Release Date: May 14, 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 record high ADRs, revenue, EBITDA, and PAT for Q4 FY24.
- The company successfully raised INR1,000 crores through a QIP, strengthening its balance sheet.
- Chalet Hotels Ltd (BOM:542399) acquired the Courtyard by Marriott Resort in Aravali, which has future expansion potential.
- The company plans to add approximately 870 more rooms to its portfolio and invest over INR2000 crores in the next three years.
- The hospitality segment revenue grew by 24% year-on-year to INR3.8 billion, with room revenue also growing by 24%.
Negative Points
- Despite strong performance, the company faces challenges in maintaining high ADR growth due to a high base effect.
- The Mumbai region showed only a 2% growth in ADR, lagging behind some peers who reported higher growth.
- The company has significant capital work in progress, with INR13.5 billion yet to be operationalized, posing a risk if market conditions change.
- There are concerns about the impact of water shortages in Bangalore on future sales and operations.
- The company has a high net debt of INR25 billion as of March 2024, which could impact financial flexibility.
Q & A Highlights
Q: This quarter or a year followed up by the last quarter, we have seen a decline in pricing on a Y-o-Y basis. Do we think now from here onwards, pricing should mirror more like inflation growth or maybe it would be more like a mid-single to high single-digit as the base is already there?
A: On pricing overall, whilst we've shown a growth of about 5% for the quarter, our same-store base ADR growth is actually 8%. For the year, our ADR growth is 17%. In the Mumbai metropolitan region, the two hotels that we are following occupancy route are the Powai hotel and Four Points By Sheraton in Vashi. These two hotels are either protecting market share or increasing occupancies as the strategy. Overall growth from Mumbai is 14% for the year, and for the hotels in other cities, it's about 23% with a blended ADR increase of 17%.
Q: Milind, in the PPT we have given receivables of INR320 crores from Bangalore real estate sales. How and when will this revenue be recognized in P&L?
A: To recognize revenue for the residential project, preconditions required to be fulfilled include handing over possession, 90% collection, and receipt of the occupation certificate. We have received the OC, and when we hand over possession, we'll get more than 90% collection. We expect to complete and hand over possession by the end of June.
Q: Sanjay, you sounded fairly confident about a double-digit run rate growth for the industry and for Chalet over the next two to three years. How confident are you about sustaining double-digit rate hikes over the next three to five years?
A: We believe the industry has an upside of double-digit rate growth going forward. We have delivered 17% rate growth this year. Our strategy is to select the months and quarters which have headroom for rate growth and not in months that have opportunities for occupancy growth. Each hotel will have its own strategy, and we will address them one hotel at a time.
Q: Can you elaborate more on the potential of the NCR asset? How should one think about the ramp-up of this asset?
A: The hotel has done well and is still in the ramp-up phase as a resort. It is positioned at a competitive price point and competes against three or four similar hotels in that market. It will have seasonal impacts, so occupancy will be lower than typical city hotels. The property has 6 acres of unutilized land, and the true potential of this asset will be realized through capacity addition at a higher level of product positioning.
Q: On the Aravali resort, can you give us some color on the revenue mix in terms of retail, events, and MICE?
A: The primary segments are family holidays, MICE (corporate events, meetings, conferences), and weddings. Family holidays typically fill up the hotel from Friday to Sunday at a premium rate. MICE and weddings are the other significant segments. We are looking at repositioning the brand and expanding capacity with a higher quality product.
Q: On the industry level, the presentation mentions that demand is growing at 11% and supply at 9%. When do you see the supply side capacity being met at the industry level, and does that pose a concern on ADR growth?
A: For the visible future, which is the next two to three years, demand is expected to outstrip supply. However, ADR growth will moderate after some time due to the high base effect.
Q: In the last earnings call, you mentioned that corporate rates have been renegotiated higher by about 12% to 20%. How come our overall ARR growth is about 5%?
A: Our actual ARR growth is 8% on a same-store basis. The mix of segments comes into play, and corporate segments typically account for 60% in Mumbai hotels, with half of that being contracted prices. Retail growth last year was higher due to a lower base. Additionally, our strategy at some hotels is to fill up the hotel post-renovation, which may involve taking on lower-rate business.
Q: Can you update on the progress of the Taj Delhi and Airoli projects?
A: The Taj construction is underway, and we expect to complete the project by Q4 of '26. For Airoli, we expect to start work in October after receiving approvals in the next few months.
Q: Are we planning to invest in the renovation of the Aravali resort, and are all the rooms currently operational?
A: The Courtyard by Marriott in Aravali is a fairly new property and will not need any renovation or refurbishment for a few years. All 158 rooms are operational. We may reposition the brand, which could involve some small changes, but no major renovation is planned.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
