Release Date: July 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Chalet Hotels Ltd (BOM:542399, Financial) reported the best Q1 performance in its history, with a 17% increase in consolidated revenue and a 31% rise in total EBITDA compared to Q1 FY '24.
- The company announced the acquisition of land in Goa for the development of a 5-star deluxe resort, aligning with its long-term growth strategy.
- Occupancy rates improved to 70%, with a 1% increase in the average room rate, contributing to a year-on-year RevPAR growth of 2%.
- The residential project in Koramangala, Bangalore, is surpassing sales expectations, achieving prices significantly higher than initially projected.
- Chalet Hotels Ltd (BOM:542399) is committed to achieving net zero greenhouse gas emissions by 2040, aligning with the Paris Agreement's goals.
Negative Points
- The Navi Mumbai hotel saw a 7% dip in RevPAR due to increased room supply in similar category hotels in the micro market.
- Novotel's RevPAR was lower due to increased capacity of 88 rooms, which will take another quarter or two to stabilize.
- Major renovation work at Dukes led to the removal of limited inventory from sales, impacting revenue.
- The Hyderabad market showed a decline in ADRs despite high occupancy rates, attributed to the addition of a new hotel with lower ADRs.
- The company's net debt increased marginally to INR 15 billion as of June 30, 2024, primarily due to capital expenses.
Q & A Highlights
Q: Congrats on the good set of numbers. Sir, I have a few questions. Firstly, somewhere the new CFO mentioned about the Goa market, so anything going on concrete on that front? I'm just curious to understand.
A: Archana, good to have you back. Look, we've just announced this morning that we have had a committee approval to conclude a process for acquisition of a land parcel in Goa. Those details have been put up in a notice and I referred to them in my opening statement. Just as a very quick macro overview on this transaction. It's 11-acre site on the beach front and we expect to get about 188 beds converting to about 170-odd rooms. This acquisition opportunity comes with approvals on the plot already. So our time to have shovels in the ground post acquisition will be very short. Goa, as you know, is a very strong market.
Q: Right, sir. Absolutely. I think that is outperforming most other markets. So secondly, on Hyderabad market, I don't have this absolute number for occupancy. But when we look at this presentation at this double-digit growth of occupancy one ADR being negative. So is that a prudent call from the management to focus more on occupancy part to boost the RevPAR or that was just one-off?
A: So these are all tactical initiatives that are taken depending on market conditions, Archana. When we see months that are slightly stretched, we tend to, in advance, decide to go with the occupancy-led strategies to fill up the hotel. But Hyderabad had another thing at play. We added a new hotel, the second hotel, which is 100% occupancy. So blended occupancy for Hyderabad will show higher growth than last year because of the new hotel with 100% occupancy at play over here.
Q: Yes. Right. And sir, lastly, on the rental market, how the situation in Mumbai market? Do we see some momentum going ahead?
A: Yes. So look, we've got two, three deals, which are literally on the verge of closing, but the formal closing has not happened, so we've not been able to announce them. I know it's a little frustrating that it's going slower than we expected it to. But we are very confident that the -- out of the 2.4 million square foot of office portfolio that we have. By the end of the calendar year, we would have around 90% of the portfolio leased out already. Bangalore is moving very well.
Q: Mr. Sethi, firstly, on the Hyderabad market, we have seen other hotel companies sort of see healthy RevPAR growth there. Now we understand that the new hotel, which came in was already contracted at double-digit rate acceleration. So if you could just point out why we have seen growth decline there? Is it largely because of the election impact? Or is there anything else that play there?
A: No, just to highlight here, we haven't seen a decrease in the Hyderabad market. In fact, our old (inaudible) which is the Mindspace with 427 rooms, we have reported 13% RevPAR growth with an equal mix of rate and occupancy led growth in that hotel. And then, of course, Westin HITEC, which is a new hotel, has had 100% occupancies with rate growing by 15% over there. So what you'll see there is because it is already 100%. It was 100% last year, you did not see any occupancy growth, but the rate is growing by 15%. As a result, the RevPAR growth even in the Westin HITEC, which is the second hotel, is 15%. So to summarize, Hyderabad Mindspace 13% RevPAR growth, Hyderabad HITEC 15% RevPAR growth.
Q: Sure. So the reason why we are seeing a decline in the ADRs, the blended ADRs because the Westin the new one has lower ADRs. Is my understanding right?
A: Lower rate, yes, so.
Q: Understood. Just on the Goa plans that you have. So could you talk about the time lines as well as the branding and price points that you might be looking at?
A: So look, from a time line perspective first, we expect to conclude the deal in the next couple of weeks. We are required to have a Board resolution authorizing the same when we go to the registrar. That's where we are right now. So we've taken that approval this morning, and we'll be submitting the documents to the registrar there. We expect to conclude in 2 weeks' time. As far as the market is concerned, Goa continues to be a very strong market. This is a beachfront property with a proper beach in the front and a really good quality beach and water. From a positioning perspective, I think we've already said it will be a 5-star deluxe hotel, which is a top category in India. There's nothing higher than that as well. Classification committees -- classification ratings go. And we expect to compete with the best over there. And because we're getting this hotel with approvals already in place, this particular land, this approval is already in place. Time to move from acquiring it to starting construction is going to be a few months only, it's only a very short period. My guess is that we're looking at maybe having shovels in the ground as soon as the monsoon hits.
Q: Right. (inaudible) really the other hotels, luxury hotels might take 5, 6 years. Do you think you will be able to do that in three, four years?
A: Yes. I mean, we are very confident that three years will be up and about because a large part of Goa development process gets -- time use gets -- time gets used up in approvals. This particular line has come with the approval in place. So it's only construction that we have to do. Design is already in place.
Q: Sure. Last question, I'm just trying to resolve the dilemma. So if you see the results across hotel companies over the last fourth quarter as well as this quarter, I mean, let's remove the election impact. What we have seen is moderation over the RevPAR growth front despite the fact that a lot of supply, which has been announced is not yet in the market. And we have still started seeing moderation in RevPAR growth to say single digits. Now what's the outlook for the rest of the year? And do you think next year it could actually accelerate and reasons for the same.
A: Jaiveer, I actually expect it to sort of start improving from this quarter itself. And obviously, Q3 and Q4 will be very strong. And it's a little incorrect to compare Q4 to Q1 because...
Q: We are actually
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
