Chalet Hotels Limited (CHALET) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the third quarter ended FY '24 earnings conference call of Chalet Hotels Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sanjay Sethi, MD and CEO, Chalet Hotels Limited. Thank you, and over to you, sir.

Thank you, Rayo. Good morning, ladies and gentlemen. Thank you for joining us for the Chalet Hotels Earnings Call for the quarter ended December '23 and for being a part of Chalet Hotels' journey of growth and innovation. Allow me to provide you with some key highlights of the last quarter. Globally, the hospitality industry is witnessing an uptick in occupancy and rates led by increasing international tourists, which as per WTO is 88% of pre-pandemic levels for the year 2023. This was aided by improvement in business travel, stronger group activity and resumption of large events. This comes against the backdrop of a volatile geopolitical environment. However, India story continues to be of resilient growth and the country remains as the fastest-growing large market. Corporate demand in the country has also seen consistent improvement -- and office space absorption and increase in business travel is expected to grow at a CAGR of 8% over the next 8 years as per IMARC's growth. We also see Tier 2 cities emerging as key hubs for new ecosystems with a slew of infrastructure projects in the pipeline. Chalet Hotels continues to ride the uptrend. And I'm pleased to report that our Q3 revenue has reached a record INR 3.8 billion, representing an 18% increase compared to the same period last year. The results are a testament to the strength of asset portfolio of Chalet Hotels, backed by overall resurgence in the hospitality industry in the country. In Q3, our RevPAR or revenue per available room grew by 18% year-on-year to INR 7,838. Average room rates grew to INR 10,974 and grew at 8% of the portfolio. However, on the same-store basis, the average room rates grew by 11% year-on-year to INR 11,253. The occupancy for the quarter was at 71%, an expansion of 6% funds over Q3 '23. And this is despite higher inventory of rooms in the portfolio. This was led by an accelerated improvement in the Mumbai market, further supported by growing demand in Bengaluru and Hyderabad. Our [indiscernible] hotels saw several large events and high demand from groups, which led to 11 percentage point increase in leading Mumbai occupancy for our portfolio. F&B revenue also did very well with 27% growth over last year. During the quarter, Hospitality segment achieved a revenue of INR 3.5 -- or, sorry, INR 3.4 billion, and our EBITDA for the quarter was INR 1.6 billion. A robust 29% growth in revenue and a 46% rise in EBITDA when you compare it with the same quarter last year. We continue to be diligent in managing costs and optimizing operating efficiency, contributing to healthy EBITDA margins. Employee costs continue to be stable at 12% of revenue and utilities as a percentage of revenue improved further with a drop of 80 bps to 4.8% of the total revenue for the quarter. Our hospitality EBITDA margin has expanded 5 percentage points over the same period in FY '23 to 46.3% now. The consolidated EBITDA for the quarter was INR 1.7 billion, reflecting a 44% increase over the same period last year on a like-to-like basis. A quick update on some of the projects. Leasing activity has picked up pace in Powai and we signed our first tenant for one floor there. Additionally, we expect a closure of 2 more floors very soon. We are also in advanced discussions with potential tenants for the rest of the spaces in Bengaluru and Powai. Our ongoing renovation and inventory additions at Dukes Retreat and the Marriott Bengaluru are as per schedule. As you're aware, the work at the new hotel, the Taj New Delhi Airport has commenced, Work at Hyatt Regency in Airoli will commence next quarter after receipt of the revised construction approvals. Sales velocity has been very promising for our residential project at Raheja Vivarea at Koramangala Bengaluru. We have sold 38 units since the last earnings call, and Milind will share some more details in a little bit. On the ESG front, I'm pleased to share that the Western Hyderabad High Tech City has recently been certified as USGBC LEED gold. Ladies and gentlemen, with a strong pipeline for expansion, healthy operating performances and a team that continues to excel, I remain excited about the foreseeable future of our company. I'm now going to request our CFO, Milind Wadekar, to take you through some of the final aspects of the financial results. Milind?

Thank you, Sanjay. Good morning, ladies and gentlemen. We have been consistently delivering strong performances and are well poised and confident in continuing the same going forward. The last quarter has been one of the best quarter for Chalet, both for revenue and EBITDA. RevPAR had a double-digit growth of 18% to reach INR 7,838. We also continue to work on our core competencies of optimizing efficiency in our existing portfolio. Our testament to the same is 4 of our existing big box business hotels, that is JW Marriott and the Westin Powai in Mumbai, the Westin Mindspace at Hyderabad and the Marriott at Bengaluru have reported their highest ever quarterly revenue in Q3 FY '24. These hotels are expected to reach new peaks as we move forward. Total develop in Hospitality segment grew by 29% to INR 3.4 billion for the quarter ended December '23, led by strong occupancies, improving ADR and aided by strong F&B trends. Reported hospitality EBITDA for the quarter was at INR 1.6 billion with EBITDA growth of 46% year-on-year basis. The margins for the quarter were at 46.3%, which is an expulsion of 500 basis points over the last year. Our continued focus on variable costs and on the back of robust revenue growth. Our other hotels, including recent additions are on growth trajectory and are expected to contribute significantly to company's growth. Consolidated revenue for the quarter was at INR 3.8 billion, a growth of 18% year-on-year basis. Consolidated EBITDA was at INR 1.7 billion for Q3 FY '24, with a growth of 44% and margin of 45%, an expulsion of 5 percentage points over last year's like-to-like performance. PAT for the quarter was at INR 0.7 billion as against INR 1 billion in the corresponding quarter, which had onetime exceptional noncash adjustment to the tune of INR 0.86 million. Adjusted for this, the PAT grew 3x. The net debt of the company declined by INR 314 million from March '23. The company spent around INR 300 billion in CapEx, which was largely met out of internal accruals. Reiterating confidence in our debt, India rating and research upgraded our credit rating to minus -- A minus sorry, A- with positive outlook. This is the second instance of debt upgrade in this financial year. Out of the net debt of INR 24 billion, around half is allocable to capital work in progress and assets yet to be operationalized. Leaving the company at healthy leverage and return ratios on invested capital. The cost of finance as on 31st December '23 was at 8.74%. The company has CapEx plan of around INR 8 billion for the next 15 months for the projects which are already announced and this CapEx will be largely funded through internal accruals. The details of the projects are included in our investor presentation. The company has available lines of credit and undrawn overdraft limits of INR 6.3 billion. Lastly, a quick update on our residential project at Bengaluru. We had received occupancy certificate for 4 residential buildings in Q2 and expect OC for 5 more buildings in next few days. Construction for 2 new residential buildings is in full swing. The project had unsold inventory of 238 flats, admeasuring 5.7 lakh square feet, adjusting for 83 flats sold earlier. Sales commence from September 2023, and we sold 42 flats till December 2023, with a total area of 1.1 lakh square feet, which is around 19% of unsold inventory. We see a strong demand for residential flats in Koramangala and expect to close entire sales much earlier than our original estimates. Faster sales will accelerate our cash flows from this project, which is expected to fund significant CapEx for next financial year. The company has collected INR 76 crores from this project as on date. The commercial tower of 1.5 lakh square feet will be sold post receipt of OC in FY '26. With this, let me open the floor for questions and answer.

[Operator Instructions] Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Archana Gude from IDBI Capital.

Congrats on very strong set of numbers. Sir, I have 3 questions. Firstly, if I just spoke about Mumbai market. Can you also give some insights on the other markets? How the 16% growth in ADR was driven? Was there any particular market behind it? Or it was more of broad-based growth in the ADR?

Archana, thank you for the question. Look, we don't give individual city ADRs because then it becomes a sensitive information in our -- within the concept that we have. So we're sort of clubbing the ADRs for Mumbai together and the rest of the cities. We've had largely 4% growth in MMR on the average room rates and all of it almost driven by the JW, Sahar. And then on the Powai hotel where we focus on occupancies, given that's a 777 key property, we focus on occupancies as we've been able to drive up occupancies quite sharply over there, resulting in the RevPAR growing at 21% in the Mumbai market. Hyderabad, Bengaluru, Pune have all done their bit, but we are not in a position to give you a breakup of each city because there is just one hotel in each of these cities.

Sure, sir. That's okay. Sir, secondly, on this corporate contract renewals for calendar year '24, so how has been the growth in the rates on [indiscernible] and overall demand for the number of rules?

So from our perspective, we've said that we'll target double-digit rate growth from corporate contracts. And thus far, the RFP profits, contracts have been negotiated in the range of 12% to 20%.

Sure. And sir, any guidance on the demand front?

Demand continues to be strong Archana. I mean the corporate travel is really doing well, especially the domestic copper travel in India. Of course, aided by a lot of MNCs within India. And then the MI segment is just doing brilliantly well. And combined together, we're in a position to continue to grow the rates and at the same time, optimize occupancies. Again, there's a lot of headroom for growth in occupancies also in most of our hotels.

Sure. That helps. And lastly, one question to Milind sir. Sir, how we should look at this debt repayment for Q4 of this year and the FY '25 and '26?

Annual repayment changes between INR 350 crores to INR 400 crores. I mean, if there is bullet repayment for any of the loan, we normally get it refinance. Excluding that, the average is around INR 300 -- sorry, INR 350 crores to INR 400 crores.

For '25 and '26 together, right, like each year?

Yes. Should be in the range of INR 350 crores.

The next question is from the line of Karan Khanna from Ambit Capital.

Congrats on the [indiscernible] for another record quarter. My first question, just continuing on the previous participant's question as well. If you look at your Mumbai portfolio, a couple of other listed hotel companies, listed real estate companies have reported performance for their hotels also in Mumbai, and we've seen double-digit ARR growth for their portfolio. But in your case, Mumbai, you've seen 4% growth and we have seen corresponding supply addition in Vikhroli and at the airport area. So going forward, how should we think about your earlier guidance on double-digit ARR growth for continuing for next couple of years in light of more supply getting added in these micro markets?

Karan, thank you for your question. Number one, the double-digit indication that I've given was an India growth rate. But I think I see no reason why Chalet shouldn't grow similar rates. There will be aberrations in markets and cities. As I mentioned earlier, Pavoi was on a base of very low occupancy last year, and our attempt has been a stabilizing occupancy at Pavoi. So if we were to sort of stabilize or exclude Pavoi, the growth within Mumbai market is in the range that we were talking about. And more importantly, as you will see, the 16% growth in the average room rates in the other cities, which is a combination of Hyderabad, Bangalore and in hotel and Pune tell the story to you. And this despite Novotel adding 88 rooms in its portfolio in this quarter. So the -- whatever ADR growth that's come out of it is on enhanced inventory, which typically when you open new inventory out, you try to grab market share by lower rates, which hasn't happened in our case.

Sure. That is helpful. Second question, have you narrowed down on any micro market where you could possibly look to add more leisure or commercial supply via inorganic route?

In several conversations were on. As I said last time, we have a busy business development team that's looking at opportunities. Chalet's theme for some years has been inventory addition and growth in organic growth. We'll continue to go down that path, whether it's in form of greenfield acquisitions of land parcels for opportunities to acquire ready hotels. But you must also keep in mind we have a fairly large pipeline that is under development now. And if you add all of them together, the -- our vision -- or my vision of hitting 5,000 rooms in the next 3 years, it's going to pan out fairly easily.

Sure. The second question, Sanjay, you've received the Board approval for possibly raising funds up to INR 20 billion at early stages at this point, but assuming you get the shareholder approval and go ahead with this, how should one think about deploying this towards sparing down debt as well as inorganic and organic growth?

Karan, as you said yourself, early stage, there are certain steps to get to actually starting the capital rate's process. All in good time. As we stated in our press release, the intent is to, of course, pay down some debt and more importantly, look at opportunities that come our way in the next couple of years.

Sure. And lastly, Milind, if you could reiterate the leasing time lines for your commercial assets and what kind of revenues are you expecting over the next 2 to 3 years?

We have 3 commercial buildings, which are almost ready in Bangalore, tenant as moving. So Bangalore, we expect entire building of 6.5 lakh square feet to be leased out by this end of financial year. The mall converted to commercial office may take 3 more months. And leasing for Powai building has started. We expect around INR 4.5 lakh to INR 5 lakh to be signed by this year-end and balance in the next financial year. In Q4 of next financial year when everything will be leased out and we start earning rentals from the same.

Before we take the next question. [Operator Instructions] We take the next question from the line of Vikas Ahuja from Antique Stock Broking.

Congratulations on a strong quarter and execution. My first question is again on the ADR growth we have seen this time. If I look at the first half, we did almost 29% growth in ADR. And now I understand the base is also catching up. And on apples-to-apples, we grew like 11% ADR. Just want to understand because in the opening remarks, you also talked about 12% to 20% increase in corporate hike. And that this overall momentum, which is going, is it reasonable to assume this kind of a growth pictures looking at maybe 12 months from here, maybe somewhere at the start of double digit.

Vikas, thank you for the question again. Yes, look, the segment that we spoke about, which is a 12% to 20% [indiscernible] segment that we're looking at is only part of the business. There are several other segments that come into play. For example, the contract or the airline crew segment, which typically comes at a lower rate, though the rates have grown and they're going back, some have being 65% to 80% from where they were pre-pandemic, actually. And in larger hotels, we'd like to get a base occupancy of these contracts, which support the overall RevPAR for the portfolio. And then we've got big city hotels that need to be supported by MICE. We've got convention centers and banquet halls. And then we have [indiscernible] periods every week during the weekend and the holiday seasons, whether it's Diwali, Christmas, Easter, all of them are come into play. And when you blend all that together and you look at the segments that we use as a mix to optimize the RevPAR for the hotel, you may not see on the base that was there already last year in Q3, Q4, the rate increases of what you've seen in the previous quarters. But all these blended together, we're still targeting to get to RevPAR, which are very interesting. We reported 18% growth on RevPAR with additional room inventory this year, 88 rooms over here in Novotel, 168 new hotel in Hyderabad, and we had The Dukes Retreat that got added to the inventory. So despite all those additions an 18% RevPAR growth is a healthy growth coming on a base of Q3 last year, which was a very good quarter.

This was helpful. And my last question is, if, Mumbai ADR was around 4%, right? So if I could -- if I understood it correctly, this is one because there was a Novotel room addition? And secondly, the Powai Westin mix was higher because occupancy there was higher. So if I look at Sahar and Powai Westin on a stand-alone basis, the ADR was still in double digits. And finally, is there any one-off in the margins or it was all or [indiscernible].

One correction there, Novotel is actually in Pune, it's not in the Mumbai metropolitan region. And as I explained earlier, it is the Powai hotel, which is the Westin and Marriott Executive Apartment, which has an inventory of 777 rooms, where we had -- occupancy was very low last year. It was in the 50s. We have attempted that doing the occupancy route in that hotel in the last quarter to get it to normalized occupancies. And therefore, the focus wasn't filling up the hotel. In terms of margins, I think all hotels have done extremely well and contributed very well to the portfolio. JW Sahar, I think, is the rockstar hotel within that. But overall, all hotels have contributed positively.

Okay. So there was no one-off in margins.

The next question is from the line of Jinesh Joshi from Prabhudas Liladar.

Sir, I have a question on our foreign guest mix. So if I look at the 9-month number that we have reported, I think we are at 34%. And this is despite the fact that we had G20 World Cup, et cetera. So what exactly is the issue? Because if I compare this number with the earlier year, we were at 35%, and I think the [indiscernible] would be -- was at about 50% plus, so any specific reason why we are still short of the earlier years despite these events? And one follow-up again is, in the opening comments, Milind sir mentioned that we have had 2 upgrades in our debt rating. But if I look at our interest rate from the last financial year to this year, I think it has come down only from 8.75% to 8.74%, so, also if you can highlight the reason behind that.

Sure Jinesh. Milind will come in immediately after I give you my answer on the mix of nationality. Look, in my opening statement, I did mention that the foreign business travel globally hasn't come up to pre-pandemic levels yet. And one way to look at it is that this is potentially the upside going forward, right, as that stabilizes. You've got to remember that there are 2 concepts going on globally, which hinder flight paths for long-haul flights. The Ukraine-Russia situation has created a longer flight path into India from East and West Coast of the U.S. And then the Middle East situation is not helping that. We did expect that at some point in time, this will sort out and there will be stabilization of foreign segment within [indiscernible]. It has grown -- as a percentage it may not show up, it's grown too much. But in absolute numbers, it has grown by, I think, about 7,000-odd room nights on a base of 62,000 room nights last year. So it is a 10% to 11% growth still. The other thing is the domestic demand in India just so strong. It seems to be coming at a price point. There is really no reason to prefer one over the other. We'll take business from wherever it comes at price points that work for us.

So Jinesh on this interest rates, one of our lending banks have increased PLR for last few months, and we expect that to stabilize as we move forward. And what is going to happen in next 2 or 3 quarters is, we may get further upgrade from betting agencies. And part of our loans will get converted into LRD, which will bring down our cost. This is a temporary phenomenon, which we expect to get stabilized in next quarter or so.

Sure, sir. One last question from my side. So, if I look at our leased area, I think that has increased from about 0.5 million square feet in FY '23 to about 0.8 million square feet as of the last quarter. But if I look at our quarterly revenue run rate over the last 3 to 4 quarters, it has more or less remained stable in the band of about INR 28 crores to INR 30 crores despite increase in the leased area. So if you can just explain the reason behind that? And also in your opening remarks, you mentioned that for Powai where the leasing has already begun. We have signed one tenant and closure for 2 more floors is expected very soon. So, explicitly for Powai in the next quarter, how much additional area are we planning to lease out?

Jinesh, if you look at quarter-on-quarter moments, in our lease income, which was in the range of INR 20 crores in first 3 quarters of last financial year. It is averaging to INR 26 crores and last -- quarter 2, it was INR 29 crores. So what we do, I mean, whenever we sign lease agreements and tenants move in for fit-outs, we start recognizing revenue, we straight line the revenue and start recognizing in books. This is a requirement as per accounting standards. And to answer your question on Powai. Last quarter of the current financial year -- sorry, next financial year, everything, the revenue will start kicking in, in the books. So we expect from Q3, there will be some revenue at Q4 it will -- sorry, I mean, it will pick up from -- it will start -- will start accounting it from quarter 1, and it will peak in the quarter 4.

Sure. Actually, I was looking out for the exact amount of area because I think in the presentation, we have mentioned that out of 0.9 million square feet, we have leased out 0.04. And Sanjay sir mentioned that first floor -- I mean first tenant has been opened and 2 more floors are closed out. So I was trying to get a sense that this INR 30 crore run rate, which we saw in 3Q, can we see a big jump in 4Q? So that was the thought behind asking the questions around the lease area, especially for 4Q.

You will see major jump in Q1 FY '25. There will be increase in last quarter. But major jump we'll see in quarter 1 FY '25. And it will go up every quarter after that. There will be significant increase on quarter-on-quarter basis. This is basically, we don't give forward-looking numbers, and that's the reason Milind suggested -- he will give you the exact numbers. But as we said, we expect a sharp pickup in Q1, while there will be some pickup in this quarter also.

The next question is from Sumant Kumar.

This quarter, we have seen a 27% growth in F&B. it might be a reason of Powai Hotel, we have opened the room. Can you talk about any other reason for the higher growth of 27% in this quarter?

Sumant, typically Q3, which is the October-December period is a high demand period for weddings and MICE events. This is a play out of that. Personally, I felt we underperformed in Q3 of last -- the previous year. And now this is sort of normalization of the numbers that we see. We are seeing tremendous demand on large banquet events, weddings, social events in the last year, year-and-a-half or so. The supply side besides the geo-center that opened out or a financial that opened up there's not much that come up, and I'm likely to come also. And after the Geo-World Center, there are just 2 or 3 hotels which have the banquet halls that are there in our portfolio. So the natural flow then is to us. That, along with a very good quality hotels given that we now renovated the Powai Hotel and rebranded it to Westin, the response has been very, very positive. The banquet halls come out very well. We've got large pre-functions over there. We've got multiple rooms to work with. All of that is large MICE and wedding business. And then, of course, the room inventory is high. So that allows large conferences to come use for that business. But it's largely demand on weddings and MICE.

And when we talk about 12% to 15% corporate rate hike, can we see a double-digit ERR growth in midterm or maybe in the next year for retail segment?

I have always stayed away from speculative numbers on this. The retail segment will play the revenue management route, depending on how the demand is looking like 30 days out, 60 days or 90 days out, they will decide the retail rates at the hotel levels. But clearly, the supply side being weak on the inventory, every hotel will take advantage of the current situation.

[Operator Instructions] The next question is from the line of Hrishikesh Bhagat from Kotak Mutual Fund.

Just if you can break up the debt number between what is backed by commercial and what is on the hotel side -- that would be helpful. That's my first question.

Well, Hrishikesh, our net debt position as of March 24 is INR 2,400 crores. So out of that, around... Sorry, as of December, by bad --- as of December its INR 2,400 crores. As on date, I mean not more than INR 500 crores we have taken by LRD route. But 50% of debt, which is around INR 1,200 crores is used for assets which are under construction or not yet operationalized. Hope that answers to your question.

Yes. When I look at this, so the backdrop of this question is largely the fund raise that -- to your proposal that you have put. Now when I look at it, and based on our past commentary, clearly, we used to say that the LRD route will bring some cost of debt lower. And incrementally, clearly, the potential -- if I look at it once the Taj -- Delhi Taj and coupled with this probably the real estate portfolio maturities the surplus that we could approve whenever it happens, I'm just saying that incrementally, and in your comment also, you said that internal accruals should take care of our growth CapEx here on. So just thought that how should we look at this then fundraise proposal -- proposal of somewhere around INR 2,000 crores concern. So is it that probably we are looking at fairly larger CapEx beyond INR 27 crores or INR 28 crores. That's how we should look at it? Because I believe the cash surplus will be significantly better. Cash flow will be reasonably better at least based on the current growth plans?

Hrishikesh the idea is not necessarily lead to activity and sit on new capital without it being productive. We would like to keep the gunpowder dry for inorganic growth opportunities. And that's the -- one of the reasons for this fund raise. And remember, it is an approval up to INR 2,000 crores. We'll clearly be prudent about how much we finally end up raising and how the deployment will be. We don't think it is productive use of capital to come to a 0 debt situation, especially not equity returns. And therefore, we will only use or draw down this capital or take advantage of the capital that we can potentially draw down, when -- provided there are good growth opportunities available in the market. I'm not talking about just stand-alone hotels. We could also be looking at platform business at some point in time.

Okay. Sir, just one feedback I still believe that it simply, considering the comfortable cash flow situation, we will be likely post '26 I still believe replacing the cheaper cost of debt with higher cost of equities is not something -- or a good financial decision.

I completely agree with you. And all of us in the table over here and across this speaker, [indiscernible] are aligned with that.

The next question is from Prashant Biyani from Elara Securities.

Sir, what would be the airline crew segment mix for this year? How much was it last year? And how much it could be for next year?

Okay. I'll have to dig out this number. Just give me a second.

So in the meantime, I can ask a second concern?

I got the number in front of me. I'm giving you a contract segment. There may be some non-crew, very small amount that could be in that. Our room nights, if you look at the -- you will not have this data. Our contract room nights in Q3 FY '23 was INR 10,600 odd room nights. It is now INR 15,500 odd room nights. And whilst there may be small deviation on that on other contracts, majority of this is going to be airline crew. So overall, INR 5,000 room night growth on a base of roughly INR 10,000, so that's a 50% growth on the nights from the airlines.

And for next year, sir, how much would we be looking at?

I think we more or less optimized the rooms that we have let out to the crew now. Now, we don't want to continue to continuously add to that part. A large part of all growth will not come out of other segments.

And secondly, sir, what would be your plans for increasing presence in leisure tourism, especially religious circuits that have been developed and are also developing -- if you can throw some light on that?

Prashant, we look at all opportunities with a lens of returns on the investment. And we do not want to dilute the returns that we are able to deliver right now. So any opportunity that comes -- that comes in the -- on beach resorts, Hillside, Hill resorts or leisure resorts needs to be able to match up to the expected returns of the -- what we're delivering right now for us to look at it seriously. There is some amount of aggressiveness in the recent weeks in terms of announcing assets or growth in Ayodhya. We've got to remember religious tourism is not necessarily the highest paying tourism. Ancillary revenues have their own restrictions. I'm talking about F&B here and leisure activities, et cetera. So we'd like to really study opportunities in any of these destinations very carefully before we step into them. We've been doing well with what we -- our strategy has been thus far, and we are not going to likely to tweak it unless it's a very compelling opportunity [indiscernible].

Sir, beyond religious tourism, I mean, in the larger leisure tourism market, you would have interest in Goa and Jaipur market, which are, I mean, almost 24 -- 365-day tourism market now?

I agree with you. In fact, it's our stated strategy to look at leisure. For example, Goa and Jaipur, we've already spoken about in the last few calls. We've also continuously spoken about drivable distance destinations from Mumbai and Delhi. In fact, the acquisition of Dukes was in line with that. We continue to pursue opportunities in Goa and Jaipur, drivable distance from Delhi. All these various conversations at our BD desk in terms of growth. But as I said, they'll all need to meet our return criteria before we start spending money on them.

Sir, just lastly, the hindrance right now is meeting the return criteria or appropriate availability of assets?

I think that's mix of both. I think Goa has been an elusive market for a while now, on account of 2 things. Number one, this is an expensive market to enter barriers the entry. And then there is also the barrier of getting -- getting clean titles, sort of situation of the land part that we looked at. We are, by nature, conscious on all that stuff. And therefore, it's taken us a little longer time, but we will get there very soon.

The next question is from Meet Jain from Motilal Oswal.

Just one more [indiscernible] question. Like in our presentation, we have mentioned the Westin Powai rooms to be 604. And are there additional 4 rooms in that?

Yes, Meet, when we were renovating and we reduced the suite count a little bit, and therefore, 4 new rooms have been added to the inventory there.

So this has been done in this quarter?

Yes, they're operational now.

Okay. And just clarification on the Dukes, how many total rooms are we going to operate there like currently, we're running 80 rooms. So it is 150 rooms target we are looking?

It's an 80-room property when we acquired it. More than half the inventory is out of action as we speak for the last 3 or 4 months for renovation and expansion. We end up somewhere between 140 and 150 rooms at the end of it after we've completed the renovation expansion by Quarter 3 of the next financial year.

Okay. And this Bangalore Marriott Whitefield expansion of 130 rooms. So the expansion is in progress. And are we going to add in the existing room of 391 -- or it's a separate hotel?

The existing inventory. That is that the fixed costs already come. These 130-odd rooms are going to come with higher margins.

The next question is from Nihal Mahesh Jham from Nuvama.

Sir, 2 questions from my side. You did mention the share of airline crew, which I think was around 6% for this quarter based on the room nights. Just on the contracted corporate rates, what would be the approximate share and how that has moved versus pre-COVID if possible to give that ballpark sense?

Okay. So Nihal, the contracted percentage of total room nights is actually 9% of total room nights that we sold in Quarter 3. Transient, which is a mix of RFP or GDS and locally negotiated trade contracts, and retail is 73%. At this point of time, I don't have the breakup of the 73% yet, but I can share with you another data point that is -- that 11% of our room nights came out of e-channel that is the OTAs, 24% came out of global distribution system or GDS as its popularly known, 13% came out of marriott.com, which is a brand website and 53% was -- came out of the channel of property, voice and others, which is basically closed at the property levels. So this is a rough breakup on the channels. Nationality is 61%, Indian 39%, foreigners and I've already shared the segment breakup, which is transient 73%, groups 18% and contracts 9% of [indiscernible].

Got it. So the rates that are already predecided and negotiated, that is 9% plus 6% which is 15% for this quarter. That is right as an understanding?

No, no. So the rates that are decided will be in the transient as a sub-segment of the transient, which is 73% right now.

Now coming from the [indiscernible] counting corporate negotiated and the airline crew...

It was 9%, you're right. But the corporate negotiated rates fall within the subset of 73% of transient segment.

Right. And possible to give a sense of what that number is like if you have it handy?

I don't have it handy our routine team will be happy to share those numbers with you at some point in time.

And I'll take that separately. Just one more clarification was that when you were giving a sense of the ADR of 4% for Mumbai, for the JW Marriott, Sahar did you mention that the area was more in sync with the other cities or the 4% increase was attributed to just the...

Actually, the Westin Powai was more or less flattish. So all the growth came out of JW Sahar.

So the 4% is more or less the reflection of the JW Sahar?

Yes, and 4 points, but 4 points is also small. It's a small inventory. So it doesn't impact the blended average too much.

The next question is from Dhruv Agarwal from Niveshaay Investment Advisors.

I am Richardson for [indiscernible], sir. Sir, I wanted to ask like what would be the RevPAR till '27, what kind of growth we can expect there in the RevPAR, sir?

Dhruv, we really don't give forward-looking numbers. The RevPAR growth for the quarter was 18%. And this despite additional room inventory in the portfolio.

Sir, can you give us some guidelines or if possible, sir?

We don't give forward-looking guidance, unfortunately, Dhruv.

And sir, like in 2023, the ROCE was around like around 9%. So what ROCE we can expect, I mean, like '24, '25, sir?

See again, you are asking for forward-looking numbers on that. But Milind do you have any?

Our ROCE for hospitality as well as commercial is around 14%, 15%.

Okay. When can we expect like 14%, 15% ROCE in the coming years, right?

Let me share this Milind. So all projects going forward, we try to hit ROCEs, which are in that -- in third year of 12% to 15%. But historical assets the ROCEs are clearly higher and then the high teens. So that's the reference number that we can more fit.

Okay. And so like.

Commercial is 20%.

Commercial is like 20%.

Yes.

And like for hotels, it will be?

High teens for historical assets.

Okay. Right. One last question, the Supreme court case on the Hyatt Regency at Airoli, Mumbai, can you give some -- like throw some light on that, like what we can expect in the coming years, like what is your point of view on that?

Are we referring to the 4 points by Sheraton by Vashi -- in Vashi?

No, sir. Airoli, Mumbai, Hyatt Regency.

We don't have a Hyatt Residency in our...

We are planning to have 20 rooms in 2027, right, sir?

There is no litigation on that land per say.

Which one... You're talking about Airoli?

right.

There is no litigation on that. That's a strike that we'll start to work on shortly. There is no litigation or legal issues on that.

The next question is from Rajiv V who is an individual investor.

Sir, on your Slide 8, the other segment, which is occupancy, can you give like-for-like occupancy for the quarter against the 64% number which you have reported?

We've got just a moment, I'm just opening the page. Slide 8.

Slide 7.

So you're referring to the occupancy of the portfolio, is it?

Q3 FY '24, other fees, which is 64%.

This is ban, but yes, because in Quarter 3, 2 things -- material things happened in the other areas. One, Pune, we added 88 rooms sometime in October, which will obviously have a natural time period for filling up additional inventory. They were added, I think, in the first or second week of October, if I recall correctly. And then we had Dukes Retreat, which we shut down more than half the inventory for renovation. So -- but Dukes Retreat, which was really 80 rooms is currently operating at 38 operational rooms. And then we had HITEC City hotel also that was added -- so these are the reasons why the occupancy may look a little lower on the other side. But if you were looking at Hyderabad and Bangalore, we have -- let people like this, satisfactory occupancies.

So my point -- and just to clarify, this revenue mix with the pie chart which you share below that includes the F&B part, right? Or this is only for room revenue?

This is all revenues, total revenue.

And this F&B bid, which has increased by 27% on a Y-o-Y basis, is this driven by any specific market or this is across the board?

Mumbai has contributed to the maximum because of the high MICE and wedding business that comes out of here. And the segment that contributed is MICE and weddings.

Sure. So I mean if I reverse work from this pie chart assuming that F&B ratio on a Y-o-Y basis across in the other segment has remained same. It looks like your entire growth on the 18% number or if you adjust it for a like-for-like maybe 22% kind of number was largely driven by occupancy in Bangalore, which was 50% in the base quarter and now, let's say, there is another room for 15% more growth there. But beyond that, the ARRs going beyond INR 10,000, that market has been little resistant. Any thoughts on that, let's say...

Rajesh I'm not able to share these numbers, I think we have broken the 10,000 barrier quite comfortably in Hyderabad and Bangalore.

And we have, let's say, Hyderabad is -- the current growth is driven by ARR as well. In the sense, there is ARR growth in Hyderabad. Can you see that?

Significant growth. See, in the others, when you look at the other segment, you got to remember, Bangalore and Hyderabad occupied most of the other segment, right -- and the ADR growth, you see in the other cities is 16%.

The point is, if I -- I mean, if you use this pie chart and use it, the RevPAR, it looks like to be a 17% growth. And if we give the entire -- this RevPAR to occupancy alone and occupancy touches close to 78% for Hyderabad also, which is slightly high, but then in are much higher...

During the recent Hyderabad rates are not growing the way they should, right. What stops us from going Hyderabad little more aggressively? And we're on the rate part.

The next question is from Pranay Shah from Anand Rathi.

So my first question to the management is, in the absence of meaningful recovery in the FDA front as compared to pre-COVID levels, how confident are you to say double-digit growth in the room rates for the next couple of years? And what according to you will trigger the faster recording FDA growth? And would also think of contributing to room rate [indiscernible] addition to double digits, which you have been talking about?

So let me answer what will trigger the FTA growth. I think one take the FTA growth is some amount of normal fee on the conflict in trades share. And therefore, the airlines in touch with them especially American Airlines starting direct flights to India. Right now, besides Air India, we don't have direct connectivity to Mumbai, Bengaluru, Hyderabad from East and West Coast [indiscernible]. And we must remember that 2/3 of the FTA in our portfolio at least used to come from U.S. So therefore, that market is critical to us. Having said that, we are not so concerned because the domestic demand has been so strong, buoyant, both on our room night demand as well as on the rate front that we've really not missed it too much. When that comes, it will be the -- let's see, it's going to be the cream on the cake.

Okay. My second question was on Novotel [indiscernible] what sort of -- with the addition of 85 rooms -- what sort of areas are you looking at inventory -- because I believe these are more premium rooms and what occupancy is expected once you rap up.

Pranay there are very cool looking rooms and the room size is the same as the previous ones, but they're brand new, so that clearly there's a sheen to them. We are trying to sort of charge a premium for that. We've seen roughly, I think, double-digit rate growth there. It's quite the norm. Pune market has -- unfortunately not been a very strong rate-driven market. And tends to typically pull down our portfolio, blended ARR of the portfolio. But we've seen growth. And the 88 rooms that have been opened there, they have been received very well. They're really nice rooms. You must -- if you got to Pune, take a look at it.

The next question is from Saurabh Jain from HDFC Life Insurance Company Limited.

So, 2 questions from my side. First is on the real estate project in Bangalore. So can you give numbers that how much [indiscernible] has been done till date in terms of amount terms? And what has the CapEx been done till date in this project?

Sorry, could repeat that, please. I think we missed the early part of it. Which project are you referring to?

Sir I'm talking about real estate project in Bangalore.

The residential one or the office one?

Residential one. The Vivarea one. Yes. So I wanted to know that what is the sales done till date? And what is the CapEx till date for that project?

Okay. We have spent around INR 430 crores on that project till date. This is including the old pre-litigation cost incurred on that project. And sale as on date is in the range of INR 200 crores. We have collected INR 76 crores out of that.

Okay. Your cash collection is INR 76 crores you are saying?

Yes.

And what do you expect the total sales from this project once the whole 1 million square foot is sold?

All put together, including commercial should be not of INR 12 crore, INR 50 crores.

And just a clarification on the CapEx of whole INR 30 crores that has been consumed, how much is the promoter money in this through the preferential shares and the interest free loan.

We spent around INR 65 crores on incur speeds on this project, Koramangala till date in the current year.

I'm asking till date. You said INR 430 crores, including the litigation cost and all.

Okay. So promoters have funded as on date around INR 290 crores. But this fund was used to pay for cancellations and all. I mean, fee flat we were canceled in the last 4, 5 years.

Okay. And my second question is on the F&B.

Can I just come in here. Totally, roughly around 8.5 lakh square feet to 1 million square foot is the project here. 8.5 lakh is the residential and 1 point this thing is. And out of that, how much was sold Milind before that?

We have sold around 2.8 lakhs.

We have 700,000 to sell.

So 5.7% on resi side and 1.5 on commercial.

And the growing rate just as this thing in the market there is north of 16,500 - 17,000. This project is a premium project, and we expect to get premium rates for the project. And so far, it is trending and tracking in that line.

Got it. So this 1250, the total sales can be -- that is upside just to that also?

Yes, that's right. And we got minus the old sales, of course.

And my second question is on the F&B expenses. If you see as a percentage of F&B income, that is significantly down this quarter at about 25%. Generally, we saw the trend in the range of about 29, 30 weak quarters and then about 27, 28 in the strong quarter, so just wanted to understand this reduction in the F&B expanded as a percentage of midterm?

Sure. 2, 3 things actually. One is coming off a higher revenue base. So therefore, the percentage does improve with scale. Second, we've had, as I mentioned earlier, a lot of growth from the banquet side and banquet typically comes with higher margins. And thirdly, in general, the average check per person has improved in our hotels.

Okay. So this trend, given Q4 is also a strong quarter, we can expect similar kind of margins in the F&B business.

Yes. Again, I don't want to give any guidance, but yes I think there is no reason why we shouldn't be seeing in the market.

We'll take that as the last question. Any pending questions can be sent to the management directly. I would now like to hand the conference back to Mr. Sanjay Sethi for closing comments.

Yes. Thank you very much. Thank you, ladies and gentlemen, for your time. We -- as I said earlier, we're extremely pleased with the trend that Chalet Hotels portfolio is showing.

Participants please connected, we seem to have lost the line for the management. Please stay connected while we reconnect the management line. Thank you. Participants, thank you for into holding line. We seem to have lost the line for the management. So we shall close the clock call. On behalf of Chalet Hotels, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.