INDHOTEL - Indian Hotels Co. Ltd Share Price

In the earnings call for the quarter ended June 30, 2025, the management of the Indian Hotels Company Limited (IHCL) provided an optimistic outlook, highlighting a robust performance despite facing headwinds. Key forward-looking points include:

1. Revenue Growth: Management expects to achieve a double-digit revenue growth for the fiscal year 2025-26, driven by strong MICE (Meetings, Incentives, Conferences, and Exhibitions) activity and high-profile diplomatic visits.

2. Financial Performance: For Q1 2025-26, consolidated revenue grew by 32% year-on-year to INR 2,102 crores, with an EBITDA of INR 637 crores (29% increase) and a bottom line of INR 296 crores (19% increase).

3. Hotel Portfolio Expansion: 12 hotels were signed, and 6 hotels were opened in Q1, contributing to a pipeline of over 143 hotels, aiming towards a target of 700 hotels by 2030 under the "Accelerate 2030" initiative.

4. RevPAR Growth: The RevPAR for consolidated domestic hotels increased by 11% year-on-year, while owned international hotels saw a 13% increase.

5. Management Fees: A capital-light strategy resulted in a 17% growth in management fees, amounting to INR 133 crores in Q1, which management expects to sustain.

6. Capex Plans: IHCL plans to invest INR 1,200 crores in FY 2025-26 for asset construction, renovations, and digital initiatives, supporting long-term growth.

7. Sustained Margins: Despite challenges, hotel segment margins were maintained at 31.4%, and the management anticipates further improvements as operational efficiencies continue.

8. New Initiatives: Management is focusing on brand evolution and strategic opportunities to enhance competitive advantages, alongside commitments to the ESG Plus initiative.

Overall, the management conveyed confidence in continuing strong performance and strategic growth, navigating through market challenges while maintaining operational efficiency.

Q1: Can you share more about the two major assets under renovation, and their impact?

A1: We have two key properties undergoing significant renovations: Taj Palace in Delhi, which is refreshing 150 rooms expected to be finished by October, and Fort Aguada in Goa, celebrating its 50th anniversary with 40 rooms also under renovation. This isn't routine maintenance but extensive refurbishment, meaning they've had to be taken out of order for an extended period, affecting our RevPAR calculations.

Q2: What is your confidence level for double-digit growth in Q2 despite potential cancellations?

A2: I appreciate your enthusiasm. Given current demand trends and the market conditions, we feel extremely confident about achieving double-digit growth for the hotel segment this year, despite past airline sector turbulences. We expect strong performance in August and September, underpinned by MICE activity and high-profile diplomatic visits.

Q3: Can you elaborate on the revenue growth driven by Tata Neu's platform?

A3: Having joined the Tata Neu Board has been beneficial; our loyalty members grew over 11 million from a previously stagnating number of around 2.2 million. This growth has been significant, with loyalty revenue jumping 46% year-on-year to INR 75 crores. We anticipate great competitive advantages arising from this collaboration, allowing enhanced member engagement and revenue potential.

Q4: What are the drivers behind the 13% RevPAR growth in international hotels?

A4: The robust RevPAR growth for our international assets is driven by substantial renovations in London, leading to better occupancy and rates amidst strong business travel. High-profile events like Wimbledon and the recovery in markets like San Francisco and Cape Town also contributed to this positive performance, and we expect this trend to continue throughout the year.

Q5: How is your capex guidance and future openings influencing growth?

A5: Our guidance for FY '25-26 is INR 1,200 crores in capex, aligning with our strategic goal of growing our asset base sustainably. We aim to open over 30 hotels, contributing to our pipeline of 143 hotels and enhancing our competitive edge. This only strengthens our forecast for the upcoming years, keeping us on track for our 2030 milestones.

Q6: Please comment on the impact of new competitive dynamics and international players entering the market.

A6: Increased competition can indeed be beneficial. More players in the market can drive innovation and service improvement. However, the demand for hotel rooms is largely still in tier-1 markets, where supply remains constrained. Thus, while new entries might exist, they often do not substantially threaten our established presence in strategic locations.

Q7: What outlook do you have for the German market and your property in Frankfurt?

A7: Our Frankfurt hotel, slated to open by the end of January, takes full advantage of the local Indian diaspora and corporate travel. We're optimistic due to its prime location near the Indian Consulate and the fair grounds. Despite challenges in the broader German market, we position this property well for profitability and long-term success.

Q8: How do you see your MICE pipeline developing for the remainder of the year?

A8: The MICE segment remains robust; we have several important events lined up, including cricketing events and conferences. While we don't anticipate significant pressure on rates, high-profile contracts can still spur growth. Overall, with many auspicious dates later in the year, we expect continued strong demand.

Q9: Can we discuss the hiring challenges and strategies surrounding your workforce?

A9: Yes, we're actively working on upskilling our workforce through various educational initiatives and skills centers. Given the industry's growth post-COVID, we've seen some attrition. However, due to our strong employee care and development policies, we maintain lower turnover rates compared to peers.

Q10: Is there potential for more partnerships similar to that with Tata Sons in the future?

A10: Absolutely. This partnership fosters a capital-light strategy while allowing us to retain brand control and revenue share. We envision similar collaborations moving forward, which will allow us to scale efficiently without bearing all development risks ourselves. This strategy aligns perfectly with our growth ambitions.