Some highlights from Q2 FY24 concall:
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So far, in the current financial year till date, we have signed 18 new hotels and opened 9. We have guided in the past to open at a minimum of 20 hotels in this financial year.
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We have reorganized Ginger, Qmin and Ama under a dedicated vertical of new businesses, which is being headed by Ms. Deepika Rao – Executive Vice president and Member of Executive Committee
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The first 26 days of October have been very strong and we expect this trend to continue (concall was held on 27th Oct)
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One analyst noted that on the international side, EBITDA is down on a Y-o-Y basis
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Why occupancy wil go up further – Most of the supply is coming not in the key metros but in the outside of the key metros. So, that means that existing micro markets and key metros should be well protected and should benefit from rising occupancy. Secondly, all the demand factors like for instance FTA, foreign travel visitors, all that should help.
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If new supply additions have to come, they will take 3 to 5 years to get added and by that time the demand “in theory” should grow faster than the supply would.
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One analyst noted that ARR was up only 1 % in Ginger. Management said we are investing in refurbishment and renovation and RevPAR growth which was 14 % would be north of 20 % going forward. Even in other properties, this is what is giving us the ability to charge higher. there will be double digit RevPAR growth in the current year, that is not a problem at all.
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Investments will be very much India centric, no intent to invest in international markets on our own money, but open to signing management contracts. Everyone is looking to invest in India. It would be foolish of us to go and invest outside.
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Intent to increase stakes in subsidiaries, JVs and associates is there. Will do when the opportunity comes.
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At the end of the quarter, cash is approximately Rs.1400 crore.
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As India is slated to grow, all these things that you are hearing as a one off now will become almost like a habit going forward (World Cup, G20, even Olympics etc)
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The cyclicality in the sector will always remain and we have to differentiate here on the domestic versus international front. But cyclicality impact should be lower than what we have witnessed in the past. Last time when cyclicality hit, we were at 17% EBITDA and we gave a guidance of 25% EBITDA margin. Today, we are giving a guidance of 33 % and even if it drops by half in a downcycle, we will be at 17 – 18 % EBIDTA. That is the change in the business model itself and the portfolio mix.
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Occupancy was 75 % even in a seasonally weak quarter Q2.
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One reason we will see higher pricing is because transient proportion of customers will keep going up. We have discouraged a number of small corporates from getting into long-term contracts and we have actually asked them to book on the web. We have changed the corporate contract from a fixed rate to partially to a rate which is linked to ARR.
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One analyst noted that the company can generate Rs.8,000 crore kind of cash over next 5-year time period. And at Rs. 2.5 crore per room kind of a number, the company can add anything around 3000 to 3500 rooms in a luxury segment.
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Taj SATS is very well positioned to go beyond Rs. 1000 crore in the next financial year and far beyond Rs. 1000 crore in the following year. Non-aviation business is less than 10% at the moment, but the aspiration is to grow it to more than 20 % over the next 3 to 5 years.
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Ginger Santacruz is our trophy asset. We do believe that in 3 years of operation it should reach Rs. 100 crores in revenue. It should operate at Rs.6500 to Rs.7000 per room stabilized rate
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Going forward the owned to managed properties ratio is expected to be 45:55
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We have 80 hotels in pipeline. If we even stopped signing any new contracts today, we would be opening 20 hotels every 12 months for the next 36 months which means 60 hotels to open.
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Management contracts are not signed when the property is fully ready. Management contracts were signed when the owner is kind of trying to start the design process and we get a share at that stage itself. Inventories per year is 3000 rooms per year which we will open, and these contracts have been signed today which we will open say in 2027.
Overall, business momentum seems intact as before. No headwinds.
(Disc.: Holding)
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