The Indian Hotels Company Limited (500850) Earnings Call Transcript & Summary

Good day, and welcome to The Indian Hotels Company Limited's Q1 FY '21 Earnings Call being hosted by Mr. Puneet Chhatwal, Managing Director and CEO, IHCL; and Mr. Giridhar Sanjeevi, EVP and CFO, IHCL. [Operator Instructions] Please note that this conference is being recorded. At this time, I would like to turn the conference over to Mr. Puneet Chhatwal. Over to you, sir.

Thank you. Good evening, everyone. Thank you for joining us on this presentation of the quarter 1 results of this financial year. Let me begin with a piece of good news as we don't have much in the industry in general globally and also not on the Indian subcontinent. The piece of good news is the Taj Mahal Palace & Tower in Mumbai was rated the #1 hotel in the world by TrustYou for the third year consecutively. I think being the flagship and the most important revenue generator for the company, including the EBITDA generator on the absolute amount, this is a piece of good news and definitely in line with what we have started to communicate of us being the most iconic and the most profitable company. And there's nothing more iconic than the Taj in Mumbai. Moving on to the difficult part of the news. This is an unprecedented downturn for the global hospitality sector but also for the Indian hospitality sector. The estimated revenue in 2019 for the sector was around INR 1,60,000 crores. And the loss in revenue in this year is expected to be around INR 90,000 crores. More than 50% of last year's revenue is going to get eroded with an occupancy loss of almost 32 percentage points, a RevPAR decline of 58%. And this is based on the information that we could see from the HVS. This includes the [ revenue share ] in the organized sector, less [ 88% ] or more than [ 80% ] of it and -- sorry, INR 40,000 crore is in the organized sector. And semi-organized and the unorganized account for INR 8,000 and INR 41,000, respectively. Moving on further. What we are facing in the industry is [indiscernible] to sharpen the saw. And we said we will reannounce our Aspiration 2022 with the new goals as we have achieved almost 70% of those outlined in less than 50% of the time. And this was not the time to focus on 2022 but more to reset what we have on our hands in 2020. And for us to R.E.S.E.T. stands for revenue growth; E for excellence in whatever we do in guest experience and operations; the S for spend optimization; the next E stands for effective asset management; and finally being thrift and financial prudent. So these became the 5 very important parts of our strategy in terms of whatever we are going to communicate in this quarter and the following few quarters. Some results have already yielded. And we will take you through those initiatives. The revenue growth accounted for INR 55 crores of revenue, which is coming from not like-for-like initiatives last year. The spend optimization resulted in savings of INR 52 crores. The effective asset management resulted in INR 22 crores and the thrift and financially prudent, another INR 90 crores. So the R.E.S.E.T. initiatives added INR 77 crores to the top line and INR 104 crores to the bottom line in the first quarter of this year. Moving on to the highlights of R.E.S.E.T., if I may start first with the hotel occupancies. What we saw from 20th of March to 20th of May is unprecedented. And that's very evident also when you see here on the slide. It's only after the 20th of May that things started turning. But until 20th or until 13th of May and starting in 20th of March, for 2 months, very, very difficult on operational inventory all on total inventory. If you look at available total inventory because more than half of it was shut down, we were for, the most part of the month of April and the early part of May, we were in a single-digit occupancy percentage. And if you took an average from 20th of March until 20th of May, that could still come to single digit. And this started changing around the 20th of May, [indiscernible] followed by June, the numbers [indiscernible] more than 20% for us, surging 25%. And on the operational inventory, we started getting close to even 40% occupancy, albeit at very low rates because some of the sales of the [indiscernible] business were regulated by the government. But this is an interesting thing, which is [indiscernible] on the next slide if you see. The Ginger brand has had a far stronger rebound and has already crossed 40% towards the last 10 days of June and also in the early part of July, which is not a part of this presentation but in terms of giving a trend in occupancy. And the rest of the portfolio of IHCL, the Taj, SeleQtions and Vivanta are in the category of north of 20% occupancy. In terms of R.E.S.E.T. growth initiatives, which contributed 31% in the first quarter, that's INR 55 crores, 44% of it came through the quarantine, Vande Bharat repatriation flights; another 25% through the BMC, Mumbai Medical -- Mumbai Municipal Corporation and medical fraternity delivery focusing on assets of more than [ INR 500 ] per day [indiscernible]. And then some incorporated some very new initiatives, which we are very excited about. So some of our new initiatives launched towards the end of June, like we've launched [ Qmin ] app. In July, the home services started [indiscernible] and also the Hospitality@Home in terms of selling [indiscernible]. That yielded almost 11% in this [indiscernible]. So that was very encouraging because it helped us create incremental revenue of INR 55 crores, when we were coming from a 0 revenue base. Some of the other things on the -- after the revenue initiatives is on the excellence. We have communicated in all media in -- by way of videos, by way of videos in-house, by way of videos on social media in terms of Tajness - A Commitment Restrengthened. And our company is known for the outstanding Tajness that it exudes. We've got the best [indiscernible] communicate under the Tajness name as a commitment, which we have recently come up with the new norms, which comply with the Ministry of Health, the WHO regulations but also us making some of those commitments to safety and security standards to a new level. And that has been rolled out in all of the hotels that are operational. And you would always see that if you enter any one of those and any of the facilities that are open to the guests. Very important, a few days ago, we also launched or communicated the IHCL Zero-Touch Digital Transformation. The first pilot was done at the Vivanta in Whitefield in Bangalore. And this is the digital journey of the kind of information that is needed in such times. Also otherwise, I think digital plays more and more important role in terms of contactless check-in, checkout processes, invoicing, where you don't touch the invoice, in terms of menus, QR codes and intelligent conversation platform. So I think this is a very exciting transformation that the industry goes through. And we are very happy and proud to be at the forefront of this. Moving on further, I think, is the spend optimization. When it comes to spend optimization, over 51% reduction was witnessed in Q1 in total expenditure. So I think I will take you through this in the details, where the fixed cost was reduced by INR 90 crores and variable by INR 365 crores. And our reduction in total expenditure comes 89% from raw material cost, which is obvious. If your occupancy levels drop, if your restaurants are shut, then the raw material cost goes down. But I think that the signs of business we had, we had a very strict control and renegotiation on all our vendor prices to come to this kind of figure of 89% lower raw material cost. Admin costs went down by 64%; heat, light and power down by 58%; fixed lease costs, which was renegotiated, and we will see some -- we were able to seek some lease variables, giving us another 51% reduction; and manpower reduction of 35%. So that combined gave an operating expense reduction of 51% in Q1. The secured -- the waivers that we secured in terms of leases across all our brands and different companies, which starting with IHCL at INR 22 crores; subsidiaries at INR 6 crores; group companies at INR 24 crores; total, INR 52 crores. And the benefit received in Q1 for IHCL and subsidiaries accounted net for INR 19 crores. Moving on further to the some of the challenges. I think we have been discussing some of the issues for a very long time. This quarter, we had a couple of significant developments, where we were able to resolve or take the first step in resolving the legacy issues of Sea Rock. Now we control 100% of the shareholding with Sea Rock. And we'll have a phased payout on the remaining 15% that we acquired. But we also acquired 50% of the shareholding of Tata Africa. And now we own 100% of the Taj Cape Town property. And then we will enter into the second phase in getting the permissions and -- for building the Sea Rock property and Taj Cape Town and restructuring that investment. Moving on to the next slide, corporate overheads, a very important one. We saw a decline of 26% in Q1 because strict prudence was kept in all corporate expenditure. There was obvious reduction in sales and marketing activities because of the lockdown. And we have entered into serious redeployments and renegotiations on all fronts. So redeployment in terms of talent redeployment, as some of the call centers which were taking calls for 80% or 75% occupancy, the people who are not needed in that kind of [indiscernible], as an example, was redeployed in other businesses, in other group companies and renegotiations definitely with the unions that you don't see all in corporate, but you will start seeing very soon in the P&L in the following quarters in terms of wages, wage settlements, postponement and coming to a zero base increase of wage. In terms of liquidity, IHCL has taken multiple steps to enhance liquidity. We've secured debt lines, this INR 500 crores of long-term debt in Q1. Additional lines have also been secured, should there be any further requirement. We are very keenly exploring all monetization opportunities, like in the previous 2 years. Only thing that will happen is a bit of acceleration on that front. However, the price has to be right. There are no bargains that are available. As we possess some very iconic assets and properties, we are not in a rush and we will not [indiscernible]. But monetization of non-core assets, for sure, and monetization of certain assets and getting into a more asset-light model remains the focus of the management even going forward. And any kind of nonessential [indiscernible] and renovations have been deferred to preserve liquidity to the extent possible. Moving on to the next slide. I will say that here, we have the Q1 numbers, the actual numbers versus Q1 last year. So on the quarter 1, the revenue decline has been 83%. So we only did a decline of -- a massive decline of 83% on the revenue front. Operating expenses declined by 52%. Depreciation level stays the same. Finance cost stays more or less the same. And the PBT, which was a negative PBT of INR 422 crores versus a INR 25 crore positive last year. However, we had an exceptional need in a couple of things. One is some shareholding we have, where the shares went up. So we had a gain there plus a gain in acquisition of Cape Town, which my colleague CFO will walk through in his presentation also. That resulted in a negative profit after tax of INR 280 crores versus a INR 6 crore profit last year. With that, I hand over to my colleague, Giridhar Sanjeevi, who is the EVP and Chief Financial Officer.

Thank you. Moving on to the financial numbers. These are the detailed numbers as has been just explained by the Managing Director. We had a revenue growth of 83%. But through prudence on cost control, we were able to reduce the different costs significantly, helping us with the total expenditure reduction of 52%. On finance costs, we were broadly in line. Exceptional items fundamentally represented an exceptional gain of INR 80-odd crores on the Cape Town acquisition because we had earlier written off and the fair value under accounting standards, we had a gain. And we ended the year with -- the quarter with INR 280 crores of profit after tax -- of loss after tax. Exceptional items, as just described, is the change in fair value of derivative contracts, which is INR 4 crores, and the acquisition of Cape Town, INR 82 crores. We did sell 1 flat apartment during the quarter, which gave us about INR 3 crores of profit. On a stand-alone basis, we had a revenue of INR 117 crores as compared to INR 608 crores in the previous year. This represented an 81% drop in the top line, like the consolidated numbers. But [indiscernible] reduction in cost, which was as much as 44% and therefore which resulted in EBITDA of INR 140 crores negative. Finance costs were steady at INR 63 crores and exceptional gain and loss was about INR 38 crores of loss. And I will come to it in a second, leading to a loss after tax of INR 239 crores. As far as the exceptional items are concerned, as you know, whatever funding we do for Pierre, we do not allow it to load the investment block and we always provide for it on a stand-alone. So it was INR 42 crores in Q1, resulting in a net exceptional loss of INR 38 crores. The gain on sale of flats was about INR 3 crores. In terms of stand-alone revenue metrics for April, May and June, as you can see that the occupancy steadily went up from April to June at 33% and for the quarter at 20.5%. ARR was INR 7,600 in the month of April. And then in June, it was about INR 4,000, largely driven by the kind of business we have, which is Vande Bharat and the quarantine flight. The RevPAR, obviously, was impacted as a result. Room revenue was INR 40 crores in this and F&B revenue was INR 20 crores. In terms of the debt position, we continue to manage debt on a prudent basis. The consolidated net debt as of June 30 was INR 2,238 crores as compared to INR 1,943 crores at the end of the year of previous year. And the net debt for stand-alone was INR 1,690 crores as compared to INR 1,400 crores. The weighted average cost of debt remains competitive at 7.9% and 6.9% for consolidated. Net debt to equity is still at 0.38%. Net debt to EBITDA, of course, has gone up, given the drop in EBITDA. Consequently in consolidated, the net debt to equity was 0.48% and net debt to EBITDA was [indiscernible] as compared to the previous year because of the drops in EBITDA. So that is really the summary of the presentation, open for questions.

[Operator Instructions] We will now take our first question.

This is Nihal from Edelweiss. I had three questions. The first one, obviously, hoping you could just give and just wanted your sense on the recovery part specifically. In your interactions over the last couple of months after we interacted in Q4, just wanted your sense, do you believe that for things to get back to pre-COVID or normal levels, is it totally contingent on a vaccine coming in? Or how is the way you are seeing it based on your interactions that you've had?

And your second question?

Sir, the second question was on Ginger. As I see that we have been purchasing our remaining stakes in a lot of entities. So when in case of Ginger, we have a 36% stake, which is owned by a PE owned by Tata. So what would be the arrangement for that?

Okay. And the last one, Nihal?

The last one, sir, was on Sea Rock. And now that we have completed the acquisition of the 100% entity, just wanted your sense that do we have any formed plans at this point in time about the different possibilities of that parcel of land?

Okay. So let me try. And Giri, please feel free to add as and when you want. There are 3 terms that are being used by the hospitality industry and all the associations, which is called the survival phase, the revival and eventually thrival. Thrival is the one which is linked to the post vaccine. And that may take anything between 18 to 24 months or 30 months or it's anybody's guess. Because it's not just when the vaccine comes, rather when the people have also been vaccinated, right? The question is on the survival. As I said, the toughest phase that the industry went through is now we could debate, if it is from 20th of March or 22nd of March, which was Janata, whatever, lockdown, called Janata curfew. And then you had this lockdown on the 24th of March. Even from that, but let's just keep it simple, let's say, the 2 months, 20th of March until 20th of May. And I think that was a very dramatic phase. We cannot count it as a survival. So since 20th of May until I think 20th of August is the survival phase. And the revival already started somewhere towards the third or fourth week of July. And there is an overlap. It's not like a switch on, switch off button that now it is survival, now it is thrival or now is revival. So the revival started, albeit at a very low level. But it is better than 0 because some of the hotels that are still shut are at 0 level revenue for the industry, does not matter there. But in this part of the world, a lot of our industry has been shut down, so opening up already helps. So I think at the moment, we are in a combination of survival, revival phase. We, as management, feel optimistic that towards mid-end September or latest mid-end October, we will start seeing a pickup in the activity. I was yesterday at an event in Taj in Gurgaon. And there was a lot of activity in the hotel. And that's what we are also seeing in Mumbai in our properties. But it was good to go out of Mumbai and see it in another place, too. So that answers on the recovery. On the Ginger, as you must have noticed here since last 2 years, we worked very actively on Ginger, its repositioning, its redesigning. And Ginger is a commitment we made to ourselves as a brand, which we think has a great future over long term on the Indian subcontinent. And that all is already being seen in the result. At this point of time, such discussions about having 100% control on Ginger is not there as we will need some capital if we had to buy somebody, whether it's a Ginger or another company or another joint venture. And we don't want to do it if we don't -- if we're not doing it out of free cash flow. So that question does not arise. But we own the Ginger brand 100%. It's only the company in which it sits as the management company, which is the Roots Corporation, that you have another shareholder, another couple of shareholders. So we are very excited about the future of Ginger. When it comes to Sea Rock, yes, it is our firm belief that together with Lands End and Sea Rock, this is building the next icon for Mumbai. Just like 100 years ago, Taj Mahal Palace & Tower was built, this will happen. The only question which we might debate or which we would definitely would not be our choice at this point of time is to use our own capital. So our strategy will stay to use some partner to help us build it and we would manage it. And that's what we have been doing. As you know, that the majority of our pipeline of hotels are contracted in the last 2 years. Based on that model that we said we will be 50-50 balanced portfolio in terms of owned and leased versus fee-based business. And that remains a clear priority for us. We are very excited about this development. And we will now set the design and all the planning wheels rolling so that hopefully in foreseeable future, which is not foreseeable, I don't mean 2, 3, 4 years, rather 12 to 18 months' time that we get the permission, so we can break ground and start going.

We will take our next question.

Sir, I have two questions, sir. Number one is like you mentioned that the model of the hospitality industry, it was always based on -- centered around the price of property. So do you think this will shift towards the brand-centric and service-centric? That is my first question, sir. And my next question is a follow-up of this is that whether a hospitality company, like Indian Hotels, would it not be better that it is -- it run as a debt-free company? And do you have any plans to make this debt-free in the next 3 to 5 years, sir?

So I will answer the first part of the question and give an introduction to the second part and let my colleague after the second part. I think your first question is a very interesting question. And I'm glad you asked it. The industry has already evolved into being brand-centric and service-centric. But the change that we are witnessing now and we will witness much more strongly going forward is that the customers will go to the brand they trust. And especially our backbone is the Taj. And the Taj stands for trust, awareness and joy. So strong -- we have very strong belief, not just in India, but globally, it will not be in the short term, it will not be the third-party websites. It will not be other people, intermediaries booking as much as they used to do before because people are hesitant to travel, but they are happy to take the risk in travel if they know which airline they are flying, if they know what destination they're going to or what are the facilities available there and which property or which brand they're going to spend their time there. So I think there, we feel we are very well positioned. And definitely, that shift is also going to last for longer because brands in such times are more important than ever before. And as we have seen that Taj was voted India's strongest brand across all sectors. I think we stand very well positioned with our other brands, too, whether it's Ginger or Vivanta or SeleQtions. But especially with the Taj, I think we are very well positioned to take advantage of that. In terms of being debt-free company, yes, in an ideal world, one would be debt-free. But a bit of debt always is good in structuring. But without getting too much there into the detail, why don't I request my colleague to answer that part of the question?

Thank you. Look, in fact, I think if I look at the pre-COVID world, I think we were always kind of managing debt. As you know, between 2017 to 2020 period, we were able to bring down the net debt to equity and the net debt to EBITDA. And in a pre-COVID world, I believe we would have liked to bring it down to about [ INR 1,000 crores ] or so. In any case, our asset-light strategy was helping. Our target was to go to 50% on an asset-light basis. And on that, that could have required much lesser capital on the balance sheet side. On the P&L side, very clearly, we were driving through EBITDA margin growth. Now I think what is likely to happen is that the profitability targets in terms of driving through performance improvement continues. In fact, all our [ cost deferred ] are going to lead to a very different operating model and cost structures once the business recovers. And then our asset-lite strategy continues. So our sense is that we will be very focused on this. That's why we are also monetizing assets and that has always been part of our strategy. So a combination, I guess, of asset-light growth monetization, improved profitability and flow-throughs, all of these will help us to keep the objective of keeping debt at optimal level impact, not sure as Puneet said, 0 debt is the right solution. But a level of debt, which is kind of small and meaningful is really what our objective [indiscernible].

Just an add-on question. Sir, I mean, in some parts of the world, the way we see hotel rooms are priced. In India, we have not seen that happen as yet. For example, let us take example of Sea Rock. I mean, the cost of the room on an average is INR 15,000. And if you don't have occupancy, would your thinking lead you to give it at INR 7,000 so that you have an optimum kind of occupancy? Would that thinking come into the pricing of rooms?

So I don't know what makes you say that this is not accurate because globally, revenue management has become a core part of any company's business. And the revenue management on the room side of the business and the food and beverage definitely is a combination of the right occupancy, the base occupancy and the right pricing strategy. You always try to get to a certain level of base occupancy before you start moving rates. And if you're operating at 85%, 90%, you don't try to [indiscernible] to fill the last 10%, 15%. Because that is counterproductive in the long term. And I think the industry actually has suffered in its ability to charge the right rate. So it is very important to maintain certain integrity with the rates. And then it is better not to build very fancy hotels and spaces that are not used by all guests, which is also called the renaissance in hotel business because that has happened. And the normal room space is being built less and less in -- not in the 5-star category but definitely important call the upscale, the upper upscale, the mid-scale or in [indiscernible] that will continue to happen. But revenue management has been a key focus for any serious hotel company having a world-class brand. So -- and we've been practicing that very diligently.

And on the issue of stand-alone hotels, sir, do you think in the post-COVID world, could have stand-alone hotels survived and thrived or it has to be necessarily be a part of a brand and a service network?

So when you say standalone, you mean unbranded?

Unbranded, single owner, single running kind of a place.

It depends on the capitalization of their asset and their credit lines, of course, [indiscernible]. So that's not our business. IHCL is in the business of running our own branded hotels. Yes, there would be an opportunity for us to go for conversions because we do believe since 6, 8, 9 months from now [Technical Difficulty]

I think we -- I think we are not able to hear you, I think...

Yes. No, I can [indiscernible] that. Hello?

Yes, please?

I think we were not able to hear you, sir.

Were you able to hear me or not?

No. For a few minutes, no sir. For a few minutes, I think it got...

[indiscernible] properties that will come onto the market and is also good conversion opportunities for us. But [indiscernible] in each area.

We will now take our next question.

This is Vikas from Antique. And the color you have given around R.E.S.E.T. initiative and cost management is truly great. My first question is, I mean, I just want your view. Once we are done with the pandemic, do you think that most property owners will prefer to partner with Indian Hotels than many of the other players as the COVID would have by now made them realize the importance of being -- having a good partner? So what I'm trying to make a sense of, I mean, the management contract, I mean, it would be more in favor of Indian Hotels once we are done with this pandemic.

So [indiscernible], if you look at what we were able to [indiscernible] was more than several years' time. [indiscernible] I do feel that the group [indiscernible] especially we have done in terms of serving the community has created a goodwill [indiscernible] definitely, we can foresee a [indiscernible] factor for our company and for [indiscernible] is very high because I think the core value of the foundation of [indiscernible]. Now I think in [indiscernible] sector [indiscernible] of looking at it. And we are already seeing [indiscernible]

Yes. I think I got some part of it because your voice was breaking in between.

If I can build on what Mr. Chhatwal is saying, I think, as you know, we were -- if you see the history in the last 3 years, we have been getting more than a 50% share of the management contracts. And the feedback from all our owners has been excellent in terms of the time and attention that we give and the access that is provided to the senior management. Unlike some of the other brands, where they end up talking to a multinational manager who comes across, I think we have been very agile and responsive to the owners as well. So my sense is that this will continue in the current environment as well. So we will continue to maintain a disproportionate share of all the new management contracts.

Sure. Giri, also -- so regarding the employee cost, I mean, I can see on standalone, it's down 11%, on consolidated, down [ 37% ]. So where is the disconnect there? Because, first of all, I understand Tata was pretty accommodative to employees and vendors. But where is the difference between that standalone and consolidated? Why consolidated number is...

Essentially, what's happened is that our ability to sort of manage the cost in the London and U.S. especially has been very significant. As you know, in London, the government came up with a subsidy plan, where employees learning up to GBP 2,500, where 80% of the cost was subsidized by the government. And that scheme is still going on, albeit it will get -- it will taper down for the next couple of months. But that has been a big implication. Secondly, in the U.S. market, what has happened, the New York union rules have allowed hotels in New York to sort of furlough the union employees for a period of 6 months, paying only the health care insurance thing. So we have been able to take advantage of that. So the significant cost savings on the labor front have been achieved in these 2 markets. Even in India, I think we have been very careful. I think there are 3 classes of employees. And as the Chairman also advised to the AGM, I think as far as the contractual employees are concerned, where we deal with agency appointments, we have been working with agencies in terms of managing their account. As far as the fixed-term contracts are concerned, we have honored all the contracts. At the time of renewing contracts, we have been taking a case-by-case call. And as far as the full-time employees are concerned, people have taken pay cuts up to a certain level with the organization. And that's been the approach in terms of managing the employee costs. And you will see -- and we are also working on redeployment, working on different operating models. All of these will come to [indiscernible] in the next few months as we go forward.

Sure. That's helpful. I just have one last question. What is the overall debt level you are comfortable with in case the occupancy remains subdued for a period of time than expected? I mean, so what point you will maybe accelerate the sale of [indiscernible] or look at divestments? And also, if you can just give me the CapEx levels you are targeting for the current year, that's about [indiscernible].

No. Fair enough. I think as far as the debt levels are concerned, very clearly, this is a very big focus area. And I think it's a combination of the monthly spends and the CapEx [indiscernible]. So at this point of time, as far as the debt level is concerned what we believe is that monetization will be a very key objective. And we are in discussions on monetization of some properties. And our idea is that whatever we monetize, we will use it to reduce our [ debt ] actually. So that is something that we would do. As far as the debt level itself is concerned, I think -- I mean, I would simply say that you've seen the 30th of June numbers. I think our debt-to-equity is still at a manageable level. So I suppose there will be some increase in debt. But with monetization hopefully by end of the year, we should come back to meaningful levels actually. So that is as far as debt management is concerned. The second question, sorry, I missed the second question you had.

What is the CapEx levels you are targeting for the [indiscernible]?

The CapEx level is a combination of 2 things. One is CapEx, which is in the current year, which is really marketing and promotions, et cetera. And the second is the payments from the previous year. Combined together, we think that the expenditure may be approximately about INR 250 crores this year.

We will now take our next question.

It's Sumant here from Motilal Oswal. So sir, can you discuss more on U.S. and U.K. hotels, the hotel open, what is the occupancy and all?

Yes. The U.K. hotels have just opened on the July 4 [indiscernible]. At this point of time, the business is slowly coming back at this point in time. So in Q1, for instance, we had an occupancy of very -- nothing because it's only the July business. So Q1, there is no business [indiscernible]. Similarly, in the Pierre and Campton also, it was minimum business. So therefore, I think the real opening-up of U.K. will happen some -- has happened from July. And as far as Pierre and Campton, we think that by end of September, Pierre should open and Campton by October. So I would say that we will start seeing the business happening from the second and third quarter. From the [indiscernible] second quarter is what I would say.

Sir, U.S., you said the opening in July?

No, I -- Pierre will open by end of September. That's the current thinking and Campton sometime in October.

October. Okay. And U.K. hotel already started?

Yes, July 4.

Okay. Also when talking of overall, the total room, how many rooms are operational currently? I'm talking about the IHCL and subsidiaries, not group level.

How many rooms are operational?

I think it's around 14,000, Giri.

Yes.

Around 14,000 as we speak now. If we include all brands, so there is around 5,000, 6,000 that is still not operational.

Okay. And what would the management contract rooms is under operation? How many rooms are operational? You said 1,400 is own hotels, right? 14,000?

No, I said 14,000 total, but we can send you that information, if you...

Okay. Okay. No problem.

Have it ready, how many in management and how many in lease by brand, by country. We don't have that. We haven't thought on this call.

Okay. Okay. And can you discuss more about the -- how is the actual -- the customer mix currently? And how is the actual demand coming up, in particular geography like Goa and Bangalore and any other market? And overall level, what is the mix of the actual demand or actually customer ex quarantine?

Right. So some of the initiatives that were launched based on the opening and closing of the market, they were able to show results. So when we launched the 4D experience, as an example, which was you dream, you drive, you discover and you delight yourself. When we started, it went very fast, and there was a lot of pent-up demand for the revenge travelers, as people call it. But then a few days later came the lockdown from -- this was from Bangalore going to Coorg. So we launched it first in Karnataka. So it was very strong. And suddenly, the lockdown was imposed again. So it dropped. But at the same time, when we launched this in Rajasthan, Udaipur is one of the biggest beneficiaries followed by Coorg, as I mentioned, the third 1 is Jaipur. So there is a lot of demand, which is not seen historically, people driving to a destination. So there is tourism or leisure is the one which is leading. Business travel still remains very subdued unless you're talking about a Ginger branded category of hotels. And that is also right because your business travel has to come in cities like Delhi. Business travel will be taken charge by cities like Mumbai, the national capital and the commercial capital of the country, right? And if both are not fully open, then the business travel remains subdued. Goa has some difficult quarantine challenges. So Goa at the moment, is subdued, it's still at #3 for us or #4 for us, but we do feel it can go up much faster and much higher depending on when the quarantine rules are relaxed or they become a bit in line with other different states of the country.

We will now take our next question.

This is Deepika from JPMorgan. I would say, just regarding this point on the customer mix, barring FY '21, do you foresee business travel to remain subdued for longer? And as a result of which, do you see other, let's say, lower margin customer mix basically gaining share and hence, impacting RevPAR even 12 months out?

Not really. I think the day we get the communication right in all the media in terms of travel is safe. And the industry is working collectively on it. I think one of the industry colleagues from MakeMyTrip did a very good video on that. We're going to push those efforts very strongly, collectively as an industry from all branches of tourism, not just hotel business, for some reason, hotels have been not treated the same way as airlines or shopping malls or stand-alone restaurants, but I do believe that this should come shortly. This opening up should happen within the next few weeks. It's quite imminent. And once that happens, the business travel will start coming back. People have to feel -- see, it's a psychological thing. People have to feel comfortable that it's okay to travel. People have to feel comfortable that the number of cases in the capital of India are limited to 1,000 and are going down consistently. People have to feel that the curve is flattening in Mumbai, and it's a sustainable thing. So once people get used to that, I think they will also start traveling and people will travel with precaution. At least that has definitely started happening in Europe. People are traveling, but they are taking all the necessary precautions, and I think it should soon come here too. And it's also happening in parts of Southeast Asia. It's not that it's not happening there.

Got it. Sir, if you could give us some color on -- I know it's early days, but towards end of July, August, what are the occupancy levels like both for Ginger and for the luxury brand? And just to follow-up on that, on the Aspiration 2022, maybe it's a little early, but are you looking to still maintain all those targets of 800 bps margin improvement and 23,000 gains?

So let me start with the last one. That 800 basis point margin improvement we already achieved at the end of 31st March. If you look at that, it was 25%, and 23,000 rooms as a total portfolio was also more or less achieved. So that's why we thought it's not the time to keep counting rooms. It's the time to focus on the current thing. And that's why we came with the reset. So if you go back and look at the last financial reporting, you'll have all those numbers in there. And that's why I said that we had achieved already 70% to 75% of all our goals of Aspiration 2022 already at the end of the financial year '19-'20. So we do think we will provide guidance or fresh guidance at the end of next quarter?

Okay. Sir, it would actually through August, yes -- on...

August, on -- the occupancy you wanted, right?

Yes.

That's the occupancy levels, as I said in the presentation, Ginger is kind of around 40% or higher, and the rest of the portfolio is north of 20%. Now that is to all available inventory. If we were to look at hotels that are allowed to open, then there are hotels even operating today as we speak, at 70%, 80% occupancy, but at lower rates. So there are a lot of hotels, which is -- and that's the maximum they can have, for example, in city like Mumbai, because of the lockdown, we are not -- and for safety reasons, we are not allowing the staff to go home, either they're staying in nearby locations or they're staying within the -- on the hotel premises. So we can't have more occupancy because the rooms are occupied by own staff also as it is the safety and security of our associates is of paramount importance. And if they are safe and secure, our guests are safe and secure.

We will now take our next question.

So I had couple of questions. So first of all, what I wanted to understand is that, of course, the cash is the king. And everybody is sort of trying to preserve cash. But in the same context, don't you think this is a good timing for the conversions because you get the cheaper properties. I mean, a lot of consolidations are happening and a lot of people are trying without cash. So what is your view in the same in this regard do you think it's a good time to convert? Are you planning to do more conversions? So what -- how the situation look like?

Giri, you want to try first, I'll add later?

Yes, sure. No, I think I understand there are 2 parts to the question. I think part number one is the whole conversions in terms of management contract. It is absolutely to do that in times like this, the conversion opportunities are greater in terms of hotels, which are operating and owners switching. So that is definitely 1 part of it which we are pursuing. The second part of it is you're talking about acquisitions. Clearly, there are stressed assets build are going up, and there will be opportunities to acquire. However, such acquisition has to be done with the right kind of money. It cannot be done with debt and to the extent that we can also leverage our platform to actually do so. So we are not -- we are not losing sight of this, but we'll have to do it at the right time.

Right. Okay. The other thing, what I wanted to understand more about the customer mix, following on the last -- on the recent question. As, so the corporate travel is not happening at the moment. And then as you said that occupancy is more in the Ginger brand. Does it indicate that the high-paying customers like the corporates like the international travel, I mean on international travels happening in India, I mean those are the guys who pay higher rate as compared to otherwise, the general customers. So do you think the RevPAR would remain under pressure even going into FY '21 -- sorry, FY '22?

Yes. I don't believe that would be the case. I think on the contrary, it depends what's the balancing act on the demand and supply would be. Based on some of the surveys done, especially by HVS, which was shared with us, the CAGR on demand is expected to be at 3.3% between '20 and '24 and the supply is a little less than 2.8. And this is something different than the previous financial crisis, where there was a lot of supply coming on the market in 2009 and '10 and '11. So that is one. The second is, at this point of time, it is -- we said it is uncertain how much of the supply may continue to function as a hotel or might be used for alternative uses. So that will depend -- the likelihood that it comes back stronger is higher than the likelihood that the RevPAR stays subdued for a very long time. As I said before, all the figures that we are reporting are on hotels as if all of them were open. If we started giving a report on hotels that are actually operational, the occupancy levels are quite high.

Yes. But then -- I mean, I agree on your point and then you're sort of trying to look at the demand and supply. And then, of course, I agree with this point. But then the demand, which you're talking about, isn't it the sort of lower paying customers who are actually staying in the hotel, I mean, of course, the quarantine and all, but otherwise, also don't you think that kind of demand is there? I mean, not the high-paying passengers, which are more international people and then more of a corporate people and all. So don't you think that is the case?

So that, of course, will -- that's what I'm saying. Today, this is what is there which is not bad in the survival phase of the industry. But it will start to revive once the lockdown start getting lifted. Now either we believe that lockdowns will be now for the next 6 months, then that demand is not going to come back. I personally believe that the phased out lifting of lockdowns has already started happening a few days ago, Guwahati was announced to have opened. Mumbai already kind of has seen phased opening. We are already talking unlock 3.0. So I do believe in the next few weeks, unless something happens that we all don't know today. With the opening up of the markets, the normal level of demand will start coming back. Albeit slowly for the first 6, 8 weeks, but then it will gain momentum.

Right. Okay. Okay. The other thing which I wanted to understand if -- and if you could please help me. So basically, you look around the world and then you go to Europe and then you go to sort of U.S. and you go to even China. People are actually avoiding air travel, and then they are looking for more for vacation kind of thing, and they are sort of driving down to the nearby places. And how is that trend happening in India? Have you noticed that kind of trend, that kind of passenger?

Yes. It's the same here. See, you can't -- man is a social animal. You can't lock down human beings for 5, 6 months. And if they want to go out, they will go out, right? We have seen it in a very negative fashion when some shops were opened in Delhi and how people aligned up without maintaining any social distancing. But not to come to concrete staycation, drivecation people driving -- taking driving holidays, this has started happening in the last few weeks. It wasn't there as strong, let's say, in April, May and even parts of June, where the real demand was coming only from the Vande Bharat and the quarantine guests and the medical staff. But of late, we are seeing these green shoots. And also we did in some of our places in June. We did do some weddings. Again, up to 50% only as allowed by the government, but you'll see, it starts changing, and we're seeing some trend yesterday while talking to my heads of operations in our company, my colleagues. We got confirmation that we are seeing some very good signs of large weddings, again, happening. Large when I mean in terms of the volume of payment, the kind of service and the kind of attributes they want again, in Rajasthan, as an example, in destination wedding, but they're like 3, 4, 6 months out when the wedding seasons come when those dates are available. And staycation for people who are in the same city would check in into a hotel. We saw that happening very much in Bangalore. We have had first few queries on that in Mumbai at the Lands End especially. So there are things like this that are definitely happening. It's a common trend globally. It's not just a trend in China or in the U.S. or Europe.

Fair enough. Fair enough. I also wanted to understand about your mix between F&B and rooms with the new initiatives, which you have taken the home delivery and all or otherwise also, I mean, so if I'm in move, and I don't want to stay at the hotel. But of course, having food and probably is safe and it's a bit of outing. So in all those scenarios, do you think the mix between F&B and room revenue could change? Or do you think -- I mean, that's not -- that's not going to happen?

I don't think over long term, the change will be that dramatic, but I'm glad you mentioned about the home delivery that is -- we have built our own app. We are not using a third party, so as to have -- drive higher margins. And we have already opened in 5 cities. 5 more will follow over the next 5 weeks. And the app, which has now been launched in Mumbai will be launched in 4 more cities. So eventually in all first 10 cities. So at the moment, we are operational in Kolkata, Chennai, Bangalore, Delhi and Mumbai, and then 5 more will follow. So very positive, very excited about this part of the business. It's not -- in the pre-COVID world, maybe it had a potential of less than 7% to 10% of our total revenue. But on the bottom line, it is far higher because everything is incremental. You're not building new kitchens, you're not adding new staff. You're using what you have. And it's being delivered to people's residences. So I think it's a high-margin business and very exciting because at least people are getting something brought to their residence. Giri, you want to add something?

No. I think what is very good is that when we started Hospitality at Home and also the [indiscernible]. I think the Hospitality at Home, the pricing was INR 5,000, INR 10,000, even [indiscernible] the average ticket size has been highly around INR 4,000 or so. So these are all high-margin businesses. So I think it's good to see that.

Right. Right. Right. I have 2 more questions. I'm really sorry for the long list. I have 2 more questions actually. One is about the cost. If you could please talk more about costs. So as you rightly said, in the first quarter, you cut down the cost by 52%, other expenses were down 60%, employee cost was down 35% and all the sort of things. So how should we expect these costs to evolve over the next quarters? I mean, so do we -- of course, I mean, as the business comes back as you start opening more hotels as you -- so your cost will start rising. So how do you see the cost evolving over the next few quarters? And then the second question, I also wanted to understand, you just talked about the demand and supply, and sorry, I forgot to point -- to point out at that point of time. So do you expect this year's demand and supply both to grow year-on-year? So how the demand and supply looks like? I'm sorry if I missed something on that.

See, I -- Giri, you can take the second half. The first half is this is in a -- there is always something good that comes out in every downturn or in every crisis. In this crisis, I would say, for the industry in general and for us also, in particular, we have been able to reset the cost base. So a lot of these costs, if you think there are only variable costs that have gone down and the occupancy that comes back and the cost will go up, that is not going to be the case. We'll be working out of a different cost base going forward. And I think even if we get to 80% of the revenues that we have achieved before, it will come to the same margin level as we had before because of the readjustment of the cost base. I just think about it from the new standards of hygiene, social distancing, et cetera, in the spaces that we have. Now you don't have the same number of seats in a restaurant like you used to have before. So you don't need the same kind of staffing, cleaning, heating, air conditioning. It automatically starts going down even if the restaurant was full. But being on different fronts in terms of security, in terms of heating, lighting, power, you get smarter after every crisis.

And about the supply demand, give me some bit of...

I think, I think as we spoke earlier on supply demand. I think very clearly, based on the HVS report, we have definitely seen supply being lower than demand. And also in terms of new supply just coming up, we do see that because of maybe funding constraints and all that we do definitely see a [ slower ] in supply happening in the -- at least for the next 1 year or so until there is better clarity on funding availability and things like that. And as far as demand is concerned, right now, of course, the demand that we have seen in the main cities of Bombay and Delhi have all been more of a quarantine and business kind of demand. But as the leisure travel picks up, all being said, and all the other initiatives that we've launched, I would say that the demand pickup will happen. More driven, I suppose, by this year. And with air traffic, air travel becoming more, and people start getting more comfortable with air travel, I think the business travel also will pick up.

We will now take our next question.

I'm Kaustubh Pawaskar from Sharekhan. I have 2 questions. Sir, post pandemic, as we see that once demand start recovering and everything is in normalcy. Should we expect even the room rental to go up? Should we expect -- is there an opportunity for large hotels to increase the prices, considering the fact that, as you said, travelers would be more keen to go into the trusted brand. So is -- will it give an opportunity like player like Indian Hotels or large player to increase the room rental?

It should give the opportunity in the medium to long term, but not in the next few quarters, right? I think at the moment, if we get that kind of customers coming in, who are willing to pay higher, we are very happy. And that happens when the business travel picks up or high-end leisure. High-end leisure, we have seen some green shoots, but we have to have some form of business travel because of the nature of the business travelers end up paying more and also meetings and events, they have to start. So eventually, it will. The ability to charge for any trusted brand, as we said before, is going to be higher than for anyone else. So I do believe that in a period of 9 months, 10 months' time, we would have a higher ability to charge. This is assuming things open up in the next 2, 3 months' time. The 6 months thereafter, it will start showing what you asked in your question.

Right, sir. Right. So something I was asking like you were expecting a recovery in September. So maybe post the vaccine or when demand actually start seeing a proper pickup. There should be an opportunity for the increase in the room rate. So my second question is, the recovery in the room demand, should we also expect the F&B part should also recover? Or it will take some more time for F&B business to come back on track?

No. Actually, first, I have to correct. What I said was I expect opening up end of this month or September, and then it will take always around 6 weeks for any business to pick up. So if the lockdowns are over, it will still take 4, 6, 8 weeks for business to restart. And once that happens and then you get into the wedding season, it will be fine. F&B is a very important source of revenue on the Indian subcontinent, and I think it will continue to be. We don't see much difference in F&B going forward. As I said before, people will go to the place they trust. They will not just go to any other restaurant, whether it is a stand-alone or it's in a hotel or it's a part of some chain of restaurants. If they trust the place, if they trust the people who are serving them, if they trust, generally, the atmosphere they will go there.

We will now take our next question.

This is Shaleen from UBS. Actually, most of my questions are already answered. Please, just 1 on confirmation on -- what the monthly cash loss right now, including the finance costs? And how much is our cash.

Sorry, sorry, what are the monthly cash -- monthly cash. I mean, I think monthly cash is approximately booked. I would say, we are spending maybe about INR 100 crores or so including Capex, including all of things, it's not just operating itself. So that's the cash run rate actually. And we have adequate cash. I think -- and we have lines of credit. I think between cash and lines of credit on hand, it will be about INR 1,000 crores plus. So I think -- so we are fine in terms of equity.

Right. All right. And on the operations front, right? So as it takes 6 to 8 months for any business to stabilize kind of even after opening. Since we have cut down our cost significantly, what about the breakeven occupancy level at the hotel and ballpark, what percentage of hotels are at occupancy level? And if you can share this, I don't know, if it's handy with you or not. Any sense for us to make assumptions, whatever you can -- you can share?

Yes, Shaleen, it's a very difficult question to answer because the breakeven point for a Taj, or a Vivanta or a Ginger or SeleQtions is not the same. So if you put everything in 1 basket, maybe it's around 42% to 43% occupancy at a system wide rate of around INR 5,000. So that would mean a RevPAR of around INR 2,500 is needed at that level. But this is only the rooms part, then you need again some activity on the F&B side also. So I think if we only looked at, I think, if we looked at a total revenue per available room, then we have to look at around INR 4,500 to have a breakeven on that Taj, SeleQtions and Vivanta brand and on Ginger, we could easily do it at INR 2,000, INR 2,200 level. So I think it's important to look at total revenue per available room and not just the room rate and the occupancy part of it.

Fair point. Completely agree with you. Another question.

And if you're -- like Giri said, if you are in the U.K. or in the U.S. and you get all the subsidies from the government and payment for the employees, then that number can change significantly, right? And the waiver in property taxes like they have done in the U.K. So sometimes it becomes a big cost. So it's -- it depends, it's by geography, it's by brand and also by contract type. If it's a management contract, then it's only a question of how much lower or higher your fees was as you don't have all these costs. So your breakeven point is more on the fee income derived versus a service provider, right?

Fair point, I agree with you. One more question, and something related. And if you can share, up to you. As per your internal assessments, what are the operating metrics, either revenue side or the occupancy or RevPAR or whatever you need to come to -- come at EBITDA breakeven levels? Because I don't know how you're operating -- if you open new hotels, it may -- you have to be decisive, whether you want to operate all the properties or you want to be selective about it. So what are you looking at it?

So Shaleen, I'll answer the second part and the first 1 because it's Giri's favorite, and he's just done a presentation today on that. So I'll let him to do that. The second 1 is as I said before, with the exception of Connaught in Delhi and a couple of Ginger properties, everything is on a management contract basis. So the cost to us out-of-pocket for opening, launching, setting up is not there. So that is -- and Connaught is relatively a small property, 100 rooms only. So we don't have -- so we are actually looking forward to the growth because all that growth should be EBITDA additive. So it will add on to the EBITDA. It's not going to create losses. So there is -- as we said, there is a rationale behind why we went for this kind of growth in our pipeline. And Giri, maybe you want to give a level at which we are both EBITDA and PAT positive?

Yes, that's right. I think, obviously, EBITDA neutrality and at least at the consolidated level, maybe PAT neutrality at a stand-alone level is obviously the standard that we are all kind of seeing what will it take. And I guess it's a combination of recovery in the third and fourth quarters and also the kind of monetization we can do. I think both are going to be very important. My sense is that at around a 50% occupancy level, we should to get closer to EBITDA neutrality at the consolidated level. This is what it looks like.

RevPAR [indiscernible].

RevPAR. RevPAR will be what it is. I think it's more driven by, I guess, what is the performance vis-à-vis the previous year. So I think in terms of what I would say is that at a 50% level as compared to the previous year, we should definitely aim, not saying we're there, to get to EBITDA breakeven for the consolidated. As far as stand-alone is concerned, I think it is more appropriate to look at that neutrality, but that depends on operational and nonoperational incomes. Operational, of course, the business services and nonoperational based monetization. So we see -- I think both these factors are important for Q2, Q3, Q4 and what else. Those are what we are kind of aiming for, in any case, so we'll see how far we get there. Yes.

Got it. All right. Just last one. Just last one. Obviously, we have renegotiated leases, et cetera, and have our partners have also tried to renegotiate management contract? Are there any cases like that?

Of course, Shaleen. There are always cases like that. There's also an opportunity because maybe -- maybe they don't -- nobody renegotiates and say, I'm not going to pay. That's not the thing. What people try to say is to protect liquidity or cash. So what can be done? And maybe if we can give them that and get something else in return is good. There's nothing like a one-sided way of negotiation. That doesn't work. Because we don't have -- we don't own the assets. There is no upside to us, right? And the fees that we charge are very much in line with the market. It's not that we are charging like 50% higher fees, so we start reducing it. So I think the ethical way of doing business is appreciated by owners and partners. And especially with -- as I said before, with our group, that level of integrity helps us also in a crisis. And there is not 1 kind of formula that you can apply. So if we have a 40-plus year partnership with Royal Family in Rajasthan, on a management contract basis, it is of a very different value than having a management contract in South of India or a Northeast in a secondary market for 100, 150 room property. One could be an iconic asset, well-known globally. And the other one, it is not really that much brand-enhancing and something which leads your branding charge or creates the halo around the brand. So -- and also not such a long-term relationship. So to last -- for relationship to last 40 years, 50 years, it's a very long time, and those people need to be treated differently than where you've just started. So it's one kind of contract at a time, and there is no one size fits all.

We will now take our last question.

This is Vinod here from [indiscernible], am I audible?

Yes, please.

I just wanted more clarity on your cost cuts that you have planned now that's in a stand-alone business. You have a 44% drop in cost, on per room basis, but it's a mix of both your own cost cuts initiatives also inventory not operating. Purely not -- I would say, all inventory was back, what would that number look like? We are able to put it to once, let's say, after second quarter, where would the cost per room be vis-à-vis what they were last year?

Yes. I would let Giri answer that question. But I would just say one thing. When we started with the lockdown, nobody expected this to go on until August, right? So the first date that was announced was till 13th of April, which was then extended to end of April, has kept getting extended. So maybe the agility in Q1 on cutting costs was missing to some extent. By that, what I want to say is that in Q2, you will see a much more improvement in also the cost initiatives that we have taken or the spend optimization initiatives that we have planned. As the first phase, it was like a wait, watch and see. And maybe after 13th April, everything will open or after April, everything will open. Then there was communication from the government, which was first communicated then was -- there was a different ruling by the Supreme Court that you have to pay salaries. You have to know whether -- I think you all recall that. So that definitely has certain impact on the Q1 cost structure, which is going to be maybe a little bit reversed in the Q2. With that, I hand over to Giri, if you want to elaborate on that, Giri, or add on to it.

No, that's fine. I think building on what Puneet said. I think very clearly, what is happening in the cost is that we are getting into a much more sustainable kind of model as people are learning how to operate at a lower level. So as opposed to purely tactical steps in terms of cost control. I think it is now becoming strategic. For example, if I give you -- shared service centers. Now shared service centers will start, but now those will get accelerated. Digitization is getting accelerated. So some of those initiatives are getting back. As you sort of do online, what do you say, check in, checkout, kind of, which is contactless. It will have an implication on the manpower, which is being used. So I would say that the cost efforts are moving from tactical to much more strategic, and that is definitely going to have an impact. The second thing is that as the hotels come back into operation and as business picks up, we will also see some of the other revenue lines also. For example, Chambers. They represent some of the safest places you see. And so we believe that some of the Chambers' revenues also will start picking up. So I think it's very difficult to just look at one part. So my sense is some of those initiatives also will start picking up, actually. And also, as we open hotels, we have now learned how to operate hotels and the ability to switch on, switch off in terms of rooms and also clustered approach where certain hotels will be more occupant than the other. I think those are being done in a very significant fashion. In terms of supervision, as I -- moving on to the fundamental thing what I spoke about, in terms of supervision, I think the supervisory framework are getting modified, where I think you will find, we will -- we will much -- grow to much more clustered operation. Training of people is changing, that people are being multi-skill training where they cannot only do housekeeping, but also be [indiscernible] et cetera. So some of those, we call them the A team. So those are also being implemented. So my sense is the quality of cost control is definitely changing, and we will see that come through as we go forward as well.

Sure. So sir, what I understand is that, a, the cost controls were implemented during the course of the quarter and therefore, only reflecting for the part of the quarter, and that we'll see the full quarter impact in 2Q. Second, is it fair to say whatever controls you have to apply, whatever cost cuts you had to do, all of that. So the number that we see in 2Q would be the full quarter sustainable cost control that you will see. You don't have to put in more initiatives now?

No, no, no. No, this will be ongoing. This is not -- there are certain things you can't do immediately. So a lot of initiatives are there that have taken place but it will be built upon. And also, it has to be seen in line with a certain level of occupancy. So I think the real metric starts coming once we start hitting 50% occupancy level, which we hope to do easily system-wide in Q3. As I said, in certain hotels, we're already operating north of 70% and in some even north of 80% occupancy, the hotels that are operational. So we will have those impacts. The negotiations are still ongoing with several partners, landlords, et cetera. It -- and also sometimes, you have to look at till what extent this lockdown is going to be. So you get the right outcome. So some of the -- so what you see is maybe already 70%, 30% has to be done, and it's not that easy. Certain things are negotiations with the unions, et cetera. So things take time. And you will see more important test is Q3 and Q4. So Q2 should be an improved number on Q1 and Q3, Q4 will be a further improvement.

Right. If I may just follow-up on the same thing, let us say, in fiscal '20, you had about an OpEx all put together, F&B, employee other OpEx above EBITDA line of about INR 4.5 million per room for the year. On a percentage basis in Q3 when you expect to hit 50% occupancy, what percentage reduction can we look at in the OpEx per room?

Giri, I think we have reported 52% decrease.

Correct.

And that is because of a low occupancy level. We had a revenue decline of 83%, right? So once it starts going to -- you have to look at -- I mean, we can give a guidance, but let's put it this way that a lot, a lot of work is still left to be done. It's not because the efforts have not been made. But the efforts have been made, but certain things will happen with time, especially, they've got accelerated in Q2. And there will be certain impact coming in Q3 and Q4, but it's quite difficult to make that forward-looking statement. What all we can say is whatever you see now you've seen mostly on variable cost, but you will see certain changes coming in fixed cost also. And I think Giri had mentioned something -- as an example, I give you redeployment. So if your hotels are operating at 50% occupancy and things open up, and we start opening again a couple of hotels a month, then we can redeploy some of our staff, right? Today, if they're all shut, what can you redeploy and that's the opportunity we have because of a very strong pipeline.

It appears there are no further questions at this time. I would like to turn the conference back to you for any additional or closing remarks.

No. I think I would just thank the participants who have dialed in [indiscernible]. We are, of course, available to answer other questions. Do write to us. And we will also replay the usual investor meetings in any case during this or after this. So thank you. Thank you.

Thank you, everyone. Thank you.