the pandemic, one 3 months before the pandemic is Qmin on the home delivery QSR and the food truck businesses today in 20 cities. They did a GMV of INR 66-plus crores. Our aspiration is to increase our footprint to 25 cities this year and keep accelerating GMV growth.

On the Ama, it's the same. We are 80 properties today in 40 destinations, and our aspiration is to grow to 500 properties and grow our market footprint over the next 3 to 5 years.

Moving on to our industry-leading new loyalty program. Yes, I'm talking here about Tata Neu. It's off to a good start. We expect significant upside, especially for our other brands, like Vivanta, SeleQtions, Qmin and even Ginger as and when they get -- start benefiting from different promotions from Tata Neu. This is also very much in line with our strategy to transfer our loyalty to a platform, which benefits from various group companies and various businesses, increasing our reach to our customers, not by doubling that base or tripling, rather over the next 3 years to have a 20x or a 30x of what we were able to achieve on our own.

I think very important for us was the launch of our ESG plus CSR plus whatever responsible business towards nation building has been as the oldest operating company, and we have given this the name of Paathya, which stands for the path that we'll embark upon, which constitutes of 6 Ps or the 6 pillars in doing justice to the wastewater, in skilling of more than 100,000 youth over the next 5 years, in saving energy, in having 100% of our hotels EarthCheck Certified, having -- going beyond the single-use plastic free, all our hotels would be single-use plastic free over time and adoption or embracing the UNESCO guidelines on sustainability, on heritage, preserving heritage, contributing towards building of heritage and also all our meetings would migrate into green meetings. So our conference business would be supported by our green meeting concept, which we have very proudly called Innergise, which is kind of giving strength to your inner self by introducing special kinds of food, special kinds of paper, pens, all the 360-degree value proposition that goes with it.

A few other awards that we got recently is the India Risk Management Awards organized by CNBC, which is Master of Risk in Business Model Adaptability, Risk in Brand and Social Management -- Masters of risk in Brand and Social Management and a Special Jury Citation for Risk Management and Hospitality Sector. In hospitality, they have put us in the bucket of the large cap category.

In terms of our delivery of our promise to deliver in order for me to summarize, yes, we are leading the recovery. As well as the industry is concerned, we're leading the growth and the growth in our pipeline. We're leading the footprint in India. We're leading the pipeline in India. We are industry leading today in innovation with F&B concepts, ESG concepts, as you have seen. We are leading today with the health of and loyalty, and we are leading in risk management and recognized by the recent awards.

Moving on to financial performance. In Q4, we did a revenue a little short of INR 1,000 crores, which is a 52% increase over Q4 of last year. Our EBITDA grew by 192%, from INR 83 crores to INR 242 crores this year. And we declared a profit after tax of INR 74 crores against a loss of INR 91 crores for the same quarter last year.

Year-to-date, however, the PAT is still at a loss, but it has come down significantly, like almost by INR 472 crores, the variation. But the EBITDA has been positive for the full year at INR 560 crore versus a loss of INR 197 crore at that level. And our revenue reached 85% of the pre-COVID level at INR 3,211 crore.

The quarter 4 was also interesting in terms of if you look at the top line and -- which I just now mentioned is at INR 955 crores. We were able to post our highest EBITDA margin in the last 10 years at 25.3%. Pre-COVID and 10 years, almost -- or 8 years before that, we had been doing north of INR 1,000 crores in revenue, but our margins were shorter. This means our business model that we have embarked upon in separating our businesses into traditional and into new businesses with the new ones being our efforts with our private membership club, our home delivery, our home stay, our Ginger brand and the traditional, we have the right tool, and the total expenditure is still less by 24%. Of course, we are also at 85% of pre-COVID. But let's not forget the inflation factor. A lot of costs have increased in the last few months given the price of fuel, et cetera.

So with that, I think the expenditure, the management and the hotels and the general managers have done a good job in keeping a strict control on the cost and our corporate overhead versus '19/'20 to be despite adding so many new businesses and new brands to our portfolio.

We are also industry-leading in terms of our balance sheet with the help of the rights issue and the QIP. Our consolidated net debt actually becomes a positive. So as you can -- as you might have noticed, all of you, that we are 100-plus cash positive now. So that is good news. We'll keep repaying as and when the debt mature and get due, whether it is a debenture or payments getting due very, very soon. In Q1 and Q2, there is one payment, which is due in April of next year. So that, we'll have to wait.

Finally, we are very pleased to announce 23rd of May as the Capital Market Day. And on that day, we will be unveiling IHCL strategy for the future. We embarked on this journey on middle of February 2018, when we announced Aspiration 2022, and now is the time to chart the course for the next 4 to 5 years. We will be sharing all those details and all the plans with you on 23rd of May, which is almost in 4 weeks from now. And we will be inviting all of you to join us physically or digitally or whatever other medium that you might prefer.

With that, I hand over to my colleague, Giridhar Sanjeevi, the Executive Vice President and the Chief Financial Officer of the company.

[Giridhar Sanjeevi, executive]

Thank you, Puneet. I think -- moving on to some details in terms of the performance. I think this is just -- this chart is really the progression across the quarter. I think what we have seen is that there has been a steady progress across the quarters. Q4 was impacted because of Omicron in the month of January. But it is good to see that even on a lower base of INR 955 crores, we were able to maintain an EBITDA margin of 25% and a profit after tax of INR 74 crores.

Next slide, please. On the stand-alone, similarly, we had a top line of INR 675 crores, which represented an 89% recovery from '19/'20. The EBITDA margin came up 36% in stand-alone for Q4 which represents, again, a very important milestone in terms of driving through EBITDA margin despite the Omicron in the month of January. And the profit after tax was INR 86 crores in stand-alone for the quarter.

In terms of the revenue and recovery across the key cities. As we look at the different cities, what is very good to see is that for January, February and March, consistently, the business continues to improve across all the cities in there. And most importantly, Mumbai, Delhi and Bengaluru, the recovery in March '22 versus March '19 was at 84%, 79% and 94%. And those 3 key cities matter to us. And in April, as we pointed earlier, it has crossed 110%. So this is something consistent with what the entire industry is experiencing and we continue to lead it.

On the international stores or hotel same store, once again, we see very strong performance in markets like Dubai where the recovery was 158%. U.K. came at 95%. U.S.A. in March '22 was at 58% as compared to March '19, and the other cities of Maldives, Africa and Sri Lanka did well, though Sri Lanka has, of course, been impacted due to the recent economic challenges.

I think one of the things that we are seeing is that -- this is a report from Morgan Stanley, which you're also seeing is that hotels possibly offer a hedge to inflation globally because the pricing is determined by demand and supply. And at this point in time, we are seeing strong demand. And as we have highlighted in earlier presentations also, there is a supply impact which is definitely we'll see. Of course, inflation is impacting some of our costs in terms of fuel and other costs. But overall, I think the hedge to this inflation is something that we continue to see so far, and we will continue to keep track of this.

If you look at the domestic same-store in Q4 and the gap between -- the difference between leisure and non-leisure, what we are clearly seeing in the occupancy is that the leisure occupancies continued to grow in the quarter up to 64%. The non-leisure grew to 73%, a sharp jump through the quarter. Ginger owned went up to 61%. Similarly in ARR, we continue to see a bump up in the leisure ARR at INR 14,982. We saw the non-leisure ARR also go up with the resumption of business travel and business conferences here in the nonleisure ARR. And Ginger also grew it's ARR also grew its ARR.

On the international geographies' results. When you look at the occupancy, the occupancy in the U.S. climbed up. U.K. went up sharply to 62%. Dubai is very well at 80%. And Maldives at 95%. All the ARR -- U.S. went up, U.K. has picked up and similarly, Dubai has been better in the month of March. Maldives, of course, has also improved. So international, also domestically, is consistent in terms of improved occupancy and ARR.

In terms of the key revenue drivers, very clearly, there are 3 key revenue drivers for us, which is revenue recovery, the asset-light growth and the new and remanaged business. Occupancy business was about 52% overall, which represented a 13 percentage point improvement. The ADR at INR 9,717 improved by 32% and RevPAR at INR 5,103 improved by 76%. These are stand-alone 12 months current year over previous year. On the asset-light growth, we had a total portfolio of 235 hotels, 28,000 rooms, including the pipeline. New openings were 19 -- 13 openings, with 19 signings. And management fee was INR 231 crores. In fact, if you remember in earlier discussion, we were earlier expecting management to close at around INR 185 crores to INR 190 crores. We're happy to report that we've got INR 231 crores of management fees, which represents a return back to what we earned in the pre-pandemic period. In fact, this is better than that.

On the new and reimagined businesses, Ginger, the portfolio of 85 hotels, Qmin in 20 cities. Ama, we had 80 bungalows. And The Chambers is about INR 85 crores of income in terms of membership and asset fees. On top of it, of course, is the business that they generate in terms of sales and parkings actually. So therefore, Chambers also did well.

The next chart really shows graphically the growth in management fees with Chambers. And as you see, the growth in management fees has bounced back to INR 231 crores and Chambers has also bounced back to the sort of INR 85 crores.

In terms of some key revenue metrics. If I look at the full year, as we discuss the full year and we'll see that the -- it has been a steady progression in terms of the occupancy, ARR and the RevPAR, actually. Q4 was slightly muted because of the Omicron impact in the month of January. Similarly in terms of F&B revenue -- room revenue, F&B revenue and other revenue, they continue to show a steady growth. Similarly, the revenue metrics on an enterprise basis on domestic also showed a steady growth in terms of occupancy, ARR and RevPAR. Similarly, room revenue, F&B revenue and other revenue.

In terms of fixed costs and corporate overheads for hotel, the chart on the left that you can see on Slide 37 in the presentation is that the fixed costs control continues. I think while the fixed costs went up from INR 1,393 crores to INR 1,590 crores during the year, driven by the increase in business. I think you will see that as compared to '19/'20, the fixed cost for hotel has dropped from 24.4% to 18.9%. Similarly, the corporate overheads, which now has come down from INR 347 crores to INR 249 crores in the current year gives you oversight on additional hotel, I think the productivity has significantly gone up and the corporate overhead for hotel has come down from INR 3.21 crores to INR 2.11 crores.

Performance of key subsidiaries. I think what is good to see is that on the U.S. front, the cash loss funding in Pierre came down from INR 164 crores in the prior year to INR 56 crores in the current year. St. James Court, did very well in terms of performance, came in at EBITDA positive. PIEM Hotels was good. They were able to also dilute -- get the benefit of the acquisition of Ginger shares, which did help, and therefore, they came in at a small EBITDA positive. Roots Corporation today is a 100% subsidiary. We have now acquired all the shares, and Roots Corporation did very well with an EBITDA of INR 43 crores during the year.

In terms of the equity issues and utilization, we raised INR 3,943 crores through the QIP and rights issues. Till date, we have paid about INR 2,873 crores. In the next few days, we pay another INR 500 crores or so. What will really be left is really the debt will come down to 0 in all places, except in IHCL India, INR 450 crores, which was a TLTRO debt, which was taken in 2020, which is an unsecured debt with a 3-year bond. We can prepay that, but that comes with a premium, as in a high cost, so we'll not retain it. This will be paid in April '23. And the balance is paying debt in the U.K., which will come down by INR 200 crores immediately, and we will continue to bring it down.

And for the markets that we -- because of the joint venture, we don't put in money as -- the corporate debt, we actually increase shareholding in the process. So therefore, if you look at the end views, I think part of it has gone to growth, which is Ginger acquisition, consolidation of shareholding in Sea Rock and also increasing shareholding in subsidiaries like St. James.

Cash position. This is, of course, as of 31st of March, it just shows a high liquidity of INR 1,902 crores, but as we get the debt repaid, this should start coming down. I think the balance lies really on the details in terms of standalone and consolidated, and these are in the presentation, which has been uploaded both on the stock exchanges as well as on the website actually.

Now I think we are open to questions. And any -- we can also have detailed discussions tomorrow for any follow-on questions. Thank you.

[Operator]

[Operator Instructions] We'll go to our first question.

[Nihal Jham, analyst]

This is Nihal Jham here from Edelweiss. Sir, 3 questions from my side. If I noticed in the presentation as you have given the recovery and the rates also for all these markets. In fact, the rates in April for literally every location that the major cities is actually much higher than April 2019. And the increment is even more than what traditionally we've seen in normal times how the hotels have done. So the first question was how sustainable do you think this recovery is? Specifically, if I have to point out like, Goa, say, at 150% of pre-COVID level. So that will be my first question. I'll come to the other 2 after that, if that's fine.

[Puneet Chhatwal, executive]

Nihal, the recovery is strong. Whether it's going to be 110%, 115%, 120%, that time will turn because it's also dependent on a lot of other factors. Having said that, let's not forget the real international traffic has not yet started. So that's a hidden upside. You might have opened the air space and allowed people to come in, but it's not that the international business travel has picked up like it used to be at a pre-COVID level. So demand is still being very strongly driven by domestic. And with that, I think even if it was to weaken a bit, I think the international will start compensating as time goes by.

[Nihal Jham, analyst]

Understood. If I could just take a related question for a city like Delhi because for Mumbai, we are aware of what the drivers are in terms of, say, IPL and rates being strong. Specifically for Delhi, with say, corporate travel also at this point in time not completely recovered, and still, rates have touched pre-COVID for us. So what are the drivers there that is leading to such kind of recovery in the rates?

[Puneet Chhatwal, executive]

No, I think the -- I don't agree with you that the corporate travel has not picked up. You have a lot of delegations coming in, and also Indian delegations are going abroad. So that is really a driver that was missing for the last year or so. And now whether it's the U.K. premier coming in, and everybody else coming in, it brings with them a lot of other people, and they are able to pay higher rates also. So the city gets them busy and the rates increase. It's a very simple formula. The other thing that is aiding for sure, is I don't know if I have heard of a new hotel that opened recently in Delhi. So if the demand comes back and if supply is contained, obviously, the rates should go up.

[Nihal Jham, analyst]

Understood. That's helpful. My final question was on our cost reduction target growth. You have been guiding, I think, for a number of around INR 300 crores. I just wanted to confirm that does that number stay or given the inflation or our aggressive plan, you may just want to revisit that target?

[Giridhar Sanjeevi, executive]

Sure. So I think what's happening on cost is I think at this point of time, I think we are seeing very strong revenue recovery. Clearly, in terms of wage inflation, there is a wage inflation for sure. And also, I think in the last 2, 3 years, we have not had some wage settlements with employees actually. So those we need to cut.

As far as the food cost inflation is concerned, our ability to price is definitely there in terms of increasing the revenue -- the pricing on both our SMB as well as on room rates we are able to do that. So therefore, my sense is that we will have to look at it together. And I think the business definitely has come back. So my sense is the leverage we get it in terms of managing inflation, driving top line and managing expenses will continue. And hence, which will be better for the margin.

[Operator]

We'll go to our next question.

[Vikas Ahuja, analyst]

This is Vikas from Antique. I have 2 questions. First, looking at the April trends, especially for the corporate-led cities, like Delhi, Mumbai. Is it fair to assume we will be crossing pre-COVID revenues in FY '23 provided that there is no fourth wave? Or there is a lot of pent-up demand you think which helped April? And also if it's possible to give the mix of corporate travel in those metro cities currently? This is my first question, sir.

[Puneet Chhatwal, executive]

Vikas, there is -- we've -- I think I've made that comment already 4 weeks ago that March, April, May is trending much higher than March, April, May '19. We don't see any change in that trend. Corporate is as strong, as is any other social events. So people are happy to go out. People are happy to be in a larger gathering. And there are some people who still wear a mask and take the necessary precautions, but it's not like it was 6 months ago. And so partially the pent-up demand, I think, it's slowly getting absorbed. I think it's now we are getting back to the normal demand.

And if you look at including your own side of business, I think a lot of your own sector companies are beginning to have events happening in the next few months because we do that and invite if we can come and be a speaker. So those events, awards events, these are all happening in person. It's not any more digital, what it was till maybe 3 months ago. So all that brings in corporate demand, and these 2 cities, both Delhi and Mumbai are very important. Of course, as we all know, Mumbai is very strongly aided by the IPL. A few of the hotels are very busy because of that. And maybe that will also reflect in the rates. But I think also demand is back, those rates will also go up. So you can expect very high occupancies in cities like Mumbai for the month of April and for the month of May.

[Vikas Ahuja, analyst]

Sure. And also, just coming back to what Nihal asked on maybe the margins. So in your opening remarks, you have talked about the cost escalation. It would be great if we can get some kind of maybe guidance on margins for FY '23? And finally, the bookings to Tata Neu, what kind of trends we are expecting there? And is there any take rate we share with them for the bookings? Because I understand it's one group, but is there any take rates, like, you share with the hotel?

[Puneet Chhatwal, executive]

Not really. Tata Neu is one of our biggest opportunities in the years ahead. It will take time. And it's been launched only on the 7th of April. And that is exactly 20 days ago. So you have to have at least 100 days of operations to start seeing a lot of tangible results. We are on that platform because it was a closed user group since 6, 7 months now. And we definitely saw the strength of the platform because it is giving you an incremental reach to a lot of customers, which you otherwise don't have, especially for our newly launched or new businesses like the Qmin or the Ginger, which will go online on Tata Neu as of June, should be very positive going forward. So I think all in all, that help as a loyalty platform is good, and we are very excited about that.

And I think data needs to mature. So we would be happy to share data with you, but I think 20 days is not a benchmark. So when you launch, you promote -- a lot of people are putting promotions, discounts, et cetera. I think it will become more relevant than the sum of -- it has stabilized over a few months' period, so that you can see what are the visible trends and how many enrollments have actually happened? At what million you are? How many people have you been able to transition to that platform who were already your members? So a lot of that work is happening as we speak. So kindly bear with us for another at least 60, 70, 80 days.

Let's give us -- give ourselves at least 100 days to give you any form of guidance or outlook. But for us, it has to be more positive than it was. So for us, it's a superior reach than what we could have done on our own. That's what we can see.

[Vikas Ahuja, analyst]

Sure, sir. And finally, this one's more for Giri, sir, on any FY '23 margins, anything that you can -- incremental we can talk about?

[Puneet Chhatwal, executive]

What we can say is that when it comes to margins and that kind of guidance, you'll have to be patient until the 23rd of May. We will do it together on the Capital Market Day, and we will announce the strategy. Having said that, you know our company well, and you've been seeing what we did in Q3. You can see what we have done in Q4. You have a certain thing about the margins and belonging to the group we belong to and given a 120-year history are the oldest operating company of the group, I don't think we have any kind of tricks there to increase margin. So actually, we are very proud and very happy that we have consistently grown margins and then came COVID, and then we all went to lockdown and was a problem.

But since things have started opening up, we have reembarked on that journey. And it's mainly driven through a lot of efficiency. See, when we announced Aspiration 2022, we were at 17% margin on the EBITDA level, right? And we were a portfolio of 150 hotels. Today, we are at 235 hotels portfolio with obviously 16 pipeline, but our corporate overhead is reduced by 28%. And last year, even it was higher than that. So -- and we have more brands and we have more businesses today. So I think that itself should give you, based on the actual figures, some idea of what that means.

[Operator]

We'll take our next question.

[Sumant Kumar, analyst]

Sumant here from Motilal Oswal. My question -- can you hear me?

[Puneet Chhatwal, executive]

Yes, Sumant. We can.

[Sumant Kumar, analyst]

Yes. So my question is regarding management contract. Can you talk about for FY '23, '24, next 3 to 5 years, what is the run rate of opening management contract room for X of Ginger in the stand-alone bookings?

[Giridhar Sanjeevi, executive]

So I think we have always guided, Sumant, on management contracts that we have been opening around at least 2,000, rooms. That has been the trend of the opening. And I think what we have been happy, that the phase of recovery of group objectives, and the management fee in '22 March has now come back to around INR 231 crores. I think we have guided earlier on July 7 that the management fee would get below INR 350 crores. But I think on 23rd March (sic) [ May ], once again, we might give you better clarity in terms of the trajectory where we believe that our pipeline is growing, our ability to open hotels. And we believe we have the potential to try to do that. So just wait till 23 to give you a full guidance on how this will go.

[Puneet Chhatwal, executive]

So what we can definitely say Sumant is -- Sumant, I will just add to what Mr. Sanjeevi was saying is that we'll definitely open more hotels this financial year than we opened last year. We opened 13. You can count on at least anything between 18 to 22 hotels to open this year. Minimum of 18, maximum of 22, everything on either a management contract or on an operating lease.

[Sumant Kumar, analyst]

Okay. So what is total number of management room in stand-alone as on March '22?

[Giridhar Sanjeevi, executive]

March '22, the number is INR 231 crores.

[Sumant Kumar, analyst]

Sir, I'm talking about number of rooms, sir.

[Giridhar Sanjeevi, executive]

Number of rooms. Okay, one minute. 7,604. Okay, 7,604.

[Puneet Chhatwal, executive]

7,600 approximately managed rooms.

[Sumant Kumar, analyst]

Yes. What is the Ginger in that?

[Puneet Chhatwal, executive]

1,100.

[Sumant Kumar, analyst]

Okay. Okay. Got it. So next question, regarding Sea Rock, can you update on that?

[Puneet Chhatwal, executive]

Yes. Also that we will provide a more detailed update on the Capital Market Day. But as we all know, given also our 100% share returns and we have started working on the development plan for Sea Rock, together with the city authorities and the government. And hopefully, we will get some decisions in the course of this financial year.

[Sumant Kumar, analyst]

Okay. So sir, can you talk about the pent-up demand in leisure segment, are we seeing a pent-up demand in business segment in coming quarters? And...

[Puneet Chhatwal, executive]

Yes, we are. Whether we call it pent-up or a strong demand or a strong recovery, there is recovery. And as we said before, one of the reasons why we have chosen 23rd of May is not for any other thing, it's just the fact that we could not get a decent-sized hall to hold the Capital Markets Day in the city of Mumbai.

[Operator]

Then we will take our next question.

[Adhidev Chattopadhyay, analyst]

Yes. This is Adhidev here from ICICI Sec. Sir, my first question is on -- now that hotels are fully opened up, how is the employee rehiring and your staff-to-room ratio? You had highlighted some numbers last year of what you expected to sustain at. But is there any change to those numbers and to hire the new employees, are you having to pay them more? Or how is the wage inflation trending for the new hires? That is the first question.

[Giridhar Sanjeevi, executive]

Yes. I think what's happening is that in terms of manpower, very clearly with the resumption of business, I think there is definitely hiring happening. We have not yet rolled out any new increments at this point of time, but that will happen now. What we're also working through is that in the last 3 years, some of the wage settlements with unions have not taken place in a number of hotels. So those are also being worked through. And in terms of cost of hiring, I think, not seen any noticeable increase in terms of cost of hiring per employee. And I think that -- those [indiscernible] I would say at this point of time.

[Adhidev Chattopadhyay, analyst]

Okay.

[Giridhar Sanjeevi, executive]

[indiscernible] activity and [indiscernible].

[Puneet Chhatwal, executive]

See, we did not -- unlike other companies, we have not asked any of our full-time employees to go. So -- there is however, having said that, there is a challenge in the global hospitality in general and also in certain countries, in particular, because a lot of people seem to have left the industry. A fear was implicated in people that by going to hotels or restaurants who get the COVID, and that's why these places have to stay shut. I'm sure a lot of people were forced by their families to leave this job and take on alternative jobs. And we are seeing those challenges, especially in cities like London because of Brexit, because of COVID, because of other reasons.

But we think that a majority of our room-to-staff ratios will be maintained, not because people were taken out or not added in contractual or fixed-term contract because of business rather by changing the business model itself at a hotel level. The way we operate hotels today, the way the organization structure is evolving is addressing an organizational need and an optimization for the future. And a lot of customers have also evolved after the pandemic. And they do not expect a lot of that kind of service with 5 people or 4 people standing around, [ reeling ] around your table and people have got used to a bit more privacy. So also the consumer behavior is evolving. So I think all that together should help the industry, not just us as a company, to redefine the business model.

[Adhidev Chattopadhyay, analyst]

Okay. Sir, second question is on the management fee income of INR 231 crores for the year. Sir could you, on a like-for-like basis, could you tell us how much would that figure be, and this excluding the new hotel openings or the Ama management fee?

[Giridhar Sanjeevi, executive]

Okay. I think can we [indiscernible]. Yes, we have a...

[Puneet Chhatwal, executive]

I think that number, you have to look at it as almost 80% to 85% coming from the previous on a like-for-like basis. Because when you open new hotels and new business, that does not immediately give you fees. There are certain exceptions to it, like our hotel in Rishikesh, in Shimla, in Goa, in Darjeeling, which were in leisure destinations, which started off very well, but you don't open a new hotel and suddenly that -- it takes time to ramp up. So I think the majority of the fees, almost more than INR 200 crores of the INR 231 crore, is from the like-for-like portfolio.

[Adhidev Chattopadhyay, analyst]

Sure, sir. And just last question, now that we're a net debt of free company -- or a net cash company rather. And assuming things stay well and good for the coming quarters, how are you using to utilize the excess free cash flow which we generate? Any clarity on the same?

[Giridhar Sanjeevi, executive]

No. I think as far as free cash flow is concerned, we will certainly -- I mean clearly -- very clearly, we don't want to get back into a borrowing situation at this point of time. I think in terms of utilization, I think what we -- the key projects that we are executing as independent company, we'll continued with completion of the Taj at Delhi. We are doing one block in London in terms of renovation. So some of these key projects will definitely continue. And in terms of renovation, I think there are some other, like chambers in Bangalore as the early projects that we're starting to invest. So we will continue to focus on renovations, which help in terms of [ division ].

So I think we don't anticipate too many -- it's not going to be a case that we have a significant amount of cash which we don't know what to do with. So we are being judicious in terms of using it. And of course, the projects that we have spoken about, like Shiroda in Maharashtra, we will have to start spending money with [indiscernible]. [ Hawadiya ] in the Gujarat is the other project that we will start spending at [indiscernible], our [ referbs ] are in planning. So really it's being deployed towards growth-related initiatives and [ demolitions ] in different part for the enterprise.

[Puneet Chhatwal, executive]

And scaling of new businesses.

[Giridhar Sanjeevi, executive]

And scaling of new business.

[Adhidev Chattopadhyay, analyst]

Okay. Sir, is there any CapEx figure you'd like to share for the coming year, any budgeted CapEx figure, which you would have [indiscernible]?

[Puneet Chhatwal, executive]

So usually, the CapEx is what we said always around 4% of the top line. If you are coming out of the pandemic, you can increase it to 5% or 6% if things are going fine. But as Mr. Sanjeevi said, it's all really dependent on those one-off projects. That we will work upon as a renovation, but also on asset monetization, we will try to keep that number with the exception of a one-off investment here or there to within those levels of 5% to 6%.

[Operator]

We'll go to our next question.

[Aishwarya Agrawal, analyst]

This is Aishwarya Agrawal from Nippon India. And my question is, I seek your view on the supply side because I understand the new supplies takes time. And if there is a gap between demand and supply, then there is a high occupancy, and hence, the tariff also goes up, which is highly beneficial for the hotel. So I just want to understand your view for the next 3 years' perspective, which I assume is the time for the new hotel to erect. So that is it, sir.

[Puneet Chhatwal, executive]

Yes, I think that should help. The supply will remain constrained except for what is already under construction. Those kind of projects will get completed with delay or without delay. But the sector with what it has gone through will have issues. And with those issues, it will be very difficult to get funding for new supply in the short to medium term. So I think in the next 2, 3 years, demand should clearly outpace supply.

[Aishwarya Agrawal, analyst]

Sure, sir. And do you have any estimates in terms of what kind of occupancy and the tariffs we should anticipate probably after a year or 2 years? It's a very difficult question, but if you have anything in mind that will be very helpful, sir. At least I'm not able to figure out the answer of this.

[Puneet Chhatwal, executive]

Can you repeat the question? What kind of?

[Aishwarya Agrawal, analyst]

Yes, sir. What kind of occupancy and the tariff you expect in next 1 year? Because I'm not able to get the answer of this question.

[Puneet Chhatwal, executive]

I don't think anybody can give. I think what you have to do is in such cases, get third parties who do this industry benchmark like HVS, Horwath, Hotelivate, a lot of such companies that do this, STR, those kind of trends. We use the same. It's not that we don't use that. We also use those kind of information. And then against that, we benchmark how we are doing. That's why we are able to show what is our market share, how much are we doing better than the market. And they are experts in doing this.

For us as listed companies, if we start giving guidance and we think the occupancy will be X percent and the rate will be Y, it becomes a challenge. So that's why I think we have to use advisory groups to get that of JLL or CBRE or whatever. We want to use all these kind of companies, they do that all the time. That's their business. And our business is to focus on running hotels and outperform the guidance which is given by advisers and try to gain more market share.

[Aishwarya Agrawal, analyst]

Sure, sir. And one last question is what could be the potential lead indicator which suggests that there is a gap between demand and supply and the things will be really moving northwards?

[Puneet Chhatwal, executive]

The lead indicator is when you have to call a few hotels to get a room or when you reach a hotel and then unfortunately, there is no room although you have a confirmed booking. How often that happens? That is the kind of statistics that one has to get.

[Aishwarya Agrawal, analyst]

I guess here, the Booking.com and these websites will be very helpful to see how the things are. And it's a very readily available...

[Puneet Chhatwal, executive]

Absolutely. So you think -- yes, you can benchmark it, let's say, today, 27th of April, just make your own portfolio of 10 hotels on one of these websites. See if you book on a certain date, what rate are you getting? And after 10 days, try the same, and then you will see the delta.

[Operator]

[Operator Instructions] We'll go to our next question.

[Achal Kumar, analyst]

This is Achal from HSBC. So I had a couple of questions actually. So first of all, could you please discuss a bit about the pickup in the different business segments. So interestingly, you said that you did not get the hotel, the room or the ballroom for the meeting. So is that a kind of an indication that there's a strong pickup in the MICE business and in terms of marriages, how do you see the marriage? Do you see the fat marriages coming back? Or do you think the marriages are still staying the smaller-sized marriages in terms of F&B business? So if you could please discuss a bit about the pickup in the different businesses, that would be very helpful. That's my first question, please.

[Puneet Chhatwal, executive]

See, there is -- what is happening is leisure is still demonstrating resilience at a high level because leisure has been working very strong. What has happened is corporate business is coming back. The MICE is coming back, the weddings are coming back. Now the difference in the consumer behavior is not a 1,000, 2,000 people wedding happening that often as it used to happen before. But you could have a wedding, which is divided over several days of functions of 50 or 100 or 200 each. So that part is definitely there. It is happening and will -- or should be reflected in the result.

As you can see, we have announced our results. If you discount for the month of January, somewhere -- and a slow pickup in the first few weeks of February, whatever numbers that you're seeing, the majority of that, 60%, 70% has come in the last 6 weeks of the last quarter. And the 4 weeks of this month are stronger than April '19. So it cannot be just coming from leisure because the markets which have really gone up very strong in the last 6, 8 weeks for us and that are relevant for us very strongly are Delhi, Mumbai and Bengaluru.

[Achal Kumar, analyst]

Sir, is it fair to assume Puneet that -- so the demand has picked up and strong in all the cities. On the cost side, you're doing good. I mean, at least versus pre-COVID level, you have restructured cost and then and the costs are now lower than pre-COVID levels. So is it fair to assume that your profits this year should be higher than pre-COVID levels unless there is some challenge? And if you don't think so, do you see any challenges other than the potential of fourth wave?

[Puneet Chhatwal, executive]

See, we can't predict the fourth, fifth waves, and the impact of that. All we can say is that we will continue to strive for excellence in our operations, enhance our revenue to the extent possible, optimize our spend, which was the definition of reset, continue to work on effective asset management and remain thrift and financially prudent. This is what we have been doing. This is what we'll continue to do. And based around all these factors, we will announce our new road map for the next 4 to 5 years, which is not far away, which is on the 23rd of May.

[Achal Kumar, analyst]

Right. Putting very quickly, since all the restaurants are open now and people prefer to walk-in, has that impacted your Qmin business?

[Puneet Chhatwal, executive]

Yes, it has. But what we have done is in the sense that you have to move. And what we did was when we started Qmin, it was the food from -- mainly the food from different restaurants. So what we have done several months ago is we have introduced the comfort food element, which has nothing to do with the restaurants. We have introduced the same for our flight kitchen business with the brand ANUKA. So we are also in the Qmin, with also the value segment and not just dependent on the restaurants.

When we launched Qmin on 25th of June 2020, it was limited to those. Let's [indiscernible], because that's what best we could have done then. So there has been an evolution in the Qmin brand. The number of orders are still being maintained, the average of our order, because it's not restaurant food, has gone down but our continuous focus on expansion on the Qmin QSR, which we recently did in Bengaluru and also on the Qmin food truck is actually helping drive superior sales when they were during the pandemic.

[Achal Kumar, analyst]

Right. Okay. One question I have on Slide 31, you are showing the difference in the occupancy levels in different brands. One thing which is very surprising and I could not understand really that you are showing there is a significant difference in the occupancy levels between your own Ginger properties and on the Ginger properties on the management contract. So why such a big difference? I mean, for the customer Ginger is a Ginger, right? I mean so what is -- why is such a big difference? And what exactly are you trying to say here? What message are you trying to pass on this?

[Giridhar Sanjeevi, executive]

Just the locations we know here. It really depends on locations in terms of how the occupancy will manage.

[Puneet Chhatwal, executive]

Some of our managed Ginger properties were closed during the pandemic, but that's not really important. The important part is our own or leased Ginger hotels are like in Goa, in Bengaluru, or like, let's see even Agartala where there is hardly any other supply. So they tend to benefit. And one of the key learnings which we have had from the managed Ginger properties is that in difficult locations, it's very difficult to drive business the way it is here.

In Mumbai, you can go 10, 15, 20 Gingers and it doesn't matter. So as we'll be opening our 371 rooms Ginger this financial year in Santacruz, the revenue of that and the occupancy of that will cross all the charts here. So that's how it is because there is a huge gap in the key metros and the kind of rates and occupancies you achieve there versus scaling sometimes in Tier 2, 3, 4 markets.

If you are the first hotel, first branded hotel in Tier 3, Tier 4, you benefit a lot. But when the second branded property, the third branded property comes in, and the demand doesn't grow in the same proportion. It does not matter in India or anywhere else in the world, then the occupancy and the rates get stressed. So typically, you tend to own or lease in key markets, which are brand-enhancing, which give your brand more visibility. So that's why we show higher occupancy.

And on the rate side, you will see the gap is not as big as really the occupancy part, which is significantly higher. And that too, it's really the 3 months of Jan, Feb, March. And I don't think it's a snapshot of the full year. This is the Slide 31 is restricted to 3 months, of which one month was COVID. And then within that, which were the cities that recovered in which states in the end, so that is the detail we can take on off-line and deep dive into it. But mainly, it's driven by Ginger in Panjim, Ginger in Dona Paula, Ginger in Madgaon, all 3 Gingers in Goa, the Ginger in Bengaluru, in all these key markets where it is doing very well.

[Achal Kumar, analyst]

Right. Sorry, last 2 quick questions, very quick.

[Puneet Chhatwal, executive]

Sorry, Achal, I forgot to tell you. Even in the new Gingers in Bhubaneswar or in Patna, et cetera, it's very nice properties for all these cities. So it tends to do very well. The Visakhapatnam, the latest property that we have opened. So there is also that kind of dynamics in this kind of capital cities, submersion of state capital.

[Achal Kumar, analyst]

Right. Right. Fair enough. Two very quick questions. On the Sea Rock, of course, you spoke very little about it, and you are intending to speak on your Capital Market Day. But just quickly -- I mean, have you sort of -- have you got any partners yet? Or if you don't get any partner, how would you manage it? I mean, would you start investing in this property? What will be your strategy?

And second question is that in the last quarter, actually, this message was very clear, not from India Hotel, but from everyone, either from Shelley or from Lemon Tree or whatever it is, that message was very clear. That people are ready to spend more and hence, the premium properties, the high-end properties are actually benefited out of that change in behavior. And of course, India Hotels, the big brands of India Hotels was definitely one of the beneficiaries. So now have you seen that continued? Or is there any change in that?

[Puneet Chhatwal, executive]

I can only agree with the colleagues from the other companies and what they said. People have not had much opportunities in the last few years to spend the discretionary spend, whether it is on hotel stays or it is in buying goods or other services, the willingness to spend is there as long as you feel safe and secure. So obviously, anything premium is more in demand. And it doesn't matter in whichever segment people go, they are looking for premium and not for price driven only.

[Achal Kumar, analyst]

Okay. And about Sea Rock, please?

[Giridhar Sanjeevi, executive]

Sea Rock, I think we have been very clear that we don't intend to put own [ actions ] into this project at this point of time. So I think that position continues to challenge.

[Achal Kumar, analyst]

But then if you don't get any partner, what will be your strategy? I mean, would you continue to wait?

[Puneet Chhatwal, executive]

Sorry, we belong to a very large group. We can have partners within the group also which are possible. We are a step-by-step process. Our first step is to get approvals from the city, from all perspectives. And that will take some time, and we are on the drawing board and are drawing the plans and once we're ready, we will approach the city, which we have already approached. We have taken their visions into account, whether it's with the urban development or it's with the BMC or whether it is with the tourism minister or tourism secretary. It's a lot of people, a lot of stakeholders who are involved.

It's also the -- you have to take care of the environment, you have all the other factors that come with it, your CRZ, there are so many regulations. So all that is being worked upon as we speak, and we are very hopeful and are very focused to find that solution within this year. We did not want to go for that last year till we had 100% control of peak property. Now we have 100% control. So it is us in the front.

[Giridhar Sanjeevi, executive]

Can we sort of have another time in this group, maybe the last 1 or 2 questions. And then if any follow-on questions are there, we can speak tomorrow.

[Operator]

We'll go to our next question.

[Deepika Mundra, analyst]

Deepika from JPMorgan. Just 2 quick things from my side. Firstly, I just wanted to ask on the U.S. business, it seems that the loss has increased in the fourth quarter. So just maybe wanted to understand, is there's any shift in the cost structure for the U.S. properties.

[Giridhar Sanjeevi, executive]

Fourth quarter traditionally, Deepika, has always been the low quarter in terms of business. So the pattern that we have seen is really consistent with that. This year, as you know, that is a 31st past, as you know, the banquets are also not operational because the renovations are taking place. So I think that will happen in the current year is that we will see business come back, both in terms of room size and banquet. The F&B [indiscernible] also will come back actually. And so I think we will -- so that's the way we look at it. So we expect a [indiscernible].

[Deepika Mundra, analyst]

So, basically there is no change of the cost restructuring that you have taken over the past couple of years, that remains, right? There is no change or to any of the fixed costs coming back in the U.S. properties?

[Giridhar Sanjeevi, executive]

In terms of the core appointment there is not really -- there is no change at all actually. There is no change.

[Puneet Chhatwal, executive]

On the contrary actually we have a reduction in the cost because, again, change in the business model. We have reduced the size of the ballroom. We have given back the additional space, which falls from our neighbors, the bar [indiscernible], back to them. It has reduced our fixed lease rental with them. So -- and given the challenges you have with the F&B service staff in New York, that reduces our cost -- labor cost also on that front. So the U.S., a lot of work has been done. Let's see when the business comes back, how the P&L will then start shaping up. From a cost point of view, we have done a lot of work and used the pandemic time to optimize it to the level that we could.

[Deepika Mundra, analyst]

Understood. That's very clear. And just lastly, on balance sheet. I think I missed it. What is the total aim, the debt reduction in the next year?

[Giridhar Sanjeevi, executive]

What is...

[Puneet Chhatwal, executive]

Aim to reduce debt. I think there will be only one big piece of debt left, which is only due in April '23, which is around INR 450 crores.

[Giridhar Sanjeevi, executive]

And U.K. would probably remain at around INR 250 crores, INR 300 crores. I think those...

[Puneet Chhatwal, executive]

Which is GBP 25 million, GBP 30 million for a property that is worth GBP 200 million. So that's the -- that's what we have and -- but we are not going to add debt. If at all, we'll keep reducing it and use the surpluses of cash available, as we said earlier on another question from one of your other colleagues to scale up our new businesses.

[Giridhar Sanjeevi, executive]

I think we can...

[Puneet Chhatwal, executive]

Good to ask our moderator.

[Giridhar Sanjeevi, executive]

Yes, I thank you for participating. I think we will close the conference now.

[Puneet Chhatwal, executive]

Thank you, everyone, for joining.

[Operator]

This concludes today's call. Thank you for your participation. You may now disconnect.