EIH Limited (EIHOTEL.NS) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and thank you for attending this virtual meeting. I'm pleased to welcome you on behalf of EIH Limited and SKP Securities to EIH Limited's F1 FY '26 Earnings Webinar. We have with us Mr. Vikram Oberoi, MD and CEO; and Mr. Vineet Kapur, CFO. Friends, this virtual meeting is being recorded for compliance reasons. And during the discussion, there may be certain forward-looking statements. These must be viewed in conjunction with the risk that the company faces. We'll have the opening remarks from Mr. Oberoi followed by a presentation and then a Q&A session. Thank you, and over to you, Vikram.

Thank you so much. Good morning, ladies and gentlemen, and a warm welcome. We just had our Q1 results. And unfortunately, the hospitality industry, and we're no exception to that, were impacted by Operation Sindoor in the tension between India and Pakistan and also the geopolitical developments, in particular, between the U.S., Iran and Israel. But despite those ruffles, we had a strong EBITDA performance for Q1. It would have been better had it not been for that. What we see overall in Q1 is still strong demand over the previous quarter of last year. And we again remain optimistic. One of the things that I've been mentioning for some time is our endeavor to drive ARR. And that obviously is easier when you have strong demand, typically in the summer months, industry does face a softening in demand. But despite that, you'll see from the investor presentation that has been loaded on -- for you to review, we've been able to take our average room rates up. And as a result, RevPAR up as well, but a strong increase in average room rates. And our endeavor would be to continue to drive rates. One of the key advantages of driving ARR is that the flow-through to EBITDA is much stronger than if it was just an increase in occupancy. So that is our endeavor. We have world-class hotels in our country, us and our competitors, they are the finest hotels probably in the world. And certainly, our approach is to drive ARR to reflect the quality of our hotels and the quality of service we offer. So with that, I'll pass it over to Vineet for the -- a quick run through our presentation, and then we can open it up to questions and answers. Thank you very much.

Thank you, Vikram, and good morning, everybody. We'll start with the Indian hotel sector first. For the outlook perspective, we see a pretty good strong hotel demand coming through for the current year 2025 and the factors already mentioned there on the growth drivers. A lot of factors driving that growth, majorly coming from -- a good increase coming from a demographic shift of the Indian population and a good increase in UHNI base as well as a good forecast for inbound tourism to grow by 15% in the current year. If you look at the Indian hotel market, especially for Q1 '26, we got impacted, as mentioned by Vikram, in the first quarter because of Operation Sindoor, the geopolitical situations in the Middle East. But in spite of that, we saw an increase happening in passenger traffic by 4.4% on a year-over-year basis. And that reflected also with a good buoyancy in the ARR. We almost saw an increase of 9% to 11%. Though on the occupancy, we were more or less flat. But overall, a good ARR increase, we saw an increase of 11% to 13% on RevPAR versus last year. So we expect -- from a management perspective, we expect the demand for high-end luxury to grow and become more prominent on the luxury side. And with our portfolio of luxury hotels, we feel ourselves we are in a good position to get the most benefit of the India's evolving option base. Considering that, we are already working -- we are very focused on our local domestic market as well as in the international destinations. We have a strong expansion strategy with almost 25 new properties, mainly focused in India, but also in some global markets to be operational by 2030. Coming to operational performance. EIH is consistently has maintained leadership versus the competition, and we continue to lead in most of the areas, including occupancy. We have maintained an overall 20% lead over the competition, if you see over the years, though, of course, that has been cyclical based on the market demands and the cycles. But more or less, on average, we have maintained 20% leadership over the competition on the RGI front. Looking at MPI, we are higher by roughly 6%. And if I compare that 3 years back in June '22, increase on the occupancy side, on the ARR, there has been some drop, but overall, a very strong leadership on the RevPAR side. Continuing on the RevPAR movement, it's the same cyclical trends what we see every year and the same cycle goes. I think important to note would be the base. If you look at -- from INR 9,811, we ended up at INR 11,350, which is a growth of 16% year-over-year on average versus last year on RevPAR. And we continue to see this base increasing year-over-year. Even -- and we also foresee a good strong base going into the next year.

Vineet, may I just add one thing. The RevPAR growth in Q1 of this year versus Q1 of last year, we see, as you know, foreign travel to India declines come April or middle of April onwards. And despite that, we have been able to take up our rates. And our endeavor will be during the winter months to drive that even further supported by foreign travel into India.

Coming on the next slide, which is the RevPAR growth by industry and by the hotel. So industry growth was at roughly 12% in Q1. Our owned and managed hotels grew a little higher than the industry growth of 16%. Oberoi Hotels continues to leads the pack with a growth of 21% on a RevPAR basis over last year. If you look at the same on the occupancy and the ARR trends, so we started the year pretty strong in April at 77%, but we saw a dip happening in May, especially impacted by Operation Sindoor as well as the geopolitical situation in the Middle East. That has picked up a little in June, and we hope to see that trend changing in the current quarter. But overall, in spite of changes in the occupancy, we saw a pretty healthy growth on ARR side in every month. So on a net basis, if I look at overall quarter, we were almost flat. at 70%, but a good increase, almost 18% growth in ARR versus last year. If I look at the same thing for EIH-owned hotels, actually, we saw a dip in occupancy. And the dip was more prominent in the month of May, especially impacting our hotels in the Northern region of India. So overall, the occupancy dip from 77% to 73%. We got an impact even in our city hotels during -- in the month of May. But overall, good -- in spite of the occupancy drop, we were able to maintain the ARR and able to grow that versus last year. If we look at growth by city in our hotels, including managed hotels, we saw a pretty good healthy trends, except what you see in Shimla and Chandigarh, which were basically impacted by the Operation Sindoor, where the travel to the northern part of India was definitely restricted. But at the same time, we saw a good increase in RevPAR in Jaipur and Ranthambore areas. Hyderabad, in particular, we saw a very high increase, but that was because of a onetime event. We had the Miss World event, which took place in Trident Hyderabad and hotel was occupied for quite a number of days, which drove the ARR for us in Hyderabad. On the international front, also we saw a good healthy increase. And this is due to good performance by our hotels in Mauritius, Egypt as well as in Marrakesh. Egypt and Marrakesh basically coming back versus last year due to the impact of Israel and Palestine conflict, which had impacted on the room nights for those hotels last year. That's coming back in the current year. On the room revenue tailwinds, I would say, more or less in the same lines, nothing dramatic from any particular segment perspective. But we saw an impact on corporate segment where we are seeing a little drop in base in Q1 versus our last 2 to 3 years average. But otherwise, most of the other ones are in the same trend as last year. Coming to the quarter 1 financials, the standalone -- I'll start with the standalone -- starting with the standalone performance. So looking at the Q1 F '26, if you see over the last 6 to 7 years, leaving aside the COVID period, even last 4 years, we had the highest revenue in Q1, highest ever revenue in Q1 as well as same thing on EBITDA. PAT was not in the same line, and that was because of a onetime impact. We have taken INR 110 crores impact in our financials on account of Mashobra, which came in Q1. And due to that, the PAT was on the lower side at INR 36 crores for the quarter. Looking into the same, if you look at the consolidated performance, again, on the revenue and EBITDA side, we had the highest ever revenue and EBITDA for the quarter. PAT was lower because -- again, because of the Mashobra impact of INR 110 crores, which lowered our PAT for the quarter. On the funds position, the funds continue to -- we keep on adding our positive cash flows and keep adding to the funds, which basically gives us a good situation to be in with a very healthy liquidity at this moment to push our growth plans, our long-term growth plans to support in the coming years. Coming on the financials in detail. If we look at -- on the consolidated level, our overall revenue went up by 9%. Expenditure was actually in good control. We only had a growth of 6% on expenditure side, which resulted in a higher drop-through of almost 16% on EBITDA. Looking at the percentage on the EBITDA, we ended up the quarter with 32% EBITDA percentage versus 30%. So good improvement in EBITDA percentage overall. On the operational side, good performance, but at the same time, we got impacted by Mashobra due to the court judgment which came in the month of June. That resulted in an impact on our PAT. We were down on 62% because of the INR 110 crores impact on account of Mashobra. If I look at the stand-alone performance, again, a good growth of 15% over year, and this is in spite of the fact that we didn't have Grand and Oberoi Airport services in the last quarter versus last year, we had both the things in the numbers. On the expenditure side, same trend has grown lower than the growth what we have seen in terms of the revenue, which has helped us to increase the EBITDA drop-through and a good growth of 28% versus last year. On an EBITDA percentage, we have gone from 30% to 34% as of Q1 FY '26. On PAT, we were down versus last year due to, again, the exceptional item of Mashobra of INR 110 crores. On the awards and accolades. The Oberoi -- there's a list of awards which Oberoi Hotels have won. We continue to lead in the luxury segment and also getting good rewards across different -- from different authorities. If you look at Telegraph Travel Awards, we got the Best Hotel Group award from Telegraph Travel Awards. We were ranked #2 among the best hotel brands in the world by Travel + Leisure, U.S.A. The list goes on. And if I look at the next sheet, we also -- our restaurants also were awarded as to be the best in terms of their own categories. Going to our next expansion plans. We continue to drive a very healthy pipeline on the hotels. We just recently signed 4 hotels, which are going to be managed. So with this overall, our list is roughly 25 properties with 2,033 keys, spread out across domestic and international, but mainly in domestic. If I look at number of keys in domestic front out of the 2,033, we are coming with 1,750 keys in domestic and the remaining keys international. Out of the 25 properties we will be owning 8 and managing 7 (sic) [ 17 ]. And so overall, a good growth pipeline coming in at this moment until 2030. This is the business footprint across national and international, along for Oberoi as well as Trident. Total number of keys in India is roughly 3,700 at the same time, 408 keys for Oberoi International in the international locations. I'm through with my set of slides, over to you, back to Navin.

[Operator Instructions] We'll take the first question from Abhishek.

Yes. I have 2 set of questions. One is regarding the RevPAR. So basically, what I've observed that the average RevPAR, which is given across the industry and for EIH, should be including the F&B revenue as well, right? Otherwise, the MAT doesn't add up.

We -- the RevPAR is revenue per available room. It does not include F&B and other income.

Okay. So if we have to just do a math on the revenue for Q1 FY '26. And if we try to take the RevPAR and multiply it with the number of available rooms into the occupancy ratio, say, maybe an average, if it is 70% or 75%, should add up to -- it adds up to the entire revenue. That's my question. It shouldn't add up to the entire revenue, right?

Yes. So I'm not sure what data you're seeing for others, but hospitality RevPAR very specifically across our industry refers to revenue per available room based on room revenue. It does not include food and beverage revenue, and it doesn't include revenue from mine operating departments. And that's an industry-wide practice. But I'm not sure what data you're referring to for others. And if you want, we can certainly take this offline and better understand what data you're looking at to answer any further questions you have, if that's okay. But ours very clearly is revenue per available room for room revenue only. That I can assure you.

Okay. And another question is on the case for which we have taken an exceptional hit of INR 110 crores. What I understood earlier is that we were to receive a substantial sum through -- because we are surrendering the property back to them. But now in this particular quarter, we have taken a hit of INR 110 crores. So how do you see this going forward?

I don't want to make any statements on how I see this going forward. The INR 110 crores is based on the judgment of the court and us accounting for that based on that. And if there may be questions. So Vineet, can I just maybe hand it over to you to just give a summary of that INR 110 crore exceptional item for Wildflower or for Mashobra.

So I mean, the INR 110 crores actually constitutes of various -- and then ultimately, we have passed the accounting based on the court judgment. The INR 110 crores is on account of net impact of the equity value, which we are not receiving based the post judgment and also impact of 50% of advance against equity, which we had given to Mashobra, which has not been considered by the court. So that constitutes the INR 110 crores.

So I have also seen that we have written back the used fee that amounts to INR 86 crores, so that we expect that we are not going to pay and we are not going to receive any sum beyond this, right? That's the thing to...

It shows -- INR 86 crores was the user fee what we are mentioning. That was the amount we were carrying in our provision in the books. Considering that -- and that was in view of we having the property, considering that stand was not taken by the court, we have reversed that user fee, which was sort of a lease rental which is payable to the state government. So net of all those 3 impacts is INR 110 crores.

Okay. So just another thing. Now that the property is given back to the government, I mean, it's very evident that there is going to be a hotel resort there, which is going to be managed by the hospitality players in India. So do you expect that going to our competitors or expect -- or you would expect that there's a chance of us getting it back?

So we're managing the hotel currently, as you know, on behalf of the state government. And we will endeavor to -- once the bidding process is announced and the criteria for bidders is disclosed, our endeavor will be to continue to operate the hotel on terms that are favorable and are a win-win for both the Mashobra government or the Himachal government and us. So that's our hope and our endeavor.

We'll take the next question from Amit Agarwal.

Amit, your voice is coming muffled. We can't unfortunately hear you clearly.

Amit, may I request you to disconnect and join again. And we'll take your questions. So meanwhile, we take the next question from Raghav Malik.

Congrats on a good set of numbers. So the first question was just a follow-up on the RevPAR question. So in your PPT, you've detailed that domestic RevPAR is higher about 16% and international is 22% higher, but consol revenue is about 9% higher. So what is the like gap between this RevPAR and revenue growth number essentially?

So Raghav, the numbers what you are seeing on the -- that's mainly on hotel. So the 3 things which impacted us on a consolidated basis was one was Mashobra versus last year, considering that we already handed all the property on 31st March, we are no longer consolidating Mashobra in our numbers. So that is not there in our revenue year-over-year. At the same time, we also get impacted by Grand, which is actually close for renovation. We had full Grand operations last year, which we don't have now. And on top of that, we also had our Oberoi Airport services in Mumbai, which was there last year, but not in the current year. So due to that, a one-to-one tie-up with RevPAR will not be possible with the revenue.

Okay. Okay. Understood. And for international hotels specifically, the RevPAR -- I mean, the slide details that it is including the hotels that were impacted by the recent Middle East conflict. So what is the like-for-like number then 22% on a non-like-for-like basis is 22%. What is like the number that would be ex the hotels that might have been impacted because of the conflict?

Raghav, actually this is the other way around. Like what happened last year was Marrakesh and Egypt and to an extent, Mauritius. These 3 entities were impacted by the Israel-Palestine, which was pretty much more impactful for these countries. Considering that, that has evened out and the impact was more for Iran, we are not seeing the impact what we had versus last year, that has actually improved.

Yes. And if I could just add to that, Raghav. In Egypt, we've also made some changes in how we are operating, which has resulted in a sharp growth in Egypt. So one is external factors. But I think due to internal changes that we've made in positioning the hotel, that has also helped see a strong growth in revenue and therefore, RevPAR as well, both in occupancy and in -- well, not in rates so much, but in occupancy, we've seen a sharp increase in occupancy, as a result of that. And in Mauritius also, we've seen an increase as in Marrakesh. So I think all of that has contributed to the increase you see in RevPAR for international.

Okay. Understood. And if I may just squeeze one last follow-up. So you don't -- I know you don't give guidance on the existing months, probably or the existing new quarter, 2Q. But in terms of just the trend, like occupancies like halfway sort of caught up, I think, in June after the dip seen in May. So is there like an upward traction that we're seeing again in July and even August maybe? Or is it like somewhat sustaining now at June levels, just occupancy for the portfolio?

Yes. Well, we -- in Q3 and Q4, in particular, we see the whole industry move up. And I don't want to make any forward statements. But the only thing that I'd like to highlight is some facts. First of all, Q1, despite all the issues that we faced as an industry in India, we were able to drive RevPAR and our endeavor will be to do that in Q2, Q3 and Q4. And I think in Q3 and Q4, our endeavor will be to really maximize opportunity given we anticipate strong increases in demand, which are customary every year.

We'll take the question from Amit Agarwal. Guess he is still facing some issues. We'll take the question from [ Vaibhav Vinesh ].

First of all, congratulations on a strong set of numbers despite all these challenges. Firstly, on your performance in owned hotels versus your domestic owned and managed hotels. So occupancy impact in owned hotels seems higher, while ARR growth is much better in the owned hotels compared to domestic, including managed hotels. So is there a strategic shift that we are targeting in our owned hotels where focus is on commanding higher ARRs even at the expense of occupancy going forward? Is it a strategic shift?

No, actually, we -- our endeavor is to maximize rates across our hotels. That, of course, is subject to demand, just applying the simple principles of supply and demand. A lot of our city hotels are EIH-owned hotels. And although, for example, Delhi was -- had a significant impact. Bangalore had a significant impact because of the political tensions. We're still running strong occupancies in the month of April. And we -- by reducing rate, we didn't feel we would stimulate additional demand because I think it was a crisis beyond our control and people will choose to travel and not travel, safety and concerns would come first. So we saw a decline in demand, and we also -- well, really in pace of reservations and cancellations, particularly as a result of Sindoor. But our city hotels have run high occupancies, both in summer and in winter. And the differential isn't that much because business travel still happens, whereas our leisure hotels, we really see sharp declines in foreign travel to our leisure hotels in the summer months. And therefore, your ability to drive rate in leisure hotels when demand tapers off is lower. And that's really it. But our endeavor is to drive rate when demand is strong across every single hotel. And in fact, our leisure hotels are they offer a level of product and service, which is unmatched at global standards. So -- and therefore, operate at much higher rates. Our leisure hotels operate well over 50% ARRs. In fact, 60% and touching 60% and beyond in the winter months, averaging in the 50s if you look at year-round. So they command much higher rates than our city hotels, particularly in the winter months.

Got it, sir. My second question was on your pipeline. So I can see there are some delays that have happened quarter-on-quarter. Mainly I can see the Oberoi Dahabiya 1 and 2, which was supposed to be operational in 2025 are now postponed to 2026. Similar is the case for Nepal property and a few others. So what was the reason behind the same?

So these hotels are all managed hotels. And although we have -- we work very closely with our partners, if there is a delay, our influence over those on the time lines because these are managed hotels is not as much as hotels that we own or have a significant equity interest in. So it's nothing more than that. Our endeavor is to work with our partners, be sensitive to their needs, support them the best we can and open the hotel as soon as possible.

So I can presume that there is no impact on our own properties expansion plans?

No. That is correct.

Perfect. Just if I may ask last one question. On the impact of closure of Oberoi Grand and Wildflower Hall. So what kind of impact was there because on the closure of these 2 properties? Along with that, what was the impact of closing of the airport lounge business? And also, if you can share the revenue numbers for OFS and OAS.

So I don't know if we share numbers. Vineet, you just want to take that question. I don't think we disclosed numbers for OFS and OAS.

Yes. So overall, I'll not share anything specific on the profitability. But on the revenue side, I can just give you an indication. On the Grand, if I look at between Q1 of this year and last year, we had roughly an impact of INR 22 crores, which we had on account of Grand. On Oberoi Airport Services, the impact was roughly INR 28 crores.

INR 28 crores?

Yes. And that was more than offset by OFS subsequently, so that I can assure you.

Got it. And about Wildflower Hall.

Wildflower would have been approximately the same because last year, we were consolidating. On revenue front, there was no impact.

We take the next question from [ Vaishnavi ].

I just have one question from my end. This is regarding the exceptional items. Do we see any other future exceptional items to be recorded from the Himachal property or the current one is the final one?

I would say the current one is the final one. We should not see any more exceptional items coming from the Himachal or Bangalore.

We'll take the next question from Amit Agarwal. Still facing a problem with his connectivity. Amit, can you please post your question on the Q&A board and I'll read it out. The next question is from [ Amit Kada ].

So my question is just I want to go back to 2 years back when we had shared this Vision 2030, where we had shared that we want to double our room counts and then we had seen a series of some activities and actions regarding. Whereas now if I look at the pipeline, what we have said till almost 2030, it gives me just an indication of 2,000-odd rooms on a current sitting base of more than 4,000 odd rooms. So how do I see this thing? Like how do I reconcile our 2-year back vision 2030 and the current pipeline? Do we have to materially scale up our managed rooms efforts so that we at least be closer to that thing because on 4,000, we were assuming 4,000 kind of additional. We are ballpark in the range of 2,000. So we need to gap -- bridge the gap of almost 2,000. So what's the management view on this particular part.

No, great question, Amit. And all I can say is that all of us in the organization are single-mindedly focused on growth. And whether that's through management contracts, through partnerships, etc. And in just this last quarter, as you know, Vineet ran through the 4 hotels that we've announced. We continue to focus on this. It has our complete attention, and we hope that with that focus and with that attention, we will be able to drive further opportunities for growth for both Oberoi and Trident.

So Vikram, we should be certainly be optimistic about that particular thing at least closer to that particular vision, what we had mentioned.

Yes. I mean what I'm saying to you is that, that is our vision. That is what we're going to work towards. And it's very important for us to drive growth. And if you just see the announcements that we've made in the last 12 months, we still got part of 2026 to go and 2027. So there's still opportunity for considerable growth. At least I remain hopeful and optimistic.

Okay. Nice to hear that. And second, just in that extension of this particular question, as the hotelier and the things what we have seen in the last 3 years, what are the challenges, new challenges which has emerged in the last 1 or 2 years, which would may not allow or will act as a deterrence to this particular vision. What I'm trying to indicate from here is that we have seen like a couple of hoteliers saying that some clearances are getting delayed. And in one of the recent comments from you only in today's call, we see that one of the hotel moved from '25 to '26. So what are the challenges, be it regulatory, be it human resource or be it some like new greenfield land level thing. So I just wanted to hear from you, what are the challenges current hoteliers have started seeing in the last 1-odd years because of the rapid expansion from all the hotel companies across India?

No. Amit, I don't know if there's anything that has changed substantially in the last 1 or 2 years. I think during COVID, and this is my personal view, is that I think we, as hoteliers or as the hotel industry, were not kind to our colleagues. There were large layoffs of people. And this really pains me a lot. As human beings, we should be supporting one another, at least people within our organization or within the companies that we work. And that really was something that the industry did not do during COVID. And as a result of that, you can look at admissions to hotel schools, there's enough published on this to see that positions weren't -- or admissions were lower, positions remained vacant. So one area of concern is, of course, people. And that's core to who we are and core to our business. We stand by our colleagues. We support our colleagues, and that is a very, very important value for our organization. So -- but human resource is a challenge for the industry. What hasn't changed is the approvals, the delays as a result of that. Those things haven't changed in the last 2 years, they existed even before. And that is -- that can cause delays for hotel openings. Land is also another issue. Securing land. Land values are very high in city locations, you have to look at mixed-use developments. And obviously, location is key to a hotel success. I don't know if I've answered your question. I'm just trying to think if there's anything else. But let me talk about the positives, right? Let's not focus on the negatives. I think we are -- our economy is growing strongly. The ability to spend on high-end experiences and products is strong and growing rapidly. So I think there are many, many positive things that are happening in our country driven by strong economic growth. And these will continue into the future. So I think there's a lot to also celebrate and just not focus on the negatives. Let's focus on see how we can capitalize on the positives and at least not worry about negatives that are beyond our control.