Release Date: August 07, 2024
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 10% increase in revenue for Q1 FY25 compared to the same quarter last year.
- The company maintains consistent RevPAR leadership over its competition, with an overall RevPAR index of 127%.
- Strong performance in international markets, particularly in UAE and Indonesia, with UAE doing better than in the past.
- The flight catering and airport lounge business continue to be robust, with expanded margins and total business growth.
- EIH Ltd (BOM:500840) has a strong funds position with INR 818 crore in consolidated funds, ready for deployment in new projects.
Negative Points
- EBITDA and PAT are slightly down compared to the same quarter last year due to similar room rates and increasing expenses.
- RevPAR for Oberoi Leisure and Trident Leisure segments is slightly down compared to last year.
- The impact of high temperatures in leisure destinations like Rajasthan and Agra affected occupancy rates.
- Employee costs have increased by 17% due to filling vacant positions and addressing work-life balance issues.
- The Wildflower Hall property will revert back to the government by March 31, 2025, following a Supreme Court ruling.
Q & A Highlights
Q: Post-COVID, we have witnessed strong double-digit rates growth. Now we saw some moderation in Q4 growth of 10% and low single digits growth this quarter. Is it fair to assume that base is catching up and events like World Cup and G20 closing, which are missing in September and October, then achieving mid- to high-single-digits rate growth would most likely be a scenario this year? Or do you think the momentum will improve from maybe this month onwards?
A: Vikramjit Singh Oberoi, Chief Executive Officer: It's really a function of supply and demand. We had the election this year, and the impact has been more than in previous elections. High temperatures in Rajasthan and Agra also affected leisure hotels. However, we remain optimistic that foreign travel is bouncing back, and with strong domestic demand, we should see strong demand and occupancy, particularly in Q3 and Q4.
Q: On margins, the decline in EBITDA – is this in line with what you anticipated, or is there any particular cost that came as a surprise? How should we look at margins from here?
A: Vikramjit Singh Oberoi, Chief Executive Officer: Employee costs have gone up due to filling vacant positions and addressing work-life balance issues. We also see a spike in summer months due to training new hires for winter. This will even out over the financial year. Other factors include renovations at Trident Nariman Point and Vanyavilas, which impacted margins temporarily.
Q: Can we discuss Wildflower Hall? There's about a year left for us to manage this property, and there's a carrying cost of INR26 crore. Is this a conservative estimate of all claims and counterclaims?
A: Vikramjit Singh Oberoi, Chief Executive Officer: Our initial investment was INR26 crore. Based on the Supreme Court ruling, the property will revert to the government on March 31. Kallol Kundu, Chief Financial Officer: The property is classified as an asset held for sale. Claims are ongoing in court, and we have taken prudent accounting measures.
Q: How do you see the revenue per available room (RevPAR) improving in the next quarters, specifically in Bombay?
A: Vikramjit Singh Oberoi, Chief Executive Officer: We added 20 residential suites at the Oberoi Mumbai, which are already at 80% occupancy with an average room rate of over INR30,000. Trident Nariman Point is renovating four floors, which will drive demand and rate. Bandra-Kurla continues to have strong demand. Overall, we remain optimistic.
Q: What is the current demand trend, and how is the July and August growth?
A: Vikramjit Singh Oberoi, Chief Executive Officer: Demand has picked up after a somewhat subdued May and June due to elections and high temperatures. We are seeing greater buoyancy and a pickup in the pace of reservations.
Q: How do you envision the portfolio six years out from now? How many hotels would be managed, owned, and how many are you looking at adding in India versus overseas?
A: Vikramjit Singh Oberoi, Chief Executive Officer: Our focus will continue to be in India, although we are looking at opportunities outside India as well. We hope to share more news on our expansion soon. We will pursue both managed and owned options, as well as joint ventures.
Q: What is the impact of quarterly seasonality on financial performance this quarter?
A: Kallol Kundu, Chief Financial Officer: Seasonality has been more prominent due to elections. Without elections, numbers would have been better than last year. Business is becoming more evenly spread, with first and second quarters doing much better than 10 years ago.
Q: Can you split the Oberoi Grand's renovation CapEx?
A: Vikramjit Singh Oberoi, Chief Executive Officer: The renovation will involve a complete overhaul of rooms, public areas, food and beverage, back of house, and MEP. The Chowringhee wing will be the first part of the renovation. Room inventory will come down from 209 to 200 keys.
Q: Regarding the Hebbal project, is it possible to segregate the commercial real estate part of CapEx out of the INR1,350 crore?
A: Kallol Kundu, Chief Financial Officer: The cost of a Trident room is around INR1.4 crore per key, and an Oberoi room is between INR2.5 crore to INR3 crore per key. The balancing figure is commercial.
Q: What is the impact of quarterly seasonality in the financial performance this quarter?
A: Kallol Kundu, Chief Financial Officer: More than seasonality, the elections had a significant impact. Without elections, numbers would have been better than last year. Business is becoming more evenly spread, with first and second quarters doing much better than 10 years ago.
Q: Can you elaborate on the mixed-development project in cities due to high cost of land? How will commercial and retail yield better results for EIH?
A: Kallol Kundu, Chief Financial Officer: The cost of development for commercial is much lower and faster than a hotel. It provides steady inflows and mitigates risk. The synergies between commercial and hotel elements will help both symbiotically.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
