- Gross ARR: INR 6,605, increased by 13.4% year on year and 4.3% quarter on quarter.
- Occupancy: 72%, decreased by 163 bps year on year and increased by 605 bps quarter on quarter.
- RevPAR: INR 4,754, increased by 10.9% year on year and 13.9% quarter on quarter.
- Total Revenue (Q4): INR 331.2 crore, higher by 30% year on year and 13.9% quarter on quarter.
- Total Revenue (FY24): INR 1,076.7 crore, increased by 23% over FY23.
- Net EBITDA Margin (Q4): 52.9%, decreased by 278 bps year on year and increased 415 bps quarter on quarter.
- Net EBITDA Margin (FY24): 49.1%, reduced by 278 bps over FY23.
- Management & Franchise Fees (Q4): INR 14.4 crore, up 34% from INR 10.7 crore in Q4 FY23.
- Total Management Fees (Q4): INR 41.2 crore, up 48% year on year from INR 27.8 crore in Q4 FY23.
- Total Management Fees (FY24): INR 134.3 crore, up 30% over FY23.
- Owned Hotel Revenue (Q4): Increased by 28% year on year.
- Total Network Revenue (FY24): INR 1,621 crore, increased by 22% from INR 1,330 crore in FY23.
- Debt: Increased by INR 143.3 crore or about 8% from INR 1,745.7 crore in FY23.
- Cash Profit (FY24): INR 293.8 crore, increased 24% year on year from INR 237.1 crore in FY23.
- New Management & Franchise Contracts (Q4): 12 new contracts, adding 667 new rooms to the pipeline.
- Operational Inventory (March 31, 2024): 104 hotels with 9,863 rooms.
- Expected Operational Inventory (End FY25): 120+ hotels with over 11,000 rooms.
Release Date: May 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Lemon Tree Hotels Ltd (BOM:541233, Financial) recorded its best-ever Q4 performance in terms of ARR revenue, EBITDA, and PAT.
- Q4 FY24 gross ARR increased by 13.4% year-on-year and 4.3% quarter-on-quarter.
- Total revenue for Q4 was INR 331.2 crore, up 30% year-on-year and 13.9% quarter-on-quarter.
- The company signed 12 new management and franchise contracts in Q4, adding 667 new rooms to its pipeline.
- Operational inventory crossed 10,000 rooms as of March 31, 2024, with expectations to exceed 11,000 rooms by the end of FY25.
Negative Points
- Occupancy for Q4 stood at 72%, a decrease of 163 bps year-on-year.
- Net EBITDA margin for Q4 FY24 decreased by 278 bps year-on-year due to increased renovation expenses and payroll inflation.
- Debt for the company increased by INR 143.3 crore or about 8% from FY23, primarily due to borrowing against Aurika, Mumbai SkyCity.
- The EBITDA margin for the games portfolio decreased by 16 percentage points year-on-year due to higher renovation expenses.
- The company faces challenges in the Bangalore market due to a slowdown in IT hiring, impacting occupancy rates.
Q & A Highlights
Highlights of Lemon Tree Hotels Ltd (BOM:541233) Q4 FY24 Earnings Call
Q: How should we read the ARR growth trends as we enter FY25, especially given the deceleration seen in upscale and luxury hotels?
A: (Patanjali Keswani, Executive Chairman and Managing Director) The industry saw significant price hikes post-COVID, which led to a high base effect in FY23. Moving forward, price hikes will be more moderate, typically between 5% to 12%. The mid-market segment is expected to see substantial growth, driven by structural shifts in consumer demand as India's GDP grows.
Q: Can we expect some moderation in overall growth in FY25 compared to the high growth seen in FY23 and FY24?
A: (Patanjali Keswani, Executive Chairman and Managing Director) Despite some challenges like elections and heat waves, we expect rate growth this year to be at least as strong as last year. The overall growth should remain robust.
Q: How did Aurika, Mumbai perform in Q4, and what are the expectations for FY25?
A: (Patanjali Keswani, Executive Chairman and Managing Director) Aurika, Mumbai achieved 66% occupancy with an ARR of INR9,000 in Q4. We are gradually reducing the crew base to target corporate retail and meetings segments. The performance is expected to improve significantly in the coming quarters.
Q: What are the expectations for overall RevPAR growth and asset quality trends for FY25 and FY26?
A: (Patanjali Keswani, Executive Chairman and Managing Director) We expect a minimum of 15% revenue growth annually for the next three years, driven by ARR increases, occupancy hikes, and growth in management contract business. The full impact of renovations will be visible from October next year.
Q: What will be the focus area in terms of ARR and occupancy for FY25 and FY26?
A: (Patanjali Keswani, Executive Chairman and Managing Director) Lemon Tree expects at least a 15% increase in revenue annually for the next three years. This growth will be driven by a mix of ARR increases, occupancy hikes, and expansion in management contracts.
Q: What was the same-store EBITDA growth excluding Aurika?
A: (Patanjali Keswani, Executive Chairman and Managing Director) Lemon Tree without keys grew by over 10% year-on-year. Keys grew by 5%, resulting in an overall ARR growth of 8% excluding MIAL.
Q: What are the renovation costs and their impact on EBITDA?
A: (Patanjali Keswani, Executive Chairman and Managing Director) Renovation costs were about 2% of revenue in Q4, up from 0.6% last year. We plan to spend INR100 crore on renovations this year and next, with about 70% of this being OpEx. The impact on EBITDA will be around INR65 crore annually.
Q: How do you view the competitive landscape and supply additions in the industry?
A: (Patanjali Keswani, Executive Chairman and Managing Director) While new supply is coming up, especially in Tier 2 and Tier 3 cities, we are confident in our ability to absorb this supply. Demand is growing, and we expect to continue expanding our footprint through asset-light routes in these markets.
Q: What are the sustainable EBITDA margins for the keys portfolio post-renovation?
A: (Patanjali Keswani, Executive Chairman and Managing Director) Post-renovation, we expect the keys portfolio to achieve an EBITDA of INR60 crore annually.
Q: Why has promoter holding been reducing, and will this trend continue?
A: (Patanjali Keswani, Executive Chairman and Managing Director) The reduction in promoter holding was primarily to pay off debt. The trend is expected to stabilize, and the pledge on shares is now zero.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
