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 Q2 FY '26 Earnings Webinar. We have with us Mr. Vikram Oberoi, Managing Director and Chief Executive Officer; and Mr. Vineet Kapur, Chief Financial Officer. Friends, this virtual meeting is being recorded for compliance reasons. And during the course of the discussion, there may be certain forward-looking statements. These must be viewed in conjunction with the risks that the company faces. We'll have the opening remarks from Mr. Oberoi, followed by a Q&A session. Thank you, and over to you, Vikram.

Thank you so much, Navin, and a very good morning to everybody who's participating on this call this morning. Maybe I can start by just talking about both Q1 and to a less extent, Q2. We unfortunately had Operation Sindoor and I'm glad it didn't last too long, but that did impact our Q1 results and to some extent, may have flowed into Q2 as well. Other factors Vineet will cover in this presentation that impacted the industry as a whole and us as well in Q2. So Vineet will cover that. And of course, we had the recent explosion in Delhi, which -- my condolences to family members who had people who passed away or who were injured. But so far, we haven't had a significant cancellation, particularly from foreign guests as a result of that. And yesterday, I was talking to a travel partner based out of the U.S. who brings very large and upscale groups to our hotel in fact, more than once a year, and she was telling me that she did get a few calls from people who are on the group coming in February. But fortunately, there have been no cancellations. So I hope that remains. So -- because it's important -- winter months are important for foreign travel into India. And I hope this crisis and tragedy doesn't impact that in a negative way. With that, I'll pass it on to Vineet to give you a short presentation, and then we'll be happy to answer your questions. Thank you very much.

Thank you, Vikram. Thanks a lot, and good morning, everybody. We'll just -- we'll start with performance -- a glance on the performance side. So we got a few disruptions, geopolitical disruptions in Q1, which also impacted Q2. Basically international travel continue to be impacted by the geopolitical disruptions, mainly because of Operation Sindoor as well as the Middle East conflict. On top of that, we also had a little bit sentimental impact because of the Air India crash that happened in June, where people were little bit risk-averse in Q2 for air travel. And due to that, we also saw domestic air passenger traffic declined by almost 2.5% in Q2. On top of that, we also had adverse weather conditions due to excess rainfall which was seen all across major regions in India, which also affected the travel, especially the domestic travel. On a like-to-like performance, this is without the Oberoi Grand and airport lounges in Mumbai. Our Q2 growth -- revenue growth was 9%, where -- and the EBITDA growth declined. In fact, there was a drop of 3% in EBITDA. But while looking at Q2, we would say we should look at H1 considering we had a few shifts between Q1 and Q2 between last year and the current year. So if you look at on a YTD basis, H1 performance, our revenue growth has been 14% and EBITDA growth has been around 12%. At the end of September, we were sitting on a cash reserve of INR 1,050 crores (sic) [ INR 1,057 crores ] which is pretty healthy and very comfortable for driving future expansions for the book. Coming on the industry performance. Q2, we saw a flat in occupancy. We saw almost flat versus last year. ARR there was an increase still about 5% to 7% and RevPAR increased by, on an average, 5% versus last year. I would say considering the fact that last year, Q2 was impacted by demand post-elections -- the pent up demand post elections and also had higher number of wedding days. YTD performance would be a good measure to see the industry growth. And considering the fact that we still had impacts of Operation Sindoor and Middle East in H1, overall occupancy, though it remained almost flat to last year, but we saw a good healthy increase in ARR in the range of 7% to 9% and this for industry and also -- that also helped in increasing overall RevPAR in the range of 8% to 10%. So despite -- I would say, despite the facts that we had impacts of Operation Sindoor and Middle East conflict, excessive rains, the industry did well in H1. From a management perspective for the current year, we feel that the sector is poised for a significant expansion. We see both growth in domestic tourism as well as Corporate and MICE segments. Also the key growth drivers, which are infrastructure, new airports, new highways is driving the growth for luxury travel. Also, we see a pretty high demand for luxury -- for leisure travel due to the good growth in India's middle class, upper middle class segment as well as growth in HNI population. Considering that we're also expanding robustly in the coming years, we have lined up roughly 27 properties across global domestic markets, which are -- which will be opened by 2030 through direct ownership through JVs, associates and manual contracts. So considering that we see a pretty robust growth in the future for the hotel segment as well as our group. I'll jump to operational performance, and this chart reflects the RevPAR leadership. This is the RevPAR leadership for EIH hotels, both -- domestic hotels including managed properties, which shows a pretty healthy leadership over the competition set. And just to mention, we have 13 out of 15 hotels, which are in the STR benchmarking, which have a rank either of 1 or 2. So a lot of our properties in the STR benchmarking lead in the industry.

And, Vineet, I'll just add 8 hotels are ranked 1 and 5 hotels are ranked 2 on STR. There are a couple of hotels where we don't have benchmarking data. For example, Vanyavilas doesn't have benchmarking data. Maidens doesn't have benchmarking data on STR. So those hotels have been excluded because we don't have a comp set for those few hotels, but also hotels that are small with very small room inventory as well.

So if you look at the quarter 2 RevPAR growth in the industry, the industry growth was an average of 5%. Oberoi Hotels, including owned and managed hotels, we grew at 7%, which -- and the Oberoi Hotels led the growth with a high of 5%. Considering that we are -- overall as a group, we are able to manage even a higher RevPAR growth versus the industry shows the fact that the luxury and the upper scale industry continues to be much in demand and is showing a much more higher ARR growth in the higher-end segment of the hospitality. On Trident, if you look at the overall versus last year, we only saw a 1% growth. That was mainly impacted by a large number of weddings, which took place last year as compared to fewer number of weddings, which we had this year. Other than that, if you look at the overall summary, EIH hotels continued to lead in RevPAR growth versus the industry. Just looking at the Q2 ARR trends. So when we look at month-wise occupancy across the last 3 months, we had -- occupancy in July was much more better than last year but flattened out in August mainly because of excessive rains and actually also resulted in a lower occupancy in the month of September, mainly impacted by the excessive rains and the flood situation in Northern and Middle India. So on an overall basis, if you look at we were at flat on a occupancy, we were flat versus last year at 72%. But despite the fact that occupancy was flat, we were able to drive our ARR almost by 7% higher than last year. And the growth was mainly coming in September. In July, the ARR almost was flat to last year. The growth only came in the month of September, where we saw a much more higher room rates across our properties. This is the slide which talks about the RevPAR growth by city for Q2. Jaipur Hotel, we saw declines in Jaipur, Mumbai, Shimla and Chandigarh and Udaipur, while the other cities still continue to grow in RevPAR. Jaipur got impacted -- Jaipur hotel was partially under renovation, which impacted the RevPAR growth. Same thing was there for Mumbai, where some floors were there -- were getting refurbished. And due to that, we had a lower RevPAR growth in Mumbai. At the same time, Shimla and Chandigarh got impacted by excessive rains, which we saw both in Punjab as well as in the Himachal Pradesh area, which resulted in decline in occupancy as well as the rates. Udaipur also was lower, and that mainly was due to lower number of passengers we witnessed in the Udaipur market in the current year as compared to last year.

Yes. Just to add, DGCA data showed a 15% decline in passenger travel to and from Udaipur, which is quite a large number. This is for Q2.

So next slide. The current slide is talking about the room revenue trends. More or less, the trends were in line with last year. We didn't see a major increase or decrease, most of them in the same pattern as we have seen over the last few years. We saw some increase in leisure segment in Q2 as compared to last year, while the MICE activity was down -- was lower because of lower number of weddings and that was because of lower number of auspicious days, which were there in Q2 of current year as compared to last year. Otherwise, on Direct and Corporate, we almost saw same trend, no change in movement versus last year. We'll move to the financial performance for quarter. So if you look at quarter 2 performance FY '26 as compared to last year, we saw a revenue increase of 2%, while there was a drop in EBITDA by 9%, and this was mainly impacted by Oberoi Grand not being there in the current year and also Oberoi Airport Services, Mumbai, not being there in the current year, which led to a lower EBITDA as compared to last year. On stand-alone, it's the same. Those 2 impacts were there. We saw the same trends as was for consolidated. And maybe one thing I missed in one of the slides before was on the international markets. We saw a good healthy RevPAR growth in our international hotels, where we saw roughly 7% to 8% increase in RevPAR growth in most of our international portfolio. On the next slide, on the fund position, we continue to have a good cash reserve and continue to build on those cash reserves in the last few years. So overall, a good healthy position to drive both our organic growth on our own hotels as well as to support further expansions in the coming year. Just getting into the quarter 2 performance. We talked about overall revenue was up 2% versus last year, while EBITDA was lower by 9% as compared to last year and mainly impacted by Grand and Oberoi Mumbai not being there operational this. On a PAT, same impact coming through mainly of the EBITDA decline, and we were down 12% versus last year. Yes. So that was -- this was quarter 2. If I look at on consolidated performance, which is H1 and therefore -- and considering the fact that Q2, we saw a couple of shifts between Q1 and Q2 between last year and current year. H1 data will -- it's more reflective of the operational performance, where we saw an actual increase of 5% and 6% increase in EBITDA. This is despite the fact that we didn't have Oberoi Grand operation as well as Oberoi Airport Services. So both healthy in terms of revenue and expenditure -- and EBITDA, but we had a onetime impact in Q1, which was Mashobra because of the Wildflower Hall settlement we had. There was a onetime impact of INR 102 crores. That resulted in year-over-year decline in profit -- in PAT by 33%. So Oberoi Group continued to be recognized for the exceptional quality and the service. So we have got quite a few awards in the last 6 months, mainly if I refer to -- we have Telegraph Travel Awards for U.K. We got Travel and Leisure Award, USA's World's Best Awards, where 4 of our hotels were ranked among the top 5 best resorts in India. And we continue to also get quite some accolades for our restaurants. So 8 restaurants in the Oberoi Group have featured on the list of India's Finest Restaurants. The same thing, if I cover in the next slide, even Michelin has in the Inaugural Edition has recognized 4 hotels under 2 keys and 3 hotels under the 1 key in the current year. So we'll talk about the current expansion plans and the upcoming projects. Overall, if you look at the hotels in the development pipeline, we are looking at a total of 27 properties with almost 2,000 keys -- 2,100 keys addition, which will be effective by 2030. Out of this, 17 are Oberoi hotels, we have 7 in Trident, and there will be 3 luxury boats and 1 Nile Cruiser. So out of the 27, roughly domestic will be 18 and international will be 9 properties. So there will be a mix of both owned and managed. In owned, it will be between our joint ventures and associates. Managed properties will be 19 properties to be added by 2030. And most of the additions -- we have additions happening in the current year, but most of the additions will come in '28, '29 year, which will be a big -- will be a good inventory add during the next couple of years. Just to mention that Oberoi Rajgarh Palace is almost ready. These are the few photographs of the property. This will open on 16th of November. We have roughly 66 keys, which will become operational from 16th of November. And considering the current booking trends, we see a pretty healthy -- very healthy interest in our property from our guests. So this is the business footprint where our national presence, both in Oberoi and Trident. We have 3,700 keys allover India. On international side, we have 6 hotels with 408 keys under Oberoi brand all across different destinations. And that's it. I'm through with my part, Navin. Back to you.

Thanks, Vineet. Thank you, Vikram. Friends, now we've opened the floor for the Q&A session. [Operator Instructions] We take the first question from Amit Agarwal.

I think Amit may be on mute.

Amit please go ahead.

Can you hear me?

[Technical Difficulty] No, Amit, we can't hear you. You're very faint. Amit, maybe you can just fix your mic, and we'll come back to you. We'll take the next question from Deepak. Deepak, please go ahead. Madhav, I have unmuted you, please go ahead. Madhav Agarwal.

So sir, I wanted to know that if I remember correctly, in the previous quarter, you mentioned that there won't be any exceptional items going ahead. But in the current quarter also, we have seen. So now going ahead, would there be any exceptional losses.

So in the current quarter, if I see exceptional items, mainly was coming in Q1. What you see is the H1 number where you are seeing the same thing impacted. We'll have a few exceptional items in Q2, but that's not something which is pretty high in value.

Okay. Okay. And sir, just wanted some clarity on the owned hotels that are in the pipeline. So I just wanted to know that we have 7 hotels, right, in the pipeline, owned hotels. So these hotels will come under which entity. So if I am correct, then the Andhra Pradesh hotels, the Oberoi and the Trident, they will come under Mumtaz, right?

That's -- So Tirupati and Gandikota will come under Mumtaz.

Vizag would be under EIH associate. In Bangalore, both EIH. In Bangalore, it's a -- we have a prime site overlooking Hebbal Lake. And with developing potential of about 1,300 -- 1.3 million square feet. And in that, we -- it's a mixed-use development which will comprise an Oberoi and a Trident hotel, which are listed in the chart on expansion or new hotels and also commercial mixed-use commercial with F&B as well. So that's a large development, the Hebbal development with 1.3 million square feet and 2 hotels plus commercial space.

Right, sir. So sir, these 2 hotels will come under stand-alone or any particular subsidiary?

Stand-alone. Stand-alone.

Okay. Okay. Got it, sir. Very helpful. And sir, you have one more subsidiary, Oberoi Kerala Hotels, right? So what is there in that particular subsidiary? I know the amount is very small, but still just to get an understanding.

There are no expansion plans under that at present.

Okay. Okay. And sir, just final question on the T20 World Cup. So any particular hotels you see, like are you expecting any meaningful surge in occupancies and ARRs due to the World Cup that is upcoming?

Yes. I think historically, what we found is when any events are taking place in India, and in particular cities, you always see an increased demand, which allows you to take rates up, and we expect that to be the same this year as well.

We'll take the next question from Amit. Amit, please go ahead.

[Technical Difficulty]

Yes, Amit, please go ahead. I guess, he's still facing some issues. Yes, Amit, please go ahead. You're not audible at all.

There's voice. There is some voice there, but...

Maybe Amit could type his questions and if that's easier.

Yes, Amit, maybe you can put your question on chat and we'll take it up. We'll move on to Vikas Ahuja.

Am I audible?

Yes, Vikas.

So my first question is, if I look at last quarter, our ADR growth was very, very strong. It was around 26%, 27%. Now I understand with all the reasons we have mentioned, the war, Air India crash. Now what we are seeing in the month of May -- in last 2 months, especially in August, and then we have witnessed double-digit growth in September. Is it fair to assume that, that things will improve going further, given the underlying demand, which has been strong, and we have mentioned that in the presentation, except for October, which may be temporarily affected by Diwali because last time it was in November. Can we assume double-digit coming back to that double-digit growth trajectory in terms of ARR in the second half? And my second question is, while Southern markets are performing strongly for the peers, we have reported a RevPAR growth of mid-single digit. So can you explain this disconnect?

Sure. So let me take the first part first. And I'll talk about November, we're in the month of November. Unfortunately, demand both across city and leisure locations is strong. We've been able to command high rates in those markets. And I have no reason to believe that, that is going to change, all things considered today. So to answer your fourth question, we're positive about the rest of the year. And I'd also like to point out that when our -- we don't discount as much as the market does for our hotels, and we don't go below certain thresholds. And in summer months, we obviously -- if there's a depressed market, because we don't go under heavy discounting. We, therefore, see the impact more than others do. And if you go through historic trends from previous presentations, and I'll even go back to COVID, you will see that because we just don't go down and we don't want to discount so heavily that impacts the brand positioning of our hotels. In the winter months, which typically start in October through to March, we see increase in demand. Some of that comes from increased foreign travel into India and into locations where we have hotels. So we should be able to provided demand remains strong, command a considerable premium over our competitors.

And sir, regarding my second question regarding the. Southern markets.

Yes, regarding your second question, I really -- I can't -- I would choose not to answer that question because I don't want to comment on competitors. You have far greater insight after competitors than I do. And you'd have the benefit of the presentation from IHCL and ITC. and I'm sure from that you can determine their performance relative to us.

No, sir, I understand. I was just trying to know if there is any one-off because even if I look at the HVS data, the industry data trends also, it's talking about a double-digit growth in Hyderabad and Bangalore, but we are -- we have reported muted. So just trying to understand maybe it was more of a one-off for us this quarter or something like that.

Yes. I would say that, again, we don't discount as heavily as our competitors. And again, if I just refer to the STR data for Q2 that Vineet shared in his presentation, you can see that 8 hotels were STR 1; 5 were, if I remember correctly, STR 2, and that's of a total of 15 hotels that participate in STR data, where we have a comp set defined.

We take the next question from Raghav Malik.

So firstly, on your -- just on your key wedding markets, essentially, you said that Jaipur was under renovation this quarter and Udaipur, you're seeing some lower packs. So any indication that you could give on early wedding linked demand, like how that's tracking for the upcoming current quarter and...

Very, very strong demand for weddings in the coming quarter. We see anyway increased weddings. And maybe it's worth pointing out just a couple of things. Udaivilas particularly and Trident as well in Udaipur really, the focus is on weddings in winter where we command very high rates, and these are buyouts of the hotel. And we're seeing strong demand in that. Sukhvilas, in fact, in the month of November has a majority of dates that are wedding dates. So there's strong demand for weddings that we're experiencing in Q3.

And is the Jaipur renovation completed now?

Yes, yes. We had a significant part of our room inventory under renovation, and that's been concluded. What we've added is pools to the luxury tents, 6 pools to our luxury tents. We've redone all our luxury tents. So there's -- and the bar has been redone as well. The bar is nearly finished. It's still not finished. It will be finished in the next week to 10 days.

And just to add to that the hotel on the renovation side, which you're talking about is Rajvilas. The Trident, Jaipur has gone under renovation, and that will only come next year back in operation.

Yes. And maybe one other thing that I can add, and this really relates to how India is changing. So we've opened reservations for the rooms and tents that have pools at Rajvilas. And we've seen extremely strong demand at very high rates for the category of rooms. So we are able to get a considerable premium on the high-end accommodation that we offer at substantially higher rates than base category rooms. And even the base category rooms in our leisure hotels and overall leisure hotels are still considerable. And that's really a positive sign about how the market is changing, and this is particularly in winter months and how our guests are willing to spend and pay a premium for higher-end accommodation within our hotels.

Sure, sure. And my second question was just specific to the Mumbai market. Now I know that you had some renovation here as well. So there was some impact from that perspective. But just ex of that, maybe how is -- how Mumbai ARRs and occupancies both tracking? Because what we've seen is that across competitors as well, there's definitely been impact in the Mumbai market specifically this quarter. So is that more of a structural issue now with extra supply or.

Maybe, I would maybe I could throw some light on that. I'll give you some information and then you can draw your conclusions on Bombay. So at the Oberoi Bombay, we had 2 floors. We have 21 keys per floor, and we had 2 floors that were under renovation. The room inventory for the Oberoi Bombay is 237 keys and rooms and suites. So roughly just over 40 keys were out of inventory, although they were somewhat staggered over the -- over Q2. So we've upgraded those rooms and those rooms are back into inventory. We also didn't take those rooms because this is a relatively short period of renovation. So we still were giving our occupancy on the full room inventory of 237 in accordance with the regulations that STR specify. So they're saying if there's a short-term decline in inventory, you still operate on full inventory, which is what we've done. At the Oberoi -- at Trident Nariman Point, and this is significant, we had -- Trident Nariman Point is 585 keys and therefore, represents a large part of South Bombay's room inventory. And we had last year, 120 rooms that were out of renovation. And because that renovation was for the entire 6 months of the year, those rooms were taken out of inventory in accordance with STR guidelines. So that entire inventory came back. And I can very happily say that we saw a strong growth actually in room nights sold at Trident Nariman Point with the 120 rooms coming back. And that may skew data because inventory was compressed last year, perhaps other hotels in Bombay may have also taken rooms under renovation. Typically, all these rooms come back or our endeavor is to bring all room inventory back for the winter months where we see stronger demand. And I presume our competitors would try and do the same. So you may not be comparing a like-to-like comparison, when you look at H1 this year or Q2 this year versus the corresponding period last year.

[Operator Instructions] Vikram, may I read out some questions on the Q&A?

Sure. Please. Absolutely. Yes. Please. Thank you.

Mehul wants to know the ARR and occupancy for owned hotels this quarter.

I don't have that.

I'll share that. The occupancy for owned hotels for quarter 2 was 75%, and the ARR was [ 17,160 ].

Thanks, Vineet.

Mehul, I hope that answers your question. Amit, who's been struggling to get online. He has a couple of points. Congratulations on the opening of Rajgarh hotel and the bar and restaurant at the Gurgaon property. How do we do the accounting for the bar and restaurant for Gurgaon property as the property doesn't belong to us?

So absolutely, both those hotels -- both the Trident in Gurgaon and the Oberoi, Gurgaon are managed hotels. And that's taken -- the bar and restaurants are taken into F&B revenue, contribute to the gross operating profit of the hotel on which we get a management fee, and that excludes the sales and marketing fee and base management fee, which is in addition to that. So it's a simple management contract and our management contracts are structured in line with what the market is in India.

Are the new openings on a lease basis or royalty basis?

Sorry, the new openings, I'm not clear on the question.

The opening of the Rajgarh hotel.

Okay. So Rajgarh is a long-term lease. And yes, so it's a long-term lease.

The second question is regarding the London property. Yes, in the last conference, we mentioned that we do offload some equity there. We would want to offload some equity there. Any reason for the same as we have huge cash flows every year, and we don't need to be so conservative.

Well, actually, we would like to look at other opportunities outside of India. So -- and I'm not saying -- I'm going to highlight some locations. Please, I don't want you to interpret from that, that we have anything that we're looking at, at this point. And when we do, of course, we'll share that with the stock exchange and yourselves on investor calls. But for example, and as an example, the Maldives is a location where you have very high rates, very affluent travel. I mean, Maldives luxury hotels operate at $2,000 a night plus. So -- and it's right in our neighborhood. So that would be an example of a location we'd like to be in amongst others. And therefore, freeing up capital that allows us to take an equity position in development of hotels in high-yielding destinations in the region, where particularly labor costs are relatively low, rates are relatively high, and therefore, you have strong margins is something that we should absolutely look at.

And I would say also that there was a mention, but we are -- there's no plans to offer any equity as of now. So this is just -- can be in future depending on the [ cash nets ]. So as of now, there's no plan.

Hope things are clear, Amit. Yes, Vineet, Bajaj has a question. Could you please provide a bifurcation of the total owned keys, domestic and international out of the total 4,144 keys. A bifurcation of the total owned keys, domestic and international.

We will give you those numbers, just give us some time.

Yes. Vineet will give those to you and -- but we can perhaps continue and we'll share that once Vineet has precise numbers.

Yes. So while Vineet pulls out the numbers, can we just move on to the next question, Vikram?

Sure. Yes, absolutely. That was my suggestion. Thanks, Navin.

Prashant wants to know -- Prashant says, hello, Mr. Kapur and Mr. Oberoi, what are the company's plans for addressing upcoming demand in the Navi Mumbai micro market?

Nothing to share it at this point. But I think with the airport opening connectivity being so good, it's a very important market for us to be present in. And as and when we have anything to share, of course, we will.

[ Pratik Oza ] with a very healthy cash position of INR 1,057 crores as of September 30, could you outline our total CapEx guidance for the owned of this pipeline over the next 3 to 5 years?

I don't think we do good guidance as do we, but I'll let...

Yes, I'll not be able to share the specific but considering the fact that our expansion in Goa is going to come soon. And also, we are going to start working on Hebbal properties. The construction will start soon. There will be an average spend of at least INR 400 crores to INR 500 crores of CapEx every year.

As a follow-up for the 19 managed properties, what is a typical margin or revenue share profile we should model for these assets? And will this capital-light expansion be margin accretive to the consolidated business?

So I'm sorry, I can't give you details of our management contracts and the terms or the financial terms and conditions of our management contracts. So I apologize for that. But with owned versus managed hotels, I mean, the analysts know our business so well. And management fees for managed hotels is a pale comparison to owned hotels, and that's industry-wide. Having said that, you -- management contracts are important for a number of reasons. They allow you to go into -- allow you to expand without deploying capital, but using your intellectual expertise in managing hotels. And I'd like to think that, that's something we do very well and give very strong returns to our owners of hotels. That's number one, and that's also reflected in ICDR data. So incidentally, our Gurgaon hotels are both STR 1. So that's the first thing I'd say. The second thing I'd say is that you -- when you take on additional hotels, you don't -- your cost structures don't increase proportionately. So the flow-through to bottom line is considerable, and you'll see that with the details of the industry on managed hotels that the industry players have. So there's considerable advantage in looking at managed hotels and equally deploying capital for owned hotels as well that obviously, EIH would also own and manage.