Release Date: November 06, 2023
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- EIH Ltd (BOM:500840, Financial) reported a record Q2 and half-year performance, driven by market buoyancy and increased travel.
- The company saw a significant increase in RevPAR, with a 48% rise for all domestic hotels, outperforming the industry average.
- EIH Ltd (BOM:500840) achieved its strongest quarter ever with a revenue of INR 490 crores, EBITDA of INR 148 crores, and PAT of INR 85 crores.
- The company is net cash positive with INR 227 crores on a stand-alone basis and INR 509 crores on a consolidated basis.
- EIH Ltd (BOM:500840) has a vision for 2030 to add 50 more hotels with about 4,500 additional keys, indicating strong future growth plans.
Negative Points
- Foreign travel has not yet returned to pre-pandemic levels, indicating potential future challenges in fully recovering international business.
- Shimla hotels were severely impacted by negative environmental conditions, leading to a significant drop in RevPAR for that region.
- The company faces a complex global economic environment with rising interest rates, monetary policy tightening, and supply chain disruptions.
- There is still a gap in employment levels in the tourism and hospitality industry compared to pre-pandemic times.
- The upcoming elections in Q1 of the next year could potentially impact ADRs and overall business performance.
Q & A Highlights
Q: How should we look at the impact of the upcoming elections on ADRs and overall performance in Q1 next year?
A: Vikram Oberoi, CEO: It's difficult to predict without specific data from previous elections. We will review past data and discuss it offline. Generally, lead time pace of reservations this far out wouldn't be an indication.
Q: Did the World Cup lead to any material improvement in business?
A: Vikram Oberoi, CEO: Yes, in locations where matches were held, there was a strong increase in rates. This was similar to the strong rates we saw during the G20 in Delhi.
Q: What led to the strong RevPAR growth in the 5-star deluxe segment?
A: Kallol Kundu, CFO: The trend is seen across the country and in our case as well. The luxury and upper upscale segments are performing better. Higher rates and a strong margin growth are key factors.
Q: How are the Shimla and Marrakesh properties recovering post-natural disasters?
A: Vikram Oberoi, CEO: Shimla is recovering well, especially Cecil due to strong international demand. Wildflower Hall is recovering slower. Marrakesh saw cancellations due to the earthquake and Middle East crisis, but business is returning to normal.
Q: Can you provide updates on upcoming projects and the vision for 2030?
A: Vikram Oberoi, CEO: We aim to add 50 more hotels with about 4,500 additional keys by 2030. Recent announcements include a Trident Hotel in Tirupati and a hotel in Vizag. We will continue to inform the stock exchange as new projects are finalized.
Q: How do you manage occupancies while maintaining pricing during expansion?
A: Vikram Oberoi, CEO: We analyze market potential and focus on locations with good occupancies and room rates. It typically takes 2-3 years for a new hotel to stabilize. Our objective is to be RevPAR 1 and drive strong numbers for both owned and managed hotels.
Q: What is the strategy for managing capital structure during expansion?
A: Vikram Oberoi, CEO: We will take on debt to drive growth, aiming to keep it within 25% of our internal benchmark. We focus on projects that exceed our cost of capital and maintain strong debt service and interest coverage ratios.
Q: How do you see the longevity of the current growth cycle in the hospitality sector?
A: Vikram Oberoi, CEO: It's hard to predict future events, but if demand remains strong, we hope to continue performing well. We will adapt our strategies as needed based on market conditions.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
