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

Good day, and welcome to the Indian Hotels Company Limited Q1 FY '21/'22 Earnings Call being hosted by Mr. Puneet Chhatwal, Managing Director and CEO of the Indian Hotels Company Limited; and Mr. Giridhar Sanjeevi, EVP and CFO of Indian Hotels Company Limited. [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. Please go ahead, sir.

Good evening, ladies and gentlemen, I'm here with Giridhar Sanjeevi, our CFO. And let me begin the evening with reinforcing the good news, which we got a few weeks ago. Taj was rated the world's strongest hotel brand by Brand Finance, report scoring 89.7%, and that is the highest score any brand has gotten. Also by Brand Finance, we were reported as the second strongest brand across all sectors in India and the strongest hospitality plan. So this is a good endorsement for a brand, which is 118th year in operation and a very deserved recognition. Moving on, I think we see some light after darkness. Of course, we saw some light between 15th of November till end of February in the last financial year, but mostly the last 19 months period or 18 months have been full of darkness for the sector, possibly the worst period the sector has ever seen in the last 100 years. However, now the global platform seems to be growing and expected to grow at 5.6%. And the second half of this financial year, acceleration is projected, especially on the global employment, which obviously leads to more disposable income and more discretionary spend. And also on the India front, very recently, the RBI governor or the IMF projected our growth at 9.5%. And also the unemployment rate to decline from 11.9% to 9.2%. So of course, we can see some more light after a long or extended period of darkness. This slide we have taken from HBS. And in the month of June, they have shown that the rates have increased at 14% to 16%. Occupancy increases also at 12% to 14%. And then the RevPAR increase of almost 90% to 95%, and that is very consistent with the results that we report. There is increase in domestic air traffic by 47% in June. And why do we talk here about June, whether it's HVS or us is because, again, the period of April and May was completely derailed by the second wave and the aftermath of second wave. So really June was the month when things started coming back. And thankfully, the period after getting a 4x growth in the number of cases, the period to bounce back after second wave was much shorter than what we saw at the outset of the pandemic. There is a month-on-month increase, therefore, in all parameters. And the Q1 RevPAR recovery is obviously stronger than last year Q1 because last year, entire Q1 was a washout with the sector, mostly shut in all the regional markets as well as the international markets. Moving further on, on key performance highlights. I think this graph, the line below is our consolidated revenues and the line above is enterprise revenues. That clearly indicates, if you look at the month of May, the tip took us down to as low as July, August of last year. But the upswing is bringing it back to a period between November and December of last year. So actually, it would be fair to share here that because July is behind us, we have seen significant growth in July versus what we saw in April, May, June, of course, hampered through the second wave, which hit us very badly. So I think this trend is expected to continue. I know a lot of you would want to ask this question. As far as visibilities there, which has become shorter, I think in the first 8 or 10 days of August, we are seeing a similar trend emerging. And that's what this slide also depicts. Last year Q1 versus this year Q1, the revenues have more than doubled, and the Q2 revenue of last year was also exceeded by the revenue of Q1. And we believe that just July, ends like half of August or 20 days of August would be good enough to get to these kind of revenue levels going forward. Further, I think it's very interesting to look at RevPAR as a percentage of last year. The RevPAR recovery in Goa was as per STR 260%, Rajasthan over 200%, same story in most of the cities. And when we look at it from the IHCL perspective, our recovery has been much stronger, which means we've been gaining a lot of market share. So also last year, our base was -- it was not as small as one would have expected. So when we show doubling, it's coming from a much larger base, and that is very well depicted in these figures that Goa and Rajasthan and also all other markets have continued to perform well for us in terms of how we have gained market share vis-a-vis the industry. On growing direct to customer that is a non-OTA business, we have improved from almost 69% to 74% on the direct channels. And the same thing we see is because of some of the campaigns that we launched on cherishing togetherness, IHCL world of privileges, our home delivery business with Qmin, our home stays with Ama, our burning your loyalty points. Some of these things have helped us get directly to the customer and which has helped us in containing our costs. One thing, and as I said, containing on cost, if you look at our fixed expenses, we've been able to maintain them at INR 126 crores a month. Pre-COVID we were at INR 163 crores. Last year, they went down to INR 123 crores. And this year, there is a marginal increase, and that's a minimal of 3, given the kind of growth we are experiencing in not only different brands but also on the growth in terms of our hotels and the new openings that we are having. Further, when it comes to our staff-to-room ratio for IHCL, we have gone down for the entire group from 1.53 to 1.49, ginger from 0.48 to 0.34, Vivanta from 1.48 to below 1. Selections from almost 2 to 1.3 and for the Taj brand from 2.17 to 1.6. So this has been a good reduction. And as I said in the last call, I think, was that in Taj brand, we also have the palaces and safaris. And to maintain a certain level of service, our ratio should not be compared with the others because others do not have this kind of luxury that we offer in terms of a palace portfolio or a safari portfolio. So that makes the Taj numbers look a bit larger, but that is really also needed because that kind of experience, those kind of rates that we charge are otherwise not possible. Something which really pleases us is this slide on corporate overhead so that you see it was not a one-off last year. We were able to reduce our corporate overhead by 39%. And this year, in the first quarter, they are further down by 12% versus Q1 of the year before. So I think that has worked well. And the corporate overhead per hotel has continued to decline, and it will even decline further because we have a lot of new openings in our pipeline. Now moving on to unlocking value in new brands and businesses. I think Ginger, we imagine Ginger has done very well for us. It achieved 60% of pre-COVID revenue even in Q1. You would recall last year, for the full year, Ginger did 63%. So in Q1, that is -- it's off to a good start. Because we are more and more also doing food and beverage on our own, there is a 3x increase in the SMB revenue and a decline in EBITDA losses by almost 85%. The TripAdvisor rating for the Ginger brand is at 4.87 of 5. And we were able to sell the Ginger in Mysore. So we entered into sale and manage back very much in line with our strategy in becoming asset-light and going into a 50-50 managed versus owned or leased portfolio. Moving on further. As you see on this picture, this project is well undermine flagship Ginger at Santacruz. The building there, which was the old flight kitchen building has been demolished. The basement works are on. And this is something which is very exciting. We hope to finish this in an 18-month period. And we believe this will really make a big difference to the standing, the positioning and the perception of the brand going forward. In terms of our home delivery business, Qmin, I'm sure you're all intrigued to hear about it. This will be its first full fiscal year. Last year, it had 8.5 months of a run. It was launched on the 25th of June. But today, it is covered in 18 cities, 70 restaurants and on 35 of our properties. Our enterprise revenue alone for the first quarter of Qmin exceeded INR 30 crores. We have served a 1.25 million customers to date, and more than 3 lakhs app downloads have happened. And very interesting in 7 or 8 destinations outside of India, you can order through the Qmin app food for your family on various occasions, whether it's a festival or it's a birthday or it's a wedding anniversary, et cetera, as travel on the international level has been restricted. Going forward, I think it would also be nice to show you our first food truck. The Qmin food truck has already started operation, also launched on 25th of June to coincide with the launch of the home delivery the year before. And what we are expecting now is around 8 to 10 of these Qmin food trailers. Why trailers instead of trucks? We realized that trucks is not always easy in terms of permissions, but the trailers build and model like the truck are easy to park anywhere, and they work in a similar fashion from inside just like the truck would work. So we are very excited. I think the first few deliveries are expected when it is definitely before we do the next quarter call with you. Going forward, also on Ama, our home stay business, which is also relatively young, we already have a portfolio of 44 bungalows, of which 30 are in operation in 11 destinations and 5 states. These bungalows as, and when they're allowed to operate, are always operating at almost 100% occupancy, and they're in great destinations like a particular broad area or the Munnar or Chandla [indiscernible] this is a picture of the latest one in Alibag, outside of Mumbai. And the next one you see is our Planter's Estate in Munnar. So very excited. We are hoping to grow this brand exponentially also over the next couple of years. And I'm very excited to have this in our portfolio, especially during the times of the pandemic. In order to achieve all this, we have been still focused on our key enablers and how to keep strengthening them. And one of those things, which has been important for us is the employee vaccination drive. I would be happy to tell you that almost 100% of our employees have got the first dose of vaccine. And those agent above 45 is more than 70% who have both the doses, and the total number of people who have got 2 vaccines is north of 30%. We expect to get to 100 on that very soon and as and when people are also eligible. We are also doing videos on responsibility, reliability and resilient stories of our employees. We are celebrating them as our COVID warriors and recognizing them in an appropriate way for the contribution some of them made in different hotels across the globe. Further, we have launched a 4P program of preventing, protecting, providing and preserving all the help that we can give to all our stakeholders under the program of COVID care. Our means to smile, which in the first phase, we had delivered 3 million meals. In the second phase, we have again done 1.5 million, and till today, we were also serving our meals, especially in the state of Maharashtra, which were badly impacted by flooding. All these meals in the second wave have actually been done under the Qmin branding. And that is -- the reason for it is that I think Qmin, as a new brand from its inception, must stand for its service and care to the community. And I think that way, it also -- we are also able to get the name out and get the folks behind it. Of course, we have also been still working especially in the second wave on the quarantine facilities. You must have all read, some of our hotels were converted into temporary hospital facilities, and we are still going ahead with our Taj family employee assistance program. These are employees of our contractors who would have possibly lost a job. I always give an example. If a limousine company has a limousine service contract, and if they cannot afford to have drivers as the demand, the limousine has dropped, then those drivers have been assisted by the Taj executives and staff by contributing their salary, which went into the Taj Public Service Welfare Trust. And from there, it was disbursed to almost 7,700 needy people across the country. At the same time, we have been driving the vaccination campaign. Not only it is important for the nation, not only it is important for the society, but it is definitely fundamental to the business of hospitality, travel and tourism, and that's why we are very strongly advocating, I'm vaccinated. I am safe. At the same time, now you see the pictures of all those meals that have been delivered in the second phase of Meals to Smile. And these are the pictures of some of the people who we recognized, some of our associates who are recognized under the COVID Warrior program, which I just alluded to. Moving forward, our financial performance. In short, before I hand over to my colleague, Giridhar Sanjeevi, our revenue increased by 111% compared to the same quarter last year. Our EBITDA declined -- negative EBITDA declined by 47% from minus INR 234 crores to minus INR 123 crores at the consolidated level. And when we look at the standalone, the revenues were up 93% and almost a similar kind of a decline at 44% on the negative EBITDA. With that, I hand over to Giridhar Sanjeevi. Thank you.

Thank you. Moving on, I think this is a snapshot of the financial performance. So we had a turnover in stand-alone of INR 226 crores, and the INR 370 crores is consolidated, which is a doubling of the earlier quarter numbers in Q1 2020. And EBITDA debt come down at a consolidated level to INR 123 crores negative and a PAT of minus INR 277 crores. I think what is worth noting is that in the previous year, we did have an exceptional [ negative outflows ] which contributed to the income in the previous year. That is not there. So on a like-for-like basis, we have improved from something like minus INR 360 crores to minus INR 277 crores. So that is the snapshot of the performance. And as we've always been mentioning, this year's Q1 has been like last year's Q2. In fact, it's been better than last year's Q2. And now as we see the performance trend in July, I think we believe that we will probably be 1 quarter ahead, as we have been mentioning, and that gives us a reason for hope in terms of net debt recovery. This is a snapshot of the Enterprise revenue. Enterprise. This is not consolidated enterprise revenue. The top box is the domestic hotels, including Ginger. And enterprise means includes the management contract. And the bottom box is the international hotels, once again, Enterprise. If I just stick to the bar on the top right, I think what we are saying is that the light blue bar is the turnover last year, which is 15% of '19, '20. And in the top blue bar is the current tail Q1, which is 38% of Q1 '19, '20. Similarly, at the bottom bar, on the international hotels, we grew from 7% of '19, '20 to 37% of '19, '20. And qualitatively, this international growth is very significant for us because these are dollar revenues, and it goes a long way in terms of reducing costs and cash losses internationally. So to that extent, it's very nice to see the uptick in performance. Going to the next slide, I think we did speak earlier in the presentation about our performance being better than industry. And now we look at our performance across the different cities in India. It is -- you can see for each of the key cities, there has been a significant uplift in the performance, whether it is Bombay or Goa or any of those states, whether business sum or the leisure cities, all of them have significantly performed better than last year's Q1, actually. Moving to the next. I think international hotels as well, you will see the similar trend in terms of the jump in performance, whether it is U.S. or U.K., which are important from our own consolidation perspective. And if you see, Dubai as well, fantastic performance even though these are all managed contracts. Now if I look at the consolidated performance trend, I think we have given the numbers on a month-on-month basis, and you can see how the numbers grew. May was obviously a difficult month with the peak of the pandemic, but we did end the quarter with INR 370 crores. EBITDA was minus INR 123 crores as compared to INR 234 crores. And in terms of PBT, we were at minus INR 315 crores, and PAT was minus INR 277 crores as compared to minus INR 280 crores. But as I said, there was a INR 82 crores exception in the previous year. So therefore, the recovery is much better. Moving on. On the stand-alone, it mirrors the consolidated trend with a top line of INR 226 crores with EBITDA of minus INR 78 crores, with a PBT of minus INR 220 crores and a PAT of minus INR 190 crores. Now I think, moving on, I think as we kind of spoke about in earlier investor meets as well, if you look at what are the key managers on the revenue side, the revenue side, there are really 3 parts of it, which is the revenue recovery, the continuation of the asset-light growth and the new -- and the growth of the new and reimagined businesses. I think on the asset light growth, we continue to do it. We expect to open 10 hotels this year. Our portfolio is 221 now. Management fee is about INR 30 crores in Q1. And that recovery, we see a smart recovery happening this year with the revenue recovery. And then revenue recovery, our occupancy grew by 7%. That is 28.5%, which is a 7 percentage point improvement. That is the previous year was about 21%. So the area of recovery was 45% with a RevPAR recovery of 101% in stand-alone. I think that's very important in terms of seeing those numbers go up. And the new and reimagine businesses, I think Ginger has done well. Qmin, as was described earlier, I think we are growing rapidly there. And I'm also [ looking forward to recovery ]. So I think on the key revenue driver, we continue to work in terms of driving the performance as we have always outlined in our previous meetings. If I go to the next slide, I think cost management, to drive operating leverage has constantly be our focus. I think on a consolidated basis, our top line grew by 111%, and the cost grew by 20%, mostly variable. Fixed cost, as was pointed out, was INR 126 crores, which is just a INR 3 crore increase from the previous year. We've kind of kept the fixed cost near constant. Stand-alone also, we grew by INR 93 crores in top line, with the expense increase of 18%. Corporate overheads went down by 12%, as we said INR 54 crores as compared to INR 62 crores. Manpower rationalization to redeployment and retiring is a major initiative, 254 people have been redeployed till July '21. And these rental waivers were there this year as well. We have able to claim about INR 15 crores of lease rentals during the quarter, excluding what we claimed in the U.S.A. So cost management continues to be a key imperative. As far as the international hotels are concerned, significant improvement. Our top line grew from INR 18 crores to INR 57 crores in the U.S., resulting in a drop of EBITDA from minus INR 42 crores to minus INR 14 crores. Similarly, the U.K. business has also come back post the reopening, and that resulted in a lower EBITDA loss as well. Cost rationalization at the Pierre was very significant, as we've always said, in terms of manpower rationalization, lease renegotiation and the surrender of the lease borrowing. And the result in permanent cost savings in the U.S. is actually more than $5 million, approximately $5 million per annum. Moving on. I think exceptional items are reducing. In fact, I think a couple of points to highlight is that, in fact, derivative contracts, which we refer to here, INR 6 crores of earnings, that will not disappear because we have repaid the derivative contracts that closed them. So you will not see that happening anymore again. South Africa, there is some small exchange, which will keep happening because of the external loans, which is there. We just sell the Mysore property, INR 7 crores of profit, INR 15 crores of top line. We didn't sell any residential flat this quarter. Lease rental concessions were about INR 15 crores, and it's good to see that the exceptional items are reducing on a consolidated basis. Moving on. Standalone as well, you will see that the U.S. losses have come down from INR 42 crores to INR 13 crores. Cape Town loss funding has been about INR 4 crores. Previously in June, we did not have kicked consolidated, and we had recent concession of INR 13 crores. Moving on. I think performance of key subsidiaries, we have spoken about the first 3, that is our U.S. and the U.K. performance. Our 3 hotels also recovered. Of course, it was also impacted during the pandemic. And Roots Corporation did INR 30 crores with a year-end EBITDA breakeven. And in July, inventory in each market. CapEx focus, as we pointed out in our Capital Market Day, we continue to be selectively focused on CapEx with Ginger, Santacruz, the Taj Mahal Mansingh, the St. James Court and The Pierre ballroom. I think -- and all of this has been carefully looked at. We expect to spend in terms of cash outflows maybe about INR 250 crores to INR 300 crores in terms of cash outflows by the end of the year. Only time will tell in terms of how the bill that we see. But we -- at this point in time, we think about INR 250 crores to INR 300 crores will be the cash outflow. Go to the next slide, please. I think in terms of management of liquidity and borrowings, we continue to have cash in line exceeding INR 1,000 crores at all points in time. Our borrowings, as I said, we have repaid our cross-currency swaps and no more exchange fluctuations. We maximize our ECLGS of INR 144 crores at attractive interest rate. We have also replaced the -- in July, the NCDs of 9.95%, which much lower cost. And unsecured borrowings, including unutilized has been INR 1,000. The net acquisition in stand-alone is about INR 2,600 crores and consolidated is INR 3,600 crores. So that is the -- I think -- do I have anything? I think this is broadly the financials. I have a couple of slides which you can look at, which is really the tables which we normally present. That will be part of the presentation that we will upload in any case, so you can look at it. And we are open for questions.

[Operator Instructions]

Yes. This is Nihal Jham from Edelweiss. Sir, 3 questions from my side. First, I just wanted to understand on the Q1 performance better. The expectation in general was that the quarter was progressing more like, as I said, Q2 of last year, somewhere similar to September, October. But the performance in June has obviously been much better, and I think the period what we achieved in October. So just to understand what components have led to this improvement as well as in June. Is it maybe coming from again leisure travel and which are the cities also, while you highlighted that in the slide, just a little more sense on the performance in June, if you could mention that.

So the other 2 questions, Nihal?

I just mentioned that. Second question was on the international part that given that they have completed the vaccination program and are progressing much better on recovery, I still see that the recovery for our international operations is similar to the Indian operation. So the divergence is there. And third was related to the analyst meet about the recognition of Qmin revenues. If I look at the business on an overall level, how is that, that Qmin incrementally adds value? If I leave apart the part that if they are servicing or giving us revenues from our [ Sanand ] entity, where it is a restaurant, which is a part of their own business. So how is it that the revenue of Qmin get accounted? That's also something I just wanted to get a mention.

Okay. So Nihal, on the growth in June, obviously, the industry is still seeing a lot more leisure travel versus business or corporate. But I have to say that business and corporate has also picked up, especially in the mid-market or at the Ginger level. We saw a lot of growth. And we saw a lot of staycation in the metros. So whatever growth you've seen in, let's say, Mumbai or Delhi is driven by that. The key destinations remain. For our portfolio, I would say, all the resorts, especially Goa, Rajasthan, the palaces, Rishika, Shimla, Coorg. But a lot of this was also not open. So a lot of places were shut. And there are still restrictions in Mumbai for dining out until 4 p.m. And so I think the good news was June picked up. But I think more important is, as I said in the presentation, July has picked up much stronger, and we are seeing a similar trend in August, at least for the first 8 days. It is quite strong or even stronger than July. Maybe it is because of the long weekend that is coming from 13 to 16. But the trend is positive, and we are seeing business travel. I've seen that also on my own travel experience to the airports that they look much more full than they look before. Of course, there are certain caveats, which don't help us, especially on our flight kitchen business like TajSATS because flights after 2 hours, you're not allowed to service any meals. On the second question, you had the international part in house recovery. You know that London was also shut for a large part of Q1. So it was -- it only benefited from maybe the last 10 days of Q1, and so was Cape Town. So both Cape Town and London was shut. San Francisco and New York had opened. They performed better than our expectations. They both exceeded more than 40% in occupancy, but at a very good rate, especially in New York, we are talking about rates which are the same or higher than pre-COVID level. And the demand for suites is much larger as our property in Pierre. Dubai was very strong, but it is very normal that Dubai, in the summer months, it gets very hot, and the performance drops for those months. Same is true for Maldives. And Sri Lanka is still struggling a bit. It will take some time. So really on the international front, the recovery is really driven more by, I would say, U.S. and U.K. and Dubai, which -- these are the 3 cities that remain very strong for us. On Qmin, the revenues are accounted in the properties themselves. Each of the properties pays a fee to Qmin that is participating. And that entity is housed at our corporate level. And unless Giri, you want to add something on that?

No. That is fine. I think INR 30 crores is what we said is the total revenue. I think some part of the revenue was actually the Means to Smile. But I would say that the 22% income comes to [indiscernible].

Maybe Nihal, we can help you. That INR 30 crores includes also Qmin meals done through Anuka, which is a brand under TajSATS, which is flight kitchen business. And some of that is also done through Ginger, through the cafe, et cetera. That's the brand of the Ginger cafe. So there is -- when we say INR 30 crores for Q1, it is the enterprise level. It's not all accounted for directly. And at that level, we do expect this trend to continue even if some of the other things were to slow down, given that 3 months was INR 30. For the full year, enterprise revenue of anything north of INR 75 or even INR 200 is quite realistic.

[Operator Instructions]

Yes. Sumant from Motilal Oswal. So with the rising policies currently in the U.S., do you think the momentum -- the business momentum is going to sustain?

In which place, Sumant, your question did you describe?

Yes. So I'm talking about the U.S. Last year, COVID cases are under rising trend. And we have seen a significant improvement in this quarter, for Q1. So do you think in Q2 and Q3, maybe in short term, 3, 4 months is -- do you think there will be an impact on the business in the U.S. market?

Sumant, it's difficult for us to say everything about the pandemic. All I can say is that we have all experienced. I'm sure everyone has seen that, that in the first wave, let's say, India or the U.S., but let's say, India, we had 9,000 cases and we were shut for 5 months or it took us 5 months to recover. In the second wave, we had 400,000 cases, and it took us 5 weeks to recover. So nobody knows the third wave and what's happening or not. But yes, people are getting used to living with this pandemic or COVID and then moving on with life, with the exception of, I would say, a state in the south and 1 in Maharastra where we are based, almost everything has more or less opened up with certain restrictions here or there in the number of people and wedding or events. But more or less, it has opened up, and we are still at almost 40,000 cases on an average for the last week. So that's all we can say. If that is a trend, then things will stay open, especially because our presence in the U.S. because your initial question was U.S. focused is in New York and San Francisco. We think that cities like those will be far more resilient then the suburbs, all the secondary and tertiary markets also within U.S.

I think I'll just add to that, which is to say that in the U.S., the pandemic is one of the unvaccinated. And if you see, so far, the demand has been domestic. And countries like the U.S. will open up international travel for those of who are fully vaccinated, which means what we see is that while there is a pandemic, it's in pincode in terms of unvaccinated. And if international travel comes back, it should help compensate as well actually. So I think that's where the world is moving in terms of allowing fully vaccinated people to travel.

Sir, can you talk about the business guest entry, business destination hotel, how the mix is changing? Are there key big clients are traveling to our hotels, staying in our hotels?

Business leisure. I think if you're talking about the mix, I think leisure business clearly was a big area entry. On the city hotels, we saw staycations happen also. So I think -- so we did see recovery in the cities based on staycations, and leisure destinations did well. Yes.

I'm talking about the -- our big client are already traveling. Overall, how is the mix in the business destination?

Business destination is still largely [indiscernible] And you have seen 1 chart in the slide, which talks about the citywide performance. And that is something that we had put up a citywide jump for all the key cities, actually, so which we have put. If you talk of the -- I mean, leisure, nonleisure, I think what I will say is that in Q1, our occupancy did grow by 18.9%. And in non-leisure, it went up by 29.3% actually on the occupancy side. And on the rate side, there was a significant jump. The leisure ARR actually increased to INR 9,695 from INR 5,200, and we'll give you these numbers off-line. I think we can always talk off-line on this. And nonleisure also improved from -- to INR 4,500 from INR 3,300. So there was a jump both in terms of leisure and nonleisure occupancies and the ARR. We can talk offline, Sumant, in terms of specific numbers.

Yes. I'm asking how is the business travel in the key cities? And how is the mix of guests, staycations, [indiscernible] and -- or our key clients of say, HP or Infosys is traveling and the overall -- over the month, it has increased or over the quarter, it has increased. I'm talking about that.

I think it's evolving. I think we fully vaccinated people slowly. Business travel is beginning. I think it will take some time before the business travel goes back. I think it's gradually picking up is what I would say.

[Operator Instructions]

My question has been answered.

[Operator Instructions]

Yes. So this is Vikas from Antique. I have a couple of questions. First, just sorry for hopping back on the data around U.S. and U.K. So clearly, our revenues this quarter is down 65% compared to pre-COVID. So we used to do a run rate of INR 1,000 crores. But now this quarter, we did around INR 350 crores, and obviously, for all the reasons related to lockdown and wave 2 and all. But what are the learnings? Or maybe the data we are getting from U.S. and U.K., especially their things are opening up. Although there has been a third wave, but the mortality there is very, very low. So maybe first, if you can share maybe for U.S., where do we stand in terms of revenues compared to pre-COVID? And what are the learnings, maybe if we say that we -- in India, the third wave didn't come. So how should we look about modeling the revenues going forward?

I think we might talk about U.S. very clearly. There are always 2 parts to the U.S. recovery record, Vikas. One was, of course, the banquet revenue, which always constituted around $30 million or so in a pre-pandemic year on a total top line of $80 million or so. This year, of course, the banquet opening may not happen because of the renovations which are there. And that's a good decision also because banquet has -- without adequate level of business, we will lose money. So then I think more 99%, we do not open the banquet revenue. So that $30 million will not be there because of a decision that we are taking under innovation that are happening. So now that leads what is the non-banquet business venue. So if you take the peak pre-pandemic revenue at around $80 million and $30 million is banquet, it comes out $50 million. I think my own sense is that, given the recovery, my own sense is that the business should come back to 50% plus in terms of occupancies very quickly actually. And hence, I won't be surprised if U.S. ends up having a top line exceeding $30 million to $35 million. I think that's the kind of range that we are thinking about on the U.S. front, actually. And similarly, on the U.K. as well, the run rate is now GBP 1 million a month actually. And that should only improve. So my sense is, again, on the U.K., I think we did what -- we did before -- yes, the first quarter, we did INR 112 crores or -- [ INR 112 ].

[indiscernible] [ INR 24 crores ].

Yes. INR 24 so far. Yes, that's right. But I think with the GBP 1 million kind of recovery happening, I think my sense is that U.S./U.K. has always been something like a GBP 40 million market. Now the question for us is that will we achieve something like $20 million this year. I think we'll see how it goes with the other growth, actually.

Vikas, I think we are beginning to see a lot of pickup in London. Now pickup doesn't mean you cannot get cancellations and things were to go back. But if I look at just the trend of the last 1 week, the pickup in -- for us in Buckingham Gate and St. James as well as at the Pierre is quite -- It stands out because we don't go through every hotel. When we get our reports on a daily basis, you get the top 5, the top 10 on cancellations on this. So London is beginning to feature constantly on it.

And this whole Amber, the color code change to countries also will help in terms of travel happening.

Does that answer your question, Vikas?

Yes. Yes, it did. And secondly, the question is to Giri, sir. There is a -- so this quarter, the employee cost increased by INR 41 crores. And sequentially, obviously, this is -- the revenues are going down maybe around 45% Q-on-Q, but employee costs went up by around 4%, 5%. So if you can explain that, that's about it.

Yes. Yes. No, the employee cost went up because I think last year, we had the benefit of the salary reduction, which happened, the payroll cuts, which happened. This year, we have not implemented a payroll cut in India. I think that's been the 1 primary reason actually. I think -- and of course, the subsidies, actually. Because the subsidies are now reducing in places like the U.K. So therefore, both -- taken both together, I think, gives us the 4% or 5% increase in employee cost.

Did you get that Vikas?

Yes, sir.

There is a significant contribution last year from the subsidies for -- under the furlough scheme of the government in the Western Hemisphere, which has gone. So actually, we have become more efficient as we showed, both on the corporate overhead as well as on the properties because these figures are not diluted to any subsidies anymore.

Sir, largely, on the employer side, they have taken out subsidies or because they have given you other subsidies as well during the lockdown and all?

No. No other subsidies. Subsidies was mainly on the employee front, and you get those in that part of the world because you have your unemployment insurance, so it's better to give subsidies and trust for many people unemployed. That's the kind of practice Europe has followed. And also U.S. was very generous, I think, in terms of distributing checks to the employees directly but also to businesses.