The Indian Hotels story is turning out to be better than expected. This is not just a macro story of demand outstripping supply “currently” or a “if India grows, IHCL will also grow” argument. The management has been taking several actions to seize the emerging opportunities in the economy with both the hands, much beyond what others are doing. In one of my previous post, I had reached the same conclusion when I said “Thus, the improvement in company fundamentals seems largely a result of the management’s efforts at re-engineering the business model and does not factor any industry-wide / macro factors. This leaves scope for more upside on the performance.” (See link here)
In the latest Q3 FY24 concall, management revealed several new initiatives and innovative steps to propel the growth going forward. Some highlights from call (reworded and paraphrased for readability):
-
Guidance: Expecting double-digit revenue growth to continue in the next financial year as well.
-
In ‘24-25 with 85 hotels in pipeline, the pace of openings will increase. Targeting to open on an average two hotels every month, or even higher.
-
The Taj brand achieving in Q3 which is the best quarter Rs.17700 ARR is less than $200, so obviously there is still some room to grow.
-
“New and reimagined brands”, which include Ginger, Qmin, Amã Stays & Trails, the Chamber’s and the Taj SATS will deliver 30 % YoY growth going forward.
-
The new businesses will do margins around 35 % plus.
-
Have very ambitious targets especially with Ginger brand - Rs.600+ crore.
-
Taj SATS will do Rs.1000+ crore next year.
-
New initiatives: Working on and expect to launch two new brands in the next six months.
-
Any new brand launched will look at getting to minimum 50 hotels in that brand in a very short period of time. The starting will be a minimum of a double-digit number before it is launched.
-
It is doing some very interesting things in F & B. For example, it has been catering to the IPL, the Cricket World Cup, catered to a big event the Prime Minister did at Dehradun with 7000 people, catering to some very interesting outdoor large catering opportunities is another novel step.
-
At some point of time, the company will not want to keep owning assets, especially in non-metro markets where the pricing of the asset is not expected to go through the roof. So, they will go for sale and leaseback. For example, the two hotels in Ekta Nagar, the Vivanta and the Ginger near the Statue of Unity. Such hotels need not be owned for perpetuity but cash can be freed through sale & leaseback deals.
-
Will have 7 to 10 “iconic” hotels in the next few years. One can expect every year one & half to two iconic Taj assets getting added.
-
Immediate future: Demand continues to outpace supply; the January trend is very much in line with what was seen in Q3 in terms of top line growth. Pickup is equally good for the month of February, and they have visibility till March as well. There is the IPL in end of March till May, again this year. So, all in all the demand is very strong, supply remains constrained.
-
New brand for Tier II & III cities: Price point will be somewhere close to Vivanta. So, just a little below the Rs. 10,000, higher than Ginger but lower than Taj somewhere in between but a full-service brand. It will help us cater to the mass market of 400 to 500 million Indians who are also not in metros but in Tier-2 and Tier-3 cities. It will be a full-service upscale brand. The details are being finalized, but it will be something that serves the needs of mass market. It will have 26 - 28 square meter room, a couple of restaurants, it will have large banqueting spaces which can accommodate weddings of 300 to 500 people easily and at an affordable price. Upper midscale, upscale - that is the positioning.
-
Emerging destinations: Ayodhya the first hotel should open in less than 12 months. Also looking at large homestay opportunities in Ayodhya, the Vivanta and Ginger combo hotel will take another 20 months to open. Lakshadweep will take longer because of the nature of the development, it’s not just building hotel its developing two islands, the islands of Suheli and Kadmat so that would take anything between three to five years.
-
Sea Rock: Will try to get a strategic partner and everybody is knocking at the doors whether from within the group or outside. IHCL will keep the majority, but they have no intention of spending further Rs.800 crores from their own cash reserves. But definitely Sea Rock will be made the Icon of India, a second gateway after the Gateway in Colaba.
-
Taj Sats: Doubling of airports from 75 to 150 provides another opportunity for Taj SATS
-
Government support: There is more and more travel happening as 50 new airports, so many new aircrafts ordered by India is going to propel a kind of growth in travel that we have not seen. And government’s focus this is second year in a row that tourism got a mention in the budget presentation of the honourable FM and also, they have got industry status in several states in India now.
-
Going ahead: Likely to achieve the 300 number at least one year in advance of our 2025-26. (300 hotels target was given as part of Ahvaan 2025).
(Disc: Holding)
Subscribe To Our Free Newsletter |