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

Ladies and gentlemen, thank you for standing by. We welcome you to the Indian Hotels Companies Limited Q3 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] I now hand over the proceedings to Mr. Puneet Chhatwal over to you, sir.

Good evening, ladies and gentlemen. At the beginning of this call, I thought, first, we will show you picture of very nice, tall boutique property that we officially launched last weekend is The Connaught in Connaught Place in New Delhi, comprising of 104 rooms, very nice outside area with a bar and restaurant and a picture of the lobby. It redefines what boutique hotel businesses in India and will be part of our selections platform, which takes the SeleQtions platform to 13 hotels in operation with another 2 in development. So moving on from The Connaught, let's [Technical Difficulty] unprecedented challenges for the hospitality and hotel industry. The global pandemic, as you're all aware, had 100 million cases, 2 million deaths, a complete shutdown of hospitality, almost 70% of the hotels across the globe were shut. There was a decline in revenue of $900 billion -- INR 900 billion, sorry, and job losses of almost 40% to 45% of all direct employees in the organized sectors lost the jobs. Having said that, the pandemic also started reshaping travel behaviors. We saw that the demand when it started coming back, it came in form of leisure. Some also included some business, so making it Bleisure travel. It was value-driven and more experiential or if you want to call it immersive. Our short-term rentals and home stays are very popular. A lot of focus in and around wellness tourism, sustainable tourism and when the MICE started opening up, that is meetings, incentives, conference and events, it started initially as digital-only and then later on and as we speak today, moved into a phygital mode. We have announced our R.E.S.E.T. 2020 strategy already after Q1. And just as a reminder, R stands for revenue initiatives, E for excellence, S for spend optimization, effective asset management and being thrift and financial [Technical Difficulty]. So all this helped us to get on the very first [Technical Difficulty] especially as we are seeing at the end of Q3 in the month of [Technical Difficulty] in January. So this slide is really on the domestic front. So April is the month when we almost reached 0 revenues, 7% occupancy and RevPAR declined to 339 and that has already gone to 10x. As a percentage of revenue, it became also 60% in December and closing to almost 50% in November. So actually, in November, I would say, is really the turning point around Diwali, 10th, 15th of November when we started seeing more and more pickup in domestic demand and business. There's a little blip, which could be misleading in the month of June. That is because of the Vande Bharat business that the hotel industry got and that's why the RevPAR is lower, but the occupancy shows a marginal increase over July or a significant increase from May, but that was really related to Vande Bharat. December is the really first month when we saw business, especially on the leisure front, on weddings, from middle of November till 31st of December, 6 good weeks for the industry. If we look at the RevPAR versus industry, this is from STR Global, I think the IHCL portfolio, the RevPAR performance has been good. We are noticing this trend across the globe that a lot of brands, which are being preferred are the ones which have a lot of history, which have a legacy in that country. So I think we are also benefiting a lot, especially because of the Taj brand. And Taj brand in many markets is seeing a huge premium, although the demand base is low but our market penetration and RevPAR penetration is very, very high. So if you look at the last 3 months in the quarter, we have gone beyond 1.5% in terms of market share. Our RevPAR for the month of December finished at INR 3,424. These figures are including Ginger. So as you would know that Ginger does a lower rate, so the figure that you saw on RevPAR is a blend of all brands that we have in our portfolio. This is an interesting slide, which also demonstrates leisure destinations led to the path of recovery, at least in domestic leisure. And if we compare the 3 quarters, you see in the third quarter, Goa was absolutely the #1 in terms of the percentage of revenue of last year -- or last year, when we say is, obviously, the comparable trend for the Q3 of the year before. So 80% then followed by Rajasthan, then followed by Calcutta and then Kerala and the challenge remains on the right extreme, which we see is Bangalore, Delhi NCR and Mumbai, these are 3 very important cities for domestic corporate, especially for our portfolio as we have significant number of our hotels in Bangalore, Delhi and Mumbai. And we see that also as an opportunity going forward because at the moment, they are not even back at 50% of the previous year's business in the quarter. Moving on from here to the signings and the openings, we have tried to maintain our growth momentum even in 2021. We have been very focused, as you all know, on signing of management contracts and not owning hotels. So we signed this year also -- in the 9 months of this year, 14 hotels. We opened 6 hotels. We have also opened 5 amã branded properties. We've signed some more amã properties, which you'll hear about in the next few days, a small portfolio of amã homestays. So on the signings and openings, given the fact that the markets were shut down and were undergoing a lockdown for 6 months, still having opened 6 hotels, and we still plan to open a few more in the next -- in the next month. So we'll get to our 12 hotels opened in the 12 months of the year. So this has worked well for us, and we are very much on target in terms of our growth strategy. Moving further from growth to focus on our excellence and well-being, Tajness, a commitment restrengthened. We talked about it already at the Q1 results. We have implemented all standards of safety, security, [Technical Difficulty] are still staying in our hotels as public transport system is [Technical Difficulty] for them to be exposed. So a lot of our associates are still being hosted by us in hotels so that their [Technical Difficulty] is clean and safe environment. We introduced a zero-touch service to transform as minimum contact as possible and something which we did not talk about so much as we introduced through our Taj Public Service Welfare Trust, certain voluntary salary contributions from the staff, which go into a fund for people within [Technical Difficulty] more contractual workers working for a car contractor or for -- or for any other [indiscernible] contractor who lost job as there was not enough demand for cars, et cetera, they were supported through our Taj Public Service Welfare Trust under the promotion of Taj for Families. And that means each of the Taj employee was contributing one way or the other towards the other less fortunate ones who may have been in our ecosystem, employed by other employers who own our hotels, but use our franchise or use our brand [Technical Difficulty] this manager. We stood to the occasion and supported them of [Technical Difficulty]. Moving on further from excellence to spend optimization. So here it is presented in terms of sustained optimization of fixed costs. We had a 27% decline in fixed cost per month. We are more or less at 120. And I think that's the figure, which is a good guidance forward versus 164, which used to be in the year [Technical Difficulty] From sustained optimization of fixed costs when we move further in terms of how did we achieve this, we have achieved this through redeployments of staff in new properties that are opening, redeployment of some of the corporate employees and other Tata group companies. Multiskilling. We have skilled our people in different areas. So they are able to work in different departments within an 8-hour shift, that's the new way of working. And that brought our staff to room ratio in April from 1.53 down to 1.14 in December. Of course, this number will increase as the occupancies increase, as the business volume increase, especially as more and more weddings and MICE events start coming, that number will have a certain increase, but there is also a certain permanent reset that we have achieved in terms of the staff-to-room ratio. In terms of effective asset management, which helps the bottom line in the quarter, the contribution to lease cost savings for sale of residential apartments for the 9 months is INR 64 crores. For this quarter, it was marginally less, but we have achieved INR 64 crores through asset management initiatives, which were launched with the launch of R.E.S.E.T. Going on further to continuous reduction in corporate overheads, we have savings of INR 67 crores in the first 9 months of the year. That is a 28% reduction. This number is expected to rise as some of the reductions did not commence immediately in the months of April and May. But there is a split prudence in all corporate expenditure. And we continue to use organizational optimization for redeployments, restructuring and better utilization of the skill sets and the talents that we have in our system. With that, the 9 months, if we look at it on the 9 months front, the revenue initiatives on a not like-for-like initiative, got us INR 205 crores in incremental revenue. Our spend optimization [Technical Difficulty] achieved was INR 280 crores, INR 64 crores in asset management, as I just explained. And under thrift and being financially prudent, we got another INR 67 crore contribution. When we move on further, I think we thought this time, we will also say that although we had R.E.S.E.T., but 2 of our other joint ventures, which are pretty important for us, adopted and embraced a strategy we call R.E.A.P., that's building revenue, containing expenses, managing assets and adapting processes. [Technical Difficulty] that, and when we look into Ginger on the next slide, you will see that Ginger performed quite well and achieved in the 9 months, 57% of last year's revenue. I think that's coming from where we are coming from, from almost 7%, 10% in April and 12% in May and then going on to 17%, 18% in June. I think Ginger getting to 57% of last year is a very good number. The 9-month RevPAR index on Ginger was at 1.23x. And they clocked 60% occupancy in December, and we see the same trend in January and February. [Technical Difficulty] [ Ginger was ] EBITDA positive for the 9 months. It has achieved 31% cost reduction over the 9-month period, and the manning in Ginger has gone down from 0.55 to 0.41. In terms of assets, now Ginger is a 75-hotel portfolio, of which 54 are in operation. And from the total lease obligation, they got 20% lease rent reduction and Ginger is still clocking a TripAdvisor score average across the system of 4.74 and is equally focused on multiskilling. When we move further to -- sorry based on [Technical Difficulty] similar trend, we also see on TajSATS, and we'll narrate more on that in the next quarterly meeting. As also air traffic is beginning to come back, we all read that the air traffic on the domestic front is almost [Technical Difficulty] the previous year. I think at the end of the full year, this will become interesting to talk also about our Flight Kitchen business. Our improvement in the revenue coming from a small base, of course, from Q1 to Q2, we saw a jump of 85%; from Q2 to Q3 of 90%, which is just a consequence of Unlock 1, Unlock 2 and Unlock 3, and as slowly the pools and the spas and the banqueting facilities start to open up, we hope to get more and more revenues also in the food and beverage side. So obviously, Q1 being the worst quarter coming from a minus INR 234 crores, we were able to finish Q3 in a positive territory, albeit at a very small amount of INR 38 crores. So the negative and the drop was significant from Q1 to Q2. And from Q2 to Q3, we had INR 121 crore improvement to get to a positive EBITDA. Moving further, trend in comparison with the previous year, as we can see, it's still a long way to go in Q3 because Q3 of last year, we had a system-wide revenue of INR 1,400 crores. But very important here is that unfortunately, for our portfolio, London, New York, San Francisco, these contributions have come to almost 0 as these cities went into a lockdown in the months of -- the U.S., it kept getting worse. And unfortunately, London also went into a lockdown. So the revenue drop is that's why very high. And also on the EBITDA front, from a INR 462 crores EBITDA, we were able to do only INR 38 crores. Otherwise, Q3 and Q4 get significant contribution from also our international operations. We were able to narrow the gap on our PAT or the loss after tax, those coming from INR 280 crores in Q1, INR 230 in Q2, we ended up close to INR 120 crores, to be precise, INR 119 crores in this quarter. Going further, after this slide, I think it is very important and interesting that the significant portfolio, EBITDA was positive in December. So 86% of our domestic hotels turned EBITDA positive in the month of December. We think that is the kind of base going forward. Of course, there is a Christmas and a New Year impact, but also as business begins to open up, we are looking forward to having that as a kind of a moving average going forward in the short term. Moving on to the next slide, I think I will hand over to my colleague, Mr. Giridhar Sanjeevi, who's our EVP and Chief Financial Officer. Over to you, Giri.

Thank you. Taking up from where the Managing Director summarized, I think I'll go into a little more of detail. As you can see, in Q3, the total revenue at INR 615 crores was minus 56% and as compared to the 9 months where we were INR 1,113 crores which was about minus 68%. So clearly, Q3 was -- saw a recovery led by leisure. On the cost reduction side, we were able to save minus 39%, as compared to minus 47% in the 9 months. And fundamentally, with the resumptions [Technical Difficulty] did come back in terms of -- like, in terms of the admin expenses and others. The manpower cost definitely was continued to be at the same minus 38% as compared to the 9 months number. In terms of the finance cost, the finance cost reflected the incremental borrowings and was in line with that. Exceptionals, we had INR 28 crores of exceptionals in Q3 and INR 135 crores in -- over the 9 months. And I will come to the details of it in the next slide, leaving us with an overall loss after tax of INR 119 crores for Q3 and INR 629 crores for the period of 9 months. Moving to the next slide. I think in terms of exceptionals, we had derivative contract changes because of the favorable rupee of about INR 6 crores in the quarter and about INR 23 crores in the 9 months. We had an exchange gain/loss in relation to the bank loans in South Africa [Technical Difficulty] INR 30 crores for 9 months. And in terms of operating and nonoperating revenue, we had gain on sale of flats of about INR 9 crores during the quarter and about INR 15 crores for the 9 months. Lease rental concessions under accounting standards comes under the revenue line. That's about INR 5 crores and INR 34 crores for the 9 months. We were able to get, and this is a good development, in Vivanta Guwahati, which is a hotel that we opened in 2015, we have received 2 kinds of concessions. One is a capital subsidy of INR 42 crores, which was received in March 2020. On top of it, there's an indirect tax subsidy where indirect taxes minus input credits are reimbursed. So for the 5 years, we were able to get a confirmation recently that we will get a refund of INR 13 crores, which has not yet come, but we should get it shortly. And this benefit will continue for 5 more years. We also had a foreign currency gain on restatement of some loans given to one of the subsidiaries of INR 24 crores. [Technical Difficulty] exceptional items and operating and nonoperating revenue inclusions actually. Moving way on to the stand-alone reported P&L, we had a top line of INR 434 crores. The overall pattern mirrors the consolidated. It was minus 51% in terms of the revenue as compared to the last year and minus 64% for the 9 months at a total revenue of INR 766 crores. In terms of cost reduction, we had a minus 33% in Q3 and minus 41% for the 9 months. So we continue to focus on the cost savings during the quarter. In terms of finance costs, once again, it reflected the incremental borrowing. On exceptional gain/loss items, we did have a loss of INR 56 crores during the quarter and INR 110 crores for the 9 months, and I'll come to it in a minute, leaving with a loss after tax of INR 95 crores for Q3 and INR 475 crores for 9 months. [Technical Difficulty] items, I think the change in fair value of derivatives we saw in the consolidated, that is INR 6 crores. As you know that whenever there is a Pierre loss, since we fund from India, we kind of provide for that in the stand alone. So that was INR 62 crores during the quarter. In terms of operating and nonoperating revenue inclusions, we had the gain in sale of flats that we saw, lease rental concessions of INR 4 crores, and the Vivanta Guwahati subsidy of INR 13 crores. So these were the fundamental exceptional and operating and nonoperating inclusions. So some metrics in terms of IHCL stand-alone. I think what is good to see on the right-hand side is that the occupancy jumped from 32.3% to 47.4%. And the ARR jump was INR 5,400 to INR 8,300, which is a very significant jump. And as was described in the earlier section, we had a significant premium in the RevPAR as well, which was INR 3,936 as compared to INR 1,751 [Technical Difficulty] the breakup of revenues, where room revenue was about INR 160 crores, F&B revenue INR 161 crores and other revenue INR 113 crores, constituting the INR 434 crores of Q3 revenue as compared to Q2. Moving to the domestic network revenue metrics. It reflected the same underlying trend, where the occupancy went up from 28% to 45% with ARR going up to INR 5,643 and RevPAR going to more than doubling to INR 2,573 and room revenue at INR 815 crores between room revenue, F&B and other revenue. The final slide we have is really the debt position. In terms of the debt position, the consolidated net debt was INR 3,079 crores. And I think the stand-alone net debt position was INR 2,175 crores. And I think one of the things to note is that the substantial increase in the debt position actually happened [Technical Difficulty] April when the net debt position was something like INR 1,900 crores or so. I think in September, the consolidated net debt was INR 2,900 crores. So while the bulk of the increase happened up to September, from September to December, the increase was marginal. So you can see that both in terms of stand-alone and consolidated, that clearly demonstrates that with the resurgence of business in Q3, the need to take incremental debt has kind of dropped. The interest cost, we continue to be competitive in terms of what we are borrowing. The net debt-to-equity still is at 0.71 for the consolidated and 0.52 for stand alone. And of course, net debt-to-EBITDA 12 months trailing will essentially be reflecting the underlying losses. So that's broadly it in terms of the debt position. So I don't think we have any other slides, and we open up for questions.

[Operator Instructions] The first question is from the line of Nihal Jham from Edelweiss.

My first question is that the recovery, I see from Q2 to Q3 is comfortable. But even now, if I look at the long-term estimates that [Technical Difficulty] consultants and credit rating agencies gave out. No one is expecting the RevPAR to come back before FY '23, what we achieved in FY '20. And [Technical Difficulty] know how the vaccine will progress and [Technical Difficulty] normalize for other segments is no. So what I wanted your comment on is that, according to you, is this a writing on the wall? Or could there be something that could change the trajectory of RevPARs coming back to pre-COVID level?

[Technical Difficulty] I think that we are living in a uncertain [Technical Difficulty] 11 months now on the domestic front. And on the international [Technical Difficulty] includes China's boutique business. I personally feel that things should start improving in 8 to 9 months as we suddenly saw improvement in December. One thing which no one [Technical Difficulty] second or a third or a fourth wave, [Technical Difficulty] know if we've already had a second wave, like, [Technical Difficulty] they had a second wave. So if that does not happen, I think, given that 85% of our portfolio is [Technical Difficulty] could be [Technical Difficulty] I think till FY '23. [Technical Difficulty] having said that, I don't feel it's easy to predict what is definitely [Technical Difficulty] to see [Technical Difficulty] showed you that month-on-month and quarter-over-quarter, there is [Technical Difficulty] it comes through domestic leisure or it comes through [Technical Difficulty]

I'm so sorry Puneet, I'm not able to hear you. Hello??

You're not able to hear me? [Technical Difficulty] some disturbance, [Technical Difficulty] some traffic. Is everybody muted?

Maybe we take off the video, Puneet. I think we will take off the video, and that may just help in terms of improving bandwidth actually.

Can you hear me now? Is it better?

Yes, absolutely.

Yes, sir.

But again, there is some traffic noise behind. Okay. So the main thing is, I don't think anybody is in a position to give any prediction today in terms of visibility of the virus, the news definitely is that in India, the flattening of the curve has happened with a clear downward trend from 95,000 cases, we are coming to now averaging around 10,000, 11,000, 12,000, and it even went to 8,600. [Technical Difficulty] If there is no new wave coming this way, the recovery on the domestic front could be faster. And I think the rollout of the vaccine in the international markets would be a key for the RevPAR growth also out there. What we can say is what we have witnessed. What we have witnessed is that there has been a 10x increase between April and December for us in terms of RevPAR. Now coming from a low base, that 10x was maybe much easier to achieve than to do 10x from where we stand today, right? So -- but the jump month-on-month and quarter-on-quarter is there. I definitely see no reason as we speak today, why February should not be as good as December. We all know that January, there is a slight dip until [Technical Difficulty] coming back, but even January, the occupancies on the domestic front have been positive. So I think the major part where the industry was missing, the RevPAR for our portfolio is only 52% to 55% of pre-COVID total revenue, right? The rooms revenue was [Technical Difficulty] and 45% is nonrooms. I think what we have been missing is the nonrooms revenue and now with restaurants opening up, with the wedding segment opening up, with the conference segment slowly opening up, that is an equally important segment. So we should not ignore that. So I think the -- instead of RevPAR, I would call it the TRevPAR revenue [indiscernible] what we should look at. And I think domestically [Technical Difficulty] then the recovery could be faster. If that somehow for some reason that [Technical Difficulty] today changes, then the RevPAR recovery to pre-COVID could go until FY '23, as you mentioned in your question.

Just 1 last question from my side, specifically for Giri. Giri, if I saw the presentation, right, I think we've reduced our cost around INR 40 crores on a quarterly basis, and I think that trend has continued. Now with 8, 9 months, and you mentioned about the staff-to-room ratio. So what is the amount you think will continue forward in '22, and that will be the R.E.S.E.T. piece going forward?

So I think on cost, as we saw on the slide, I think the costs are now -- fixed costs are approximately about INR 120 crores a month. And that is the kind of number that we are kind of saying that we would like to maintain. Because if you see the fixed cost savings in every quarter, I think, Q1, the fixed cost savings was about INR 8 crores. Q2 was [Technical Difficulty] INR 38 crores a month. And overall, we have been maintaining about INR 44 crores a month, and now the whole attempt in terms of redeployment of manpower in terms of corporate overhead reductions, in terms of other initiatives, I think we are trying to make sure that we kind of stay around the INR 120 crores a month in terms of fixed cost. So that's what we are attempting, actually. Yes.

The next question is from the line of Sumant Kumar from Motilal Oswal Financial Services. [Operator Instructions]

Giri, regarding the corporate rate, can you discuss more about how the corporate negotiation going on?

Excuse me, this is the operator. I'm sorry to interrupt, Sumant Kumar, your voice is not audible.

Hello?

Yes, it is better now Sumant.

Yes. So my question is about the corporate rate and negotiation. How is the scenario currently if we are going to negotiate with the corporate? Is the -- they are asking a more discount from the pre-COVID level? Can you elaborate more about that?

So what is happening, Sumant, at this point of time is that the corporate renewals, more or less, most corporates are now essentially asking us to renew the existing contracts on the same basis as the previous year. [Technical Difficulty] business is yet to pick up. So we have not gotten into any serious discussions in terms of discounting of price negotiations. It is just getting renewed as per the previous year. And as the business starts to pick up, then I think we will get a better sense, actually. Because if you see the mix of business, we are still dependent on the transient business at this point of time. So I would simply say that renewals are happening based on previous year rates.

Okay. And when talking about overall the Q3, we have seen a decent recovery. Talking about the current quarter, January, you have seen some dip and February has some wedding season and F&B segment is going to recover. Assuming all this scenario and -- what is your view on the Q4 number -- Q4 scenario compared to the Q3?

Yes. No, I think you wanted to answer that, Puneet? Yes.

[Technical Difficulty] [indiscernible] you can add your thing. We are, at this point of time, based on the business on the books plus our daily pickup that we are seeing on a daily basis, Q4 will definitely be stronger than Q3. As I've said always, if there is no new sudden wave of virus coming or if there is no lockdown, if the business goes on as it is like for the last 2, 3 months, then definitely, Q4 will be better. There is no reason that we know today, as I said before, by February should not do as well as December or March should not do as well as February. So it's an important one. January is always a slow start, but January has done well, and it's been in line with our expectations on the domestic front. The only place where we are missing in January is, as I said before, London, New York, San Francisco [Technical Difficulty] Giri, do you want to add?

No, I think that's right. I think very clearly, we expect, see, if you look at the Q3 numbers where the top line was INR 615 crores, I think all we are talking about is about INR 200 crores a month. And there's no reason why we should not do it. And the other thing is that London also, the current news is that the lockdown should end by March first week, actually. So which means we are likely to see, hopefully, some resumption of business, and that's the turnover that we have been missing. So I think we continue to be optimistic as far as Q4 is concerned.

So any new trend post this Q3, you are expecting, like Q3, we have seen a good wedding season and overall F&B segment has recovered. So any [Technical Difficulty] for the Q4 and maybe the coming quarter, how if in [Technical Difficulty]

I think if I answer that, I think 1 of the things which is worth noting, I suppose, is that if you've noticed the news in Delhi, Sumant, I think weddings are now allowed for 200 people if inside and unlimited outside. So that is definitely helping us for sure. So I think -- so that is a trend which will definitely help. So the wedding business, there is still some wedding business, which is happening. Then the other things are, basically, the -- we are seeing some sports segments also opening up at this point of time with the BCCI India-England series. So that should also potentially help. And wellness retreats are also we are seeing happening, especially with [Technical Difficulty] I think in addition to weddings, some of these other trends are slowly kind of opening up is what I would say.

Okay. And lastly, the business destination, we have seen a very strong recovery in the leisure destination. Any new trend? Are you see -- are you -- have you seen in the business destination and how the key destination recovery is going to be like Mumbai, New Delhi and Bangalore and Hyderabad in the coming couple of quarters?

So I think...

Sumant, if I may answer that...

Yes.

The RevPAR growth globally and historically has a direct correlation with the GDP growth. If the GDP keeps growing, the way it is expected to grow, the RevPAR should grow, especially in the business destinations. The leisure markets, the RevPAR growth has been very good. People are wanting to move and take a holiday. So the business destination, I'm hoping with the kind of optimism we are seeing on the markets should also help drive demand in the hospitality sector and also in the aviation sector. Anything to do with hotel sector, restaurant sector, and I think that is positive. And we are reasonably optimistic that we will continue to see improvement. Now how strong that growth will be? Over 2 quarters to describe is very difficult. But definitely, this quarter, the total revenue with all possible mathematics looks better than the previous quarter.

The next question is from the line of Achal Kumar from HSBC. [Operator Instructions] As there is no response, we take the next question from the line of Vikas Ahuja from Antique Stockbroking.

Am I audible?

Yes. You are.

So my first question is [Technical Difficulty] talking about travel costs partially coming back in next fiscal year. Just want to know what your views around that? What your large corporate customers are telling you around the time lines and all because they have also started unlocking a bit? So that's my first question. And the second question is to Giri. Sir, the kind of margin savings we have seen in this pandemic, can you please highlight what cost savings will come back when growth is back? And what are actually the structural savings that will stay even whenever we'll reach to pre-COVID levels? And also if you can give some color on where you see the margins of FY '22, '23 going? I know it's hard to estimate, but whatever you are working with internally. I'll stop there.

Puneet, can you answer the first question?

Sure. On the first, can you just repeat the -- that you wanted...

So the first question is around all these tech consulting bank, companies are talking about the travel cost coming back in next fiscal year gradually. Obviously, for example, if you take an example also TCS also 3% of their revenue is travel cost, which includes hotel, travel, everything. And they are saying that around 1.5%, 2% might come back in FY '22, '23. So what are we hearing from our large customers, any time lines they are throwing?

Not anything really to that extent. We are seeing -- there were 2 kinds of people in the last few months, those who are traveling and those [Technical Difficulty] getting good bargain because everybody goes for the occupancy. If you look at 30, 40 years of STR charts, you will see that the first occupancy drop when a crisis comes and then the rate follows. And then the occupancy comes back, and then there is a lag of 3 to 6 months before the rate starts coming back. So I think that's one of the things. But definitely what we have seen is on the bottom of the pyramid, the junior corporate executive, that travel has commenced and [Technical Difficulty] Ginger brand. But what we are really missing is, to be very precise, on your question, is events with the meeting for 100 people, these are very rare. We have had a few in Goa, a few in Mumbai. It's 50 people because only 50 were allowed. God knows, if 200 were allowed, will an event happen for 200 people. So one thing is for sure, if the numbers keep going down and -- on the new COVID cases, if the vaccination keeps rolling the way it is expected to roll, then people will start traveling and travel costs will, as you rightly said, and all such companies start going up again because travel is not just in a domestic leisure, a human need. Certain business, you can do digitally but not forever. And the reason is because what we have done in the last 10, 12 months, we have been digging into our relationship capital of the past and using that to do business to build the capital for future. And I personally feel that within in our own group that travel is expected to pick up as people have the need to meet physically, everything cannot be done on a screen. If you don't know each other, and you have to build new businesses, you have to build new contacts, you have to build new client base, you have to build new products, so that way the travel is expected to come back as things are opening up. And as we can see, airports, I came back on Sunday from Delhi after the formal opening of The Connaught. I never saw Mumbai airport as full as I saw it on Sunday evening. So that means people are traveling. How many of those were leisure and how many of those were corporate or part of bleasure, as we said, combining business and leisure, that's -- we will get to know in a few months the statistics, but travel has started.

Sure. That's clear.

And I think if I take on the second question, Vikas, you were asking about sustainable cost savings. Obviously, I think what I -- what we said is that clearly, we have had a lot of success so far. And I think the attempt now is to make sure that we continue to maintain and sustain the cost savings. Essentially, there are a number of steps that we are taking, which we have highlighted before as well. The most important cost line for us clearly is manpower. In addition to what was highlighted in terms of relooking at the manning ratios where I think significant work has happened. Redeployment is a very important part of our strategy. As our growth continues, we are kind of working in terms of redeploying people to different hotels. Secondly, we also highlighted reskilling. There's a project A1, which has been introduced and is being gradually rolled across all the [Technical Difficulty] to do different jobs actually. That's a very big part of it. I think we continue our work on shared services, that is continuing. Digitization is one area where we will spend to make sure that we can increasingly digitize and you were already able to see some changes, not just to the front end, but also in the back end. Both ways, we are kind of working on digitization. So I think there is all around effort happening in terms of making sure that we can sustain the cost savings. I think we will be able to probably provide more clarity as the quarters go forward and as our plans in terms of changing some of the fundamental structure of our operating model kind of happens actually. I think -- so we will talk about it, but you're able to see Q1, Q2, Q3 were the kind of sustained cost reductions that we have kind of implemented.

Sure, sir. Also [Technical Difficulty] we have not seen -- it was expecting November, December, there would be some deals around it smaller hotels, which are struggling, there would be some consolidation around it. Do you think we are at the cusp the acceleration here? Or somehow the cash flow versus the other valuation doesn't match, so consolidation is very, very hard in this market? And secondly, if you can just give some more color on Ginger because your strategy of having Ginger with larger rooms and all, what kind of potential we are seeing in terms of the revenues or the margins maybe in the medium term? That's about it, sir.

So I think -- oh, sorry. Giri, go ahead.

You go ahead, Puneet.

No. I'm just saying, you're very right. You already answered the question yourself because your question included the answer in [Technical Difficulty] the truth is the expectation of a seller and the price that a buyer is willing to pay, the delta is pretty big. And it's very difficult to narrow the gap. That's why you're not seeing a lot of consolidation efforts. And also from the banks who have given monies, and people have still got benefited from the moratorium, they are in discussions. So I think you'll see some of that activity coming back maybe in 6 months. It will not take longer than 6 months. I think it will start coming back in 6 months' time and some consolidation will definitely happen. That's one thing which I see. And as you rightly said, given the current scenario, if one analyst asks, do you think we'll get to pre-COVID level FY '23? Somebody thinks it's FY '24, [Technical Difficulty] seller will all say, well, listen, I am in leisure destination, you're already back at the normal level and COVID is as good as over. So that's where the gap is there. So I expect that to change in the next maximum 6 months' time.

That's helpful. And on Ginger?

On Ginger. See, Ginger is a very good brand. It's a leader in its segment, which we call the lead lux or the value-driven proposition that we have. Ginger's repositioning has worked very well for us. Ginger is actually doing very well, especially, as I said in the last few months. And one of the things which we want to change for Ginger [Technical Difficulty] you know large properties as we do have some land bank and one which we had announced in our -- one of our Capital Markets Day and where we have got the intimation of disapproval is -- on the land in Santa Cruz and old Flight Kitchen, where we had the old Flight Kitchen of TajSATS. And we own the land as IHCL. So there we have got permission to build 371 rooms. Similarly, other such markets where you are like 1 or 2 kilometers at the most of the airport, if not directly at the airport and very close to business areas, I think those large boxes could be big brand builders for Ginger, and that was needed. So I think the idea was always great and a boom came in the way of Ginger when it was launched, the boom of 2004, '05, '06, '07 and then [Technical Difficulty] was history. So I think all the efforts we did are delivering very, very positive results, and our MD and CEO, is doing a great job with the entire team. And we are looking at a rapid expansion of Ginger. And as we have done, I think we expanded very fast. We have 54 in operation. And for a long time, this number was at a very low level, and our pipeline is more than 20 hotels. So that's -- 40% of the hotels in operations are in pipeline. When we do the big [Technical Difficulty] rooms. So therefore, successful repositioning of this brand will only happen through big box Gingers in key markets, and that will drive really the margins because the Ginger [Technical Difficulty] percent as gross margin in any key destination.

The next question is from the line of Jignesh Kamani from GMO.

Just want to know about our overseas operation, particularly for The Pierre. There, our cost structure was very high because we are another part of the community in which we operate. Has COVID given any opportunity to rationalize manpower and bring down the cost structure?

Yes. No, yes, Jignesh. I think very clearly, we have done a number of efforts in The Pierre in terms of the overall cost rationalization. I think there are 3 parts to it. I think 1 part is related to the lease rental renegotiation that we were able to effect in Pierre. That's number one. Number two was that in terms of manpower, there were 2 kinds of manpower. One is the union manpower and the second is the nonunion manpower. On the union manpower, under the local New York union regulations, we were able to have a temporary furlough of employees for a period of 6 months. And after October, we have gradually opened the hotel and taken back some of the people basis need. So therefore, that's clearly helped actually.