Lemon Tree Hotels Limited (LEMONTREE) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Lemon Tree Hotels Limited Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Anoop Poojari from CDR India. Thank you, and over to you.

Thank you. Good afternoon, everyone, and thank you for joining us on Lemon Tree Hotels Q1 FY '26 Earnings Conference Call. We have with us Mr. Patanjali Govind Keswani, CMD; Mr. Kapil Sharma, CFO; Mr. Vishvapreet Cheema, President; Mr. Sanjay Rai, Chief Revenue Officer; Mr. Saurabh Shatdal, CEO, Fleur Hotels; Mr. Mayank Sharma, CFO, Fleur Hotels Limited; and Mr. Niket Sood, Vice President, Commercial Strategy of the company. We would like to begin the call with opening remarks from the management, following which we'll have the forum open for an interactive question-and-answer session. Before we start, I would like to point out that some statements made in today's call may be forward-looking in nature, and a disclaimer to this effect has been included in the earnings presentation shared with you earlier. I will now request Mr. Keswani to make his opening remarks.

Thank you. Good afternoon, everyone, and thank you for joining us on this call. I'll be covering the business highlights and the financial performance for Q1 this year, post which we'll open the forum for your questions and suggestions. In Q1, despite the headwinds faced by the industry due to the geopolitical tensions and COVID scare, Lemon Tree recorded its highest ever Q1 revenue at INR 317.4 crores, our revenue grew 18% compared to Q1 last year. Net EBITDA grew 23% year-on-year to INR 142 crores, translating into a net EBITDA margin of 44.8%, which increased 178 bps year-on-year. Q1 '26 recorded a gross ARR of INR 6,236, which increased 10% year-on-year, and the occupancy for the quarter stood at 72.5%, an increase of 591 bps year-on-year. This translated into a RevPAR of INR 4,523, which increased 19% year-on-year. The company's profit after tax stood at INR 48.1 crores for this quarter, an increase of 139% year-on-year. Cash profit for the company stood at INR 82.3 crores in this quarter, an increase of 51% year-on-year. The debt for the company stood at INR 1,658 crores in Q1 '26, a fall of INR 206 crores or 11% vis-a-vis INR 1,864 crores in Q1 last year. The company has significantly reduced its cost of borrowing over the year to 8.01% in this quarter as compared to 8.8% in the previous year. Slide 17 of the investor presentation demarcates the gross debt, that is the borrowings from banks and the lease liabilities. The gross debt represents debt on existing properties and new strategic investments that the company has made on new developments. We continue making significant investments in renovations, business development, tech and renewable energy. These expenses are incremental in nature over and above the normal expenses and are necessary to prepare our company to LT version 2 as highlighted in our 5-year plan. During the quarter, 350 rooms were shut for renovation, the majority of which were in Delhi, Hyderabad and Bangalore, and we shall continue to spend on renovation into FY '27 until the entire portfolio of owned hotels has been fully renovated and refreshed. Going forward, we are confident that once all these incremental investments are done with over the next 15 months, then firstly, the occupancy or ARRs or both will go up meaningfully across our entire portfolio leading to a very significant increase in our owned hotel revenue. Number two, the renovation and tech costs will also drop significantly down to about 2% to 2.25% of the total revenue from 6% currently with the upgradations also leading to a reduction in the repairs and maintenance costs that the company incurs annually. Three, the current investments made in renewable energy have already led to a year-on-year drop in power and fuel costs from 8.7% of revenue to 6.9% of revenue in this quarter in spite of a 6 percentage point increase in occupancy. Over the next 12 to 18 months, we will continue these investments to achieve our target of 50% renewable energy in our own portfolio from 40% currently, leading to further savings. On the asset-light side, in Q1, we signed 14 new management and franchise contracts, adding 1,273 new rooms to our pipeline and operationalized 5 hotels, adding about 400 rooms to our operational portfolio. As of June 30, 2025, the total inventory for the group stands at 226 hotels and 18,430 rooms divided into 10,660 rooms and 116 hotels being operational and the rest in pipeline. Fees from management and franchise contracts for third-party hotels stood at INR 16.1 crores in Q1, an increase of 29% year-on-year. Fees from Fleur Hotels stood at INR 21.3 crores, also an increase of 29% year-on-year. Total management fees for Lemon Tree stood at INR 37.4 crores in Q1 FY '26. Although there have been delays in scheduled openings of managed and franchised hotels due to factors beyond our control, we are very confident of accelerated growth in our management fees going forward. With this, I come to the end of my opening remarks. I would ask the moderator to open the forum for any questions.

[Operator Instructions] The first question is from the line of Archana Gude from IDBI Capital.

Congrats on very good set of numbers. I have 3 questions. First in Aurika, Bombay. So there has been slight -- the occupancy has been pretty robust, but ADR looks slightly subdued. So what would be the management strategy on threshold level of occupancy post which we should expect ADR to take the [ sustainable level ]?

So Archana, as far as Aurika, Bombay goes, our primary focus was on taking the occupancy to what we felt was a sustainable ongoing level. And last year, we did only about 46%. And this year, we did about 76%, which means a 30% increase. Now typically, you cannot increase occupancy and ARR in a new hotel both at the same time. So the normal strategy is build occupancy. And once you hit a sustainable level, then keep adding at higher rates and removing the lower rate business. So we are very much there. There has been nearly a 50% increase in our corporate business with an increase in ARR in the corporate side. The airline business has also increased because, obviously, we needed a certain base occupancy there and we have also focused on the non-negotiated or retail business. So that is why we have increased 30% in absolute numbers. And I expect that now going forward, once we've achieved what we would call stability, we will focus now on increasing the rates.

Sure, sir. Sir, again, on Aurika, currently, we have these 4 hotels under pipeline and expect to be open FY '28 onwards. So is that there are -- I'm sure these are the greenfield projects. So is it a conscious decision of the management to keep a check on the addition or is dearth of supply which fits the way for us for Aurika?

No, we will continue to focus on building hotels. But right now, we have only 2 under construction and one is fairly advanced, which is the hotel in Shimla, which is nearly 100 rooms. And the second one, which is 160 rooms in Shillong, we have started construction. So that too should be ready in the next 2.5, 3 years. And I'm sure in the next -- well, if you wait for a little time, you will understand our strategy. Right now, there are multiple things, ball is in the air, but we are going to have a very accelerated growth in our entire portfolio, whether it is owned, leased, managed or franchised and we are going to try and do it in a very risk-mitigated fashion. So I can only give this level of guidance right now.

Sure, sir. But sir, my question was more of on the management contract side. I'm sure there are many hotels up for contract. And is that there are less options for us, which fits the below Aurika for us was my question, sir?

So Aurika, we have right now got 4 managed Aurika’s in the pipeline, which is in Kasol, Rishikesh, Sasan Gir, and Surat. But obviously, we are going to look at getting more and more, but we are very finicky also about the quality of the hotel we would brand Aurika. So here is the problem. In India, there are very few upscale or upper upscale hotels which are unbranded. Most of the unbranded hotels are in the upper mid-scale, mid-scale and economy segments. So the runway for branding more Aurika’s would really come from greenfield or brownfield projects because most hotels of that quality are already branded by either an international or a domestic brand of high quality.

Right, sir. And my last question, when I look at the ADR for rest of India, it has underperformed the blended ADR. So where are the few markets which underperformed and how we should look at it going forward?

See, rest of India is basically a combination of 100 -- well, not 100, but maybe 60, 70 markets where we are present. And each of them has a distinct characteristic. So it's a function of demand supply in each of those markets. So technically, if I break rest of India down, there are markets that have grown 15% in ADR and there are markets that have grown 0 in ADR. It's entirely a function of that micro market. So I would not really specifically be able to give you an idea of why it is. This is a weighted average that you see. Obviously, our intent is to increase. But if you notice that if you look at the ARR increase in Gurgaon, it has not been very high. In Bangalore, it has not been very high. In Mumbai, it is actually just 2% above because our focus was on stabilizing the occupancy of Aurika. Pune is 7% and the rest of India is 4%. But I'm not unhappy with this because we have achieved this with a significant increase in our occupancy also. And I think what one must look at is overall the RevPAR that we have grown by, which is 19%.

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

Congrats on the strong RevPAR outperformance during the quarter despite external headwinds. Firstly, a part of congrats on strengthening the senior management team. If you can just start with some thoughts on the recent senior management appointments and how this will change the growth orbit for Lemon Tree moving forward? And also, if you can share some thoughts on your long-term aspirations for the company and as Executive Chairman, how would you be looking to work closely with Neelendra and Saurabh in helping Lemon Tree move in that direction?

So let me explain. You may have also seen that we have said that a committee of directors has been set up in Lemon Tree and in Fleur to evaluate how we can possibly look at a transfer of assets from Lemon Tree into Fleur through a demerger scheme and then automatically look at how we can list Fleur. So the intent is that Lemon Tree will then become asset-light, a significant shareholder in Fleur and will focus on management, brand and technology as a company, which is, I think, quite common to what has been global trends in this space. Fleur will become an independent asset company, a propco. And the intent of the leadership change was to get 2 very good people who would then run these 2 companies independently on a day-to-day basis. If you observe my role in Lemon Tree, since Neelendra will be taking over from October 1, I have just taken an 18-month extension beyond that as Executive Chairman as an Executive Director. The reason is I obviously want to settle in Neelendra. It is a listed company. And although he has run a very large operation at Adidas, he's been with Adidas for over 20 years. And his experience is interestingly just the kind of experience we need for growing Lemon Tree. However, he needs, I'm sure, some level of handholding, which is my job, so that he settles in quickly and understands, firstly, the industry, which is quite different from the shoe industry or the athletic shoe industry. And number two is to help him navigate how a listed company in India operates, what are the compliances, the regulatory oversights required and so on. So really, my focus is transitioning over the executive role to Neelendra and then focusing on strengthening Lemon Tree's expansion and asset-light growth and providing just generally a high-level strategic oversight and governance through the Board. Now coming to Fleur. Since the committee of directors has been set up in both companies, Fleur, we hope to will become a listed company in the next -- by the end of next calendar. So Saurabh, who has worked extensively in transactions and in structuring of real estate across multiple asset classes and has great experience in that. Saurabh's role will be driving the asset-heavy growth once Fleur lists or even before. And my job then in that is besides, of course, strategic oversight and long-term governance is to also ensure a smooth transition and to guide and strengthen Fleur Hotels expansion plans through a very structured capital allocation strategy, using technology to identify high-demand areas where there is a serious -- while there is less risk and potentially high returns. So we will be focusing there on asset development or asset acquisition, leases and with a very disciplined risk management framework. So that's the overview. Then to support Neelendra, we've got an outstanding set of 3 colleagues. There is Vishvapreet, who was running Intercontinental hotels in India. There were 45 such hotels, 8,000 rooms with a very high degree of quality. And he is there as President to run the operations and the revenue function. To support him, there is Sanjay Rai, who was formerly Executive Vice President, Sales and Marketing of Oberoi Hotels, who is the Chief Revenue Officer and his Deputy; Niket Sood, who was running revenue for Accor Hotels. And I'm pretty confident with these 4 supported by our existing teams, specifically Kapil Sharma, who is now also becoming an Executive Director, I think we will position Lemon Tree for its version 2. And while we said we want to have 20,000 rooms, that is absolutely going to be exceeded in our 5-year plan. And I'm very pleased that there is this team in place to take this company forward. As far as this Fleur is concerned, with the proposed listing, hopefully, end of next year, we also have Mayank Sharma, who's worked with Lemon Tree for over 10 years. And he is the CFO working with Saurabh and with Sanjeev Jain, who has great experience in development and in projects. I think we are positioning both companies for, as I said, very, very accelerated growth.

Sure. This is quite helpful. Just a follow-up on this. If you talk about the pipeline of assets, right, so most of the hotels are asset-light currently with just 2 pipeline hotels on your balance sheet in Shimla [ and the Sikkim ]. How should one think about, let's say, future expansion within Fleur? Do we see that those announcements coming, let's say, after 18 months or whenever Fleur gets listed independently? Is that the right time to think about more announcement on the asset heavy front?

No. Once we are going through this scheme, I think you will get a very clear idea of how we intend Fleur to be as a stand-alone listed company with its -- with investors who will be focused -- we are actually even offering 2 options for any potential investors. One is the asset-light side of the business, the brand business, which is Lemon Tree and the asset-heavy side of the business, which is Fleur. I don't think you need to wait another 16 months. I think we will be making enough interesting announcements in the next 1 year, which will give a very clear idea of where we think Fleur will go and really look at how we can increase this inventory enormously in the next 3 years.

Sure. My second question is on Aurika, Mumbai, which seems to have done quite well over the last 2 quarters. Given that we'll start seeing T1 shutting down soon, and you spoke about taking price hikes here as well. Help us reconcile how the demand would look like for this property in the seasonally strong 2? And what sort of an impact are you expecting owing to the shutdown?

See, as you have seen, Karan, we have hit about 76% in Q1. Now what I want to actually tell everybody who's listening in on this call is that all -- I was happy to see all our other hotels in the listed space had also reported good results. But one reason for that was that last year, there was -- it was due to some level of a base effect last year. Last year, in Q1, it was very significantly affected due to elections and the heat wave. So normally, Q1 last year should have been at least 5% or 6% better than what it ended up being because of these deflators of demand. Now -- in spite of that, this year, it was actually the -- it is going to be the reverse because Q2 will see a moderation. The base effect of last year, there was no base effect in Q2 last year. And this year, in fact, we have -- July has not been so good. Festivals, all the festivals which affect demand for business hotels or city hotels will happen in Q2 this year. And I know I'm not directly answering your question. I just want to put certain things in perspective, which is Q1 last year, was very affected by multiple events. Q1 this year was slightly affected by the geopolitical tensions and the COVID scare, but nowhere near as Q1 was last year. In fact, this year, some of the stuff that did not happen in Q2 has flown into Q2 this year. So there will be, number one, a moderation. But in spite of the moderation, what we are seeing is in markets like where Aurika operates, -- and I'm aware that there will be some shift of demand to Navi Mumbai and so on. I am very sure that Aurika, Bombay and in fact, that micro market of Bombay will continue to do occupancies north of 80% because if you look at the distribution of demand, that is still growing. So maybe some massive incremental demand will occur in Navi Mumbai with more and more passengers there. But keep in mind, there are 1,800 planes that are going to be operating in India in the next few years. So I just see growth in demand. I don't see a loss of demand in where Aurika operates.

Sure. And my last question, given you spoke about the trends in second quarter and also for Aurika Mumbai, but more importantly, what's the outlook for seasonally strong second half for the company?

Very positive.

The next question is from the line of Vaibhav Jain from Macquarie Capital.

Yes. Actually, this is Sameet Sinha here. So a question for you, Pat. It's interesting, you're already pretty close to the 20,000 rooms that you have been talking about for the last few quarters. And you kind of vetted our appetite by talking about how you see -- how we should expect to see some accelerated growth in rooms and pipeline. So what -- I mean, in that 5-year plan that you mentioned, what are we thinking about? Are we thinking about 30,000 rooms, 40,000? Is that within the realm of possibility? That's my first question, then I'll ask a couple of follow-ups.

Yes. It is in the realm of possibility.

Okay. Got it. Got it. Okay. So the [ Neelen's ] hiring was interesting. Can you talk about how his experience with retail and footwear, athletic footwear fits in with your thought about Lemon Tree? Are we talking about more branding? I'm just going to stop there and let you answer that question.

Okay. Good. So Sameet, let me go back for a minute. Lemon Tree is basically morphing into an asset-light company, of course, with a significant shareholding and flavor. But it will be basically focusing on brand on management, on technology as an enabler and of course, business development to grow this portfolio. So one of the biggest markets, in fact, not one. In my best guess, it is probably the single biggest market today in the world. It is the 2- to 3-star market of unbranded hotels in India. So let me give you some numbers. If I go to make my trip and look at their platform, there are roughly 14 lakh or 15 lakh rooms in the platform. If I look at the cities where most of these hotels are, they are in about 180 to 190 cities in India, where about 85% of personal consumption expenditure occurs. These are cities of typically 5 lakh or more population and while some of them are not so well connected, if you look at the plans for Vande Bharat trains, you look at the plans for the growth in airports in India, which we have a list of. And then if you look at the connections through highways, and I was very -- I was delighted to read that Mr. Gadkari says that our target is now to build 100 kilometers of highways every day. If you put all these together, India is going to be super well connected. And I think there is -- we are at the early stages of a structural shift of demand into discretionary. Now Neelendra has been in this specific area of branding, franchising. He was earlier the Senior Vice President, Franchise globally in Germany for Adidas. So he's run owned stores, he's run franchise stores. He has a very structured way of looking at managing scale. So if Lemon Tree is to scale up in an area which is currently totally unstructured, which is about 1.2 million rooms, which are completely unbranded, we need somebody with that kind of a mindset and experience. So while we may not specifically have hotel experience, he certainly has the competencies required to lead Lemon Tree to its next phase.

That's certainly some out-of-the-box thinking. So final question. If you can talk to us about the rooms that have been renovated over the last year or so, what sort of an increase in occupancy and ARR are you seeing in those rooms?

So before COVID, we used to renovate 1/6 of our hotel rooms every year. So it was a structured process by which every 6 years, a hotel would be renovated. And we would try and close inventory such that it would not significantly affect our ability to fulfill demand. Unfortunately, in 2019, we -- 2 things occurred. One is we acquired another 1,000 rooms, which was Keys. And we opened 3 hotels -- 4 hotels in Lemon Tree Premiers in Bombay, Kolkata, Pune and 1 Red Fox in Dehradun in our own portfolio. So that added another 700 rooms. So really, our inventory increased from 4,000 rooms to 5,800 rooms straightaway. Now COVID completely disrupted the renovations we would have done to the older hotels, excluding these 3 and the renovation we planned for Keys. So the next 3 years -- or actually, I should say, 4 years really went towards surviving COVID and then repairing our balance sheet. Once all that -- and of course, opening Aurika Bombay and stabilizing Aurika Bombay. Now once all that happened, we had to do what is called a catch-up. So typically, we spend 1.5% to 1.8% of our revenue every year in this 1/6 of the hotels renovation. But in order to do a catch-up, we had to practically triple the amount invested, though our revenue went up still from a revenue basis, we are spending -- I think this year, we'll be spending how much, a couple about INR 100-plus crores. So when you see -- interestingly, when you see our EBITDA margins, they are -- they have shrunk by another 4% because of the investments other than normal because of the investments we are making in technology, in business development and in renovation. All this will be over by next year October. Then we will go back to normal. So really, in the next 15 months, we are going to continue renovating very large numbers of rooms. Now coming to the specific numbers of rooms. We -- if I take out Aurika Bombay and the new hotels pre-COVID, which together account for about 1,400, 1,500 rooms, we have to renovate 4,300 rooms. We have completed about 65% to 70% of that in the last 2, 2.5 years. And by next year, as I said, October, we will have completed all these. And then what you will see is a huge expansion in our EBITDA margins because you'll have new rooms and wherever even in Keys portfolio, the first fully renovated hotel was the Keys Pimpri. The ARR went up by, I think, INR 1,300, INR 1,400 and the occupancy went up by 10% -- now you're going to see it with Keys Whitefield, which is -- it is a large hotel. It is 220 rooms. I think we've renovated about 170 rooms, and we will finish the other 50 in the next 1 year. Trivandrum, Cochin are undergoing renovation. Visakhapatnam will undergo renovation and Ludhiana is complete. So that was the Keys portfolio. As far as the rest of the hotels go, we had looked at -- so out of those balance 3,300 rooms, excluding the Keys portfolio, we really looked at where should we put in the maximum money to get the maximum return. So Bombay -- sorry, Delhi, Hyderabad and Bangalore were identified as where we have large inventory hotels, which needed this uplift. I think we have completed about 70% -- no, not 70%, 80% in Delhi. We have completed I think about 60%, 70% in Hyderabad, where we have about 700 rooms, and we have completed about 30% in Bangalore. So this is going to just go nonstop. At any given time, 350 rooms are shut, we typically take 2 to 3 months to renovate them. So on an ongoing basis, say, in 6 months, we would renovate this year, maybe 1,200 rooms or 1,300 rooms. And this will happen next year also, and then it's an entirely new portfolio. And interestingly, just let me add, if you look at the increase in ARRs also, it is direct -- you can see directly it occurring, for example, Delhi, now that we have managed to renovate so many rooms, the ARR went up 15%. Hyderabad 19%. So you can see the direct linkage that when we finish, then 1 of 3 things will happen. In certain markets where demand -- where we felt from a brand perspective, we needed to upgrade the rooms anyway. We did not spend as much as because we just wanted to ensure that the brand quality standards were maintained. But in some markets where we felt there was a possibility of significantly increasing ARR and occupancy, we spent double the amount per room. So it's a mix and match. But the intent is ultimately to increase RevPAR and increase guest satisfaction and stickiness.

The next question is from the line of Vaibhav Muley from Yes Securities.

Congrats on a very strong set of numbers. My first question was on our management contracts pipeline. So we have a very strong pipeline. And as just sir mentioned, there is a potential to reach 30,000 to 40,000 rooms in the long term. Do you think there can be an execution challenge while adding such aggressive amount of inventory, especially given many industry participants are highlighting that there are challenges on the manpower front. So do you think that can pose a challenge in future? And would that affect the flow-through to EBITDA? That's my first question.

So Vaibhav, let me go back. Challenges are always there when you are talking hyper growth, and we want hyper growth. So if you notice the rate of signings is much more than the rate of openings currently. But surely, in the next couple of years, the reverse is going to -- I mean, well, the openings are going to also accelerate because -- about 70%, 75% of the hotels we are signing are brownfields or greenfields. We are very keenly aware that we need trained staff for this. So we are trying to combine an approach which is both technology-oriented and identifying the future leaders of all these new hotels within our system. So that process is ongoing. We have multiple learning and development programs for general managers for heads of department and so on and so forth. So while there will be challenges based on our rate of growth, we have also grown 30% a year or I think more than 30% a year over the last 10, 15 years. Keep in mind that we were 1,000 rooms 12, 13 years ago. So I think we are quite familiar with that challenge. Now as far as the flow-through goes, it is -- there is no risk to the flow-through. Management fees will keep accelerating. And as I -- I think we specified in our Lemon Tree version 2 when we said we'll be 20,000 rooms, including pipeline by 2028, I think. We will achieve that in the next 6 months, by the way, I think. That question that I was asked earlier, I think, by Karan or Sameet, 30,000, 40,000, it could be any of these numbers. I hope, of course, it is much more than what we have targeted. We are quite sure we'll be able to manage the growth. There will be hiccups, but I think our entire approach was, first, let's finish with our old portfolio, let's get it cleaned out, renovated, fully staffed, improve the occupancies, as you can see, it is happening, improve the ARR still more once the renovation is over. And then our entire focus will be on the asset-light growth. And once Fleur lists also on the asset-heavy growth, where Fleur will raise capital and also go debt-free, I'm sure, in the next 1, 1.5 years. So basically, the way I see it is Lemon Tree will be more or less debt-free in another -- as a group in the next 18 months. It will also have a large -- it will raise -- I'm pretty sure Fleur will raise a large amount of capital. It will expand in the asset-heavy side, and we will focus on managing hotels across the spectrum in Lemon Tree.

Got it, sir. My second question was on your tie-up with BCG for revamping your technology website and your loyalty program. So has that exercise been completed? And have you started seeing any material benefit in terms of higher bookings from your website or from benefit of your loyalty program? So if you can share some color on that?

So the BCG assignment was towards a digital transformation, and it was building a foundation of using technology to enable hyper growth. So once BCG finished, it was more of a strategic level intervention. They moved on. And then we had actually moved this entire IP we created into a 100% subsidiary of Lemon Tree called Total Fox Solutions, which is now fully manned. We've got data scientists. We've got user experience engineers. We have people, including 2 people amusingly from BCG themselves. We also have Ernst & Young working with us in this. And we have created a bunch of products. They are what we call MVP, means minimum viable products. Some of them have been launched in revenue management. Some have been launched at early stage in loyalty, but it's an ongoing process. So my best estimate is that the fruits of these entire investments in technology, which will include customization, personalization, loyalty program, predictive revenue management rather than prescriptive revenue management rather than predictive using chatbots, agentic AI, so on and so forth, which will help also reduce staffing and reduce training costs. All these will start rolling out, I think I'm told from October this year, going forward into September next year. So the MVPs have been prepared. We are piloting it at multiple hotels. In fact, at any given time, 2, 3 hotels have 1 MVP in place. So we are refining it. And I'm pretty sure that in the next 12 months, -- as far as our loyalty program goes and our revenue management, we'll be best-in-class. Now loyalty, I think we have already increased the number of members. We are enrolling them very fast. So I think we have about 2 million members now. 2.1 million members already in the loyalty program. Our repeat usage is about 43%, 44%. So that's very encouraging for us because what it really means is that if we open a new hotel, we are very rapidly able to move customers there who are part of our -- who are repeat members and make that hotel breakeven very quickly. And that, I think, is an attractive proposition for any hotel owner from the asset-light side. So all this is work in progress. And I think you will see a completely new Lemon Tree and Fleur in the next 15 months.

Got it, sir. Lastly, on Keys portfolio. So we have seen stable quarter-on-quarter numbers for Keys. I believe this is on the back of benefits from the renovated portfolio. So I just wanted to check what kind of headroom do you see from the current levels of 63-odd percent occupancy and around INR 3,800 ARR in the Keys portfolio itself? And what is the contribution of overall renovation expense we are expanding into Keys portfolio currently?

So Keys is 930 rooms. We have identified high-value investments, specifically in Lemon -- in Keys Pimpri, Pune, which is over, we spent INR 10 crores, INR 12 crores. We have already spent, I think, INR 10 crores, INR 12 crores in Keys Whitefield and we still need to spend another INR 8 crores, INR 10 crores. We have done completely renovated Ludhiana at INR 3 lakhs a room. So as I told you, if I split the Keys portfolio, the -- what is called the Bangalore and Pune portfolio is about 500 rooms and the other 500 are in 400 and something are in these other markets. So what we are really doing is in the markets like Trivandrum, Cochin, Visakhapatnam and Ludhiana, our intent was to -- because the hotels were so tired and old, our intent was from a brand standards perspective to just renovate them to minimum standards at INR 3 lakhs a Key. And the others would spend INR 8 lakhs to INR 10 lakhs a Key, which is like Pune and Whitefield. So the average would be INR 5 lakhs across 900-plus Keys. So we would spend about INR 45 crores, INR 50 crores over 3 years in the Keys portfolio. What is our intent? Our intent is, and I've said this before, is that we want to take the EBITDA of Keys to between INR 60 crores to INR 80 crores, which means that we will need to take the EBITDA margin to about 50%, which means we need a revenue of INR 120 crores to INR 160 crores in Keys. And that would require, if you work back, our occupancy is moving to 75% to 80% and the ARR is moving towards Red Fox levels, which is INR 4,500 to INR 5,000. So Keys Whitefield. The renovated part is already doing INR 4,500 ARR. The Pimpri is doing INR 5,000-plus ARR, I think INR 5,500. So that is why you're seeing this gradual shift in Keys. And this EBITDA doubling is nothing. The base was very low. And our intent is basically to make INR 60 crores to INR 80 crores out of Keys by next year as a run rate.

The next question is from the line of Prashant Biyani from Elara Capital.

Sir, a question on renovation again. Sir, by when are we going to complete the renovation for LTP High-Tech City, then Whitefield, Delhi Airport, LT Gachibowli, Keys Select and -- Keys Select Hosur and Whitefield?

Okay. Sorry, I didn't write it down. So let me start with Lemon Tree Delhi -- Lemon Tree Premier Delhi will be done by somewhere in the middle of next year. So maybe July, August. We have also renovated all the public areas, including the lobby, restaurants, banquets, et cetera. Now we get to Red Fox Delhi, which is also a very high earning hotel. I think we have done about 60%. So this will -- should get over by next year. And we are going to -- we are looking at converting it into a Lemon Tree Hotel because our colleagues in our revenue department say that if you rebrand it Lemon Tree, the possibility to increase rates by 15%, 20% will become very visible or likely. Then we go to Electronic City in Bangalore. We are going to rebrand it a Lemon Tree Premier, renovation is underway, but this will take about 1.5 years to 2 years. So we will renovate 75% of the hotel by next year. As far as Hyderabad goes, there were 2 issues. One was the renovation of Hyderabad. In public areas, we have completed 80% of that. And then was the rooms, I think we have done about 60%, 70% of the rooms, and I expect that we'll finish it all by next year. Red Fox Hyderabad is also likely to be converted into a Lemon Tree Hotel. It is also, I think, 50% renovated. We have to finish the rooms and the public areas as a Lemon Tree Hotel, again, we will look at significantly raising the average rate once it is rebranded. Lemon Tree Gachibowli is going to be completed by 18 months. It is going -- it has very high demand. We are not sure because of the room size, whether we will call it a Lemon Tree Premier or retain it as a Lemon Tree Hotel. But either way, it will happen in the next 18 months. As far as Keys Hosur goes, we will -- this will continue. So this, I think, as I said, 80%, 90% of the portfolio would be renovated. Some parts like Keys Hosur would probably go into early 2028 calendar. But the point is the major investments in renovation will be over by H1 next year. And after that, we will revert back to that 1/6 of the hotels. So -- and a huge drop in renovation expenses by about, I think, what would it be? It will be about 3% of revenue or 3.5% of revenue.

Sir, is there some delay in renovation due to high demand? Because previously, we were about to complete major renovations by H1 of this year.

Never that. I don't think that was ever the case, Prashant. I always said it will take 3 years. See, we -- it's a balancing act. Like I'll give you an example. Red Fox Hotel, we are renovating, I think, 30 rooms at a time. It takes about 2.5 months. Now when we released those 30 rooms about 2, 3 weeks ago, suddenly, there was a spike in demand for Red Fox. So we said, okay, we'll defer it for 2 weeks, and we'll do -- try and do a catch-up. So it's a balancing act. Sometimes we defer renovation when we have a very large block or some very exciting demand opportunities. But by and large, we obviously look at the trade-offs. That is if I delay renovation, will it go into season? Will I have a loss there versus what is my benefit here? So this is basically displacement in revenue management, it's called displacement. What am I displacing by doing this now versus later? And I think we are quite -- we've done a pretty good job. And I must say our renovation team has generally always delivered on time.

Right. Sir, you have announced key management changes. What could be the flow-through of events for the parent entity as well as for Fleur, which can happen between now and listing of Fleur? One thing which you highlighted was of signings for Fleur apart from that, anything else?

See, the thinking is very simple, Prashant. Let me say we own -- I'm just speaking -- this is speculative. But let's assume we own 60% of Fleur. But our management fee income is typically 17% to 20% of the EBITDA. So when we own 60% of Fleur, it means we really get about 66% to 68% of the economic return. The 7%, 8% more we get is the management fees from the other owner, so to speak. Or to put it another way, we earn INR 100 of EBITDA, we take fees of INR 17. The remaining INR 83 is distributed to the shareholders, which is 60 Lemon Tree and 40 to APG. Now the larger amount of capital we raise in Fleur, while our shareholding may come down, our economic interest increases disproportionately. So it's really a return on equity that we get through management fee contracts in Fleur itself. So obviously, it is in the interest of both Fleur. And our fees, by the way, are very, very common -- I mean, are very standard. I mean, whether it is Lemon Tree or any other management company, the fees are generally at the same level. So it is not that we charge disproportionate fees. But our view is that the more we dilute in Fleur and the larger the capital raise and assuming it is deployed successfully, the management fees of Lemon Tree from Fleur will explode. It is already about -- it is -- this year, it is -- it will be over -- it will be INR 150 crores this year. But there will be a time when it could easily be if we do what we want to do, then it could be INR 300 crores to INR 400 crores just from Fleur in the next 3 years.

Congrats to the team new management team at both Lemon Tree and Fleur.

The next question is from the line of Pratik Oza from Systematix Group.

Sir, just one question. First on your international strategy. I guess in the previous call, you had stated that your international strategy is opportunistic and asset-light one, which is targeting Indian diaspora. So first is, could you share some learnings from your first international foray? How is that property performing? And is it serving as a successful template for future ventures.

Yes. Pratik, it is doing very well. We have a hotel in Dubai. To give you an idea, 6 million Indians go to Dubai every year, 6 million. So I was reading, I don't know, was it today or yesterday in one of the financial newspapers, maybe Economic Times or Mint that last year, FY -- calendar year '24, I think the government meant, there were -- sorry, I think 9.9 million arrivals into India, inbound. And they said 3 crores, 30 million Indians traveled overseas. So here is a very interesting statistic. The number of foreign guys who come into India, and this includes, I presume, Indian diaspora is 1/3 of the number of Indians who go outside of India. So if we -- it makes complete sense for us to follow where Indians go. And we have a hotel in Dubai, which is doing very well. We have -- I think now we have a hotel in Nepal also. We have -- so we are going in the neighboring countries where there are a large number of Indians and where we feel we can provide a revenue uplift to those hotels by capturing loyalty members of our program who travel to these cities. So the long answer which I've given you is that it makes complete sense for us to go where Indians go without losing focus on capturing obviously, the Indian market in India.

Got it. Got it, sir. Sir, second question is, I guess, on the other expenses, which I'm seeing, there is this delta of INR 8.9 crores. So just wanted a breakup of this. I mean how much of this would be our discretionary spending like marketing for launch of Infinity 2.0 and new website versus nondiscretionary or inflationary cost pressure. Just wanted to get an idea on this.

So we are doing 2 things. Let me explain which are also one-offs. Our technology OpEx is pretty significant right now. This year, it will be INR 10 crores alone or INR 12 crores. We are also -- during COVID in order to ensure we did not lay off anybody. As a company, we took a call that the top 20% of the company would take a big salary cut in order to enable us not to lay off anybody. So it started with me. I took 100% cut. Senior leaders and colleagues like Kapil and so on, took 75%, 66% at different times based on COVID over 2, 2.5 years, there was a very large amount of salary cut from the top leaders. So basically, last year -- well, this year, we are returning it to them. It is a part of the other expenses that you are seeing. And our intent is very simple that by the end of this year, more or less, we will have returned to every employee of our company, whatever money we deducted from them in those 2.5 years of COVID. So again, this is an extraordinary one-off expense. And next year onwards, you will see it fall back to normal. Does that answer your question?

The next question is from the line of Jinesh Joshi from PL Capital.