EIH Ltd, previously referred to as East India Hotels Limited, is a leading player in the hospitality industry, celebrated for its luxury accommodations, resorts, and related services. As the flagship enterprise of The Oberoi Group, EIH Ltd manages a prestigious collection of premier hotels under the Oberoi and Trident brands, delivering outstanding experiences to guests in India and around the globe.
In this article, we will learn about the company’s Q3 earnings conference call summary in detail. Let’s Begin
Business Performance & Market Trends
If you look at the overall hotel sector, we have seen quite good expansions happening in 2024. And the expansion is happening both in domestic tourism, as well as corporate travel.
The main key drivers are tourism, conferences & events. There’s also sports tourism.
There is good growth from the Indian leisure segment in the luxury & wellness segment.
If you look at the industry numbers for Q3, domestic air traffic has improved by 12% compared to the pre-COVID era. And we also see a very healthy 9% growth in air traffic on a year-over-year basis.
Overall, the industry has done very well on occupancy; roughly 2% to 4% growth over last year in occupancy and also a very healthy growth in ARR, which is around 9% to 11%.
This has resulted in a good RevPAR growth of 14% to 16% versus last year. And if you look at it versus pre-COVID, the growth is almost 45% to 46%.
Revenue Growth & RevPAR Performance
The company succeeded in maintaining more than 100% index versus the competition on both MPI and ARI.
At the industry growth on RevPAR, we have seen a healthy 15% growth on RevPAR for domestic hotels.
If you look at the Group, within the owned and managed hotels, we have seen a healthy RevPAR growth of 17%.
We have seen a strong growth in our Oberoi Hotel segment, which his around 22% growth.
If we look at the five-year RevPAR growth trend, we have seen a 5-year RevPAR CAGR of 13%. We have seen the cycles of summers and then picking up again towards Q3 and Q4.
In Q3, we are seeing healthy occupancy levels beyond 70-75%, and we’ve seen healthy growth in December as well.
We have seen de-growth in cities like Bhubaneswar, mainly driven by some sports events, which were there as a one-time event last year.
if you look at Hyderabad, RevPAR grew by 26% driven by high demand.
Our international hotels: We have seen a 20% growth in terms of RevPAR, driven by the fact that last year we got badly impacted by the Israel conflict, which is now stabilizing, at least from the tourism and traveller’s perspective.
Financial Performance
Revenue grew by 6% on Q3 (standalone basis).( the company had one of the hotel Oberoi Grand in Calcutta, which was shut down for renovation. If we exclude that impact, on a like-to-like basis, we have grown at 11%.)
EBITDA has grown in a healthy range of 7%. In Q3.
PAT growth was roughly 18% in Q3 on standalone basis and on consolidated basis PAT grows about 21%.
Expansion plans
19 new properties in the pipeline, including 13 Oberoi Hotels, 3 Trident Hotels, and 3 luxury boats/cruisers.
10 domestic and 9 international hotels planned, with 8 owned and 11 managed properties.
Upcoming projects include Tirupati, Rajgarh, Gandikota, and Hebbal.
Two new contracts (one Oberoi, one Trident) have been signed in India, with a press release expected soon.
Current footprints of the hotel
The international presence: The company has 7 resorts and hotels across different geographies.
The national presence: both for Trident and Oberoi. roughly 3,700 keys across India.
Question and answer session
We had this impressive mid-teen increase in ADR. How has been the trend in Jan-Feb of this quarter?
We continue to drive ADR, and we’re confident that we will be able to drive ADR like we’ve done in the past, and there’s no reason for that to change. That position still remains unchanged from previous questions that I’ve answered along these lines.
I also want to point out that given the quality of hotels, not only EIH hotels, but the quality of hotels that we have in India, EIH and others, and you look at our pricing relative to other cities around the world, there is a considerable upside in rate.
We’re still, in my view, underpriced for the quality of hotels that we offer, both in parts of Asia and in leisure and business, and also in Europe and North America, where many of our guests come from. So, we’re still great value for our guests who travel to and stay at our hotels. And we’ll continue to drive ADR up.
how the Tirupati development going on? Because I heard that political… there have been some political objections to the project. So are we sure we are going to meet the deadline?
We absolutely will, yes
Your RevPAR grew 17%, but absolute revenue growth was only 8% (or 11% after adjustments). What explains this difference?
The revenue growth was impacted by The Oberoi Grand’s renovation, which removed a significant revenue contributor.
If we exclude The Grand, our revenue growth is 11%, and EBITDA growth is 14%.
Other factors include:
- Asset discards at Trident Nariman Point due to renovations.
- Dividend impact timing differences.
I can see that the metro cities have seen much stronger growth compared to the tourism focused cities. And that is the trend actually we have been seeing across all other hotel companies that have reported. So do you think this sort of discrepancy is going to go on in the near term or as well as in the medium term as well?
And in that light, how does that tally with your strategy given that if I see the pipeline that you have that focuses mostly on the domestic side, mostly on the tourist cities? So how do you see this trend going forward?
Yeah, it’s a great question, Abhay. First, we’ll say that, you know, if you look at outbound travel from India, you know, that continues to grow year-on-year. And although that’s not broken up into leisure and business, I think many of us are traveling not only within India, but looking at opportunities outside of India for travel. And with connecting improving as an example, now you can fly directly from Delhi to Bali.
It’s an overnight flight. And we’ve, at our Bali hotel, we’ve seen a substantial rise in our Indian guests staying at the Oberoi Bali. So, I think number one, what you’re saying is correct. Connectivity is improved and people are traveling, you know, outside of India, not only holidaying in India and that’s reflected in the numbers.
Now I think my counter to that is that we as an organization need to say what is it that we need to do to get a larger share and still drive growth for our leisure hotels and we are working on that.
Because if we take that as given, then really where is it that we are applying minds to really influence our future? And therefore we need to take steps to say, despite that, how do we grow our leisure business?
One, of course, is foreign travel. Foreign travel in a number of leisure locations has still not reached pre pandemic levels. But in addition to that, even with our domestic guests, how do we incentivize them to stay with us increasingly not only by providing a better service but through other means as well so that we get a larger share of their wallets. And that’s something that we are working on and we will continue to work on.
Vikram, I’m just curious, I mean, of course, because almost all hotels are, I mean, old and built over a time, so we are generating a very high ROC as of today. But now going ahead we are adding in the portfolio and the cost of land as well as construction cost has gone up. So, to sustain those kind of ROCE, what kind of ARR growth do we have to really look for?
great, great question. And really, unfortunately, there’s no straightforward answer to that question. So, in City Hotels, if you’re just doing a hotel and it’s a prime location then to get a healthy ROC given the cost of development becomes very difficult and that’s why we’re looking at mixeduse opportunities for City Hotels. Hebbal is an example of that. And please be rest assured that that development has a very healthy ROCE. So, that’s the first thing I’ll say. – In leisure locations land, depending on where you go, and the nice thing with leisure locations is the more remote you are and the less that is around you, guests are willing to pay a premium for that.
So, provided it’s reasonably well connected and it’s a couple hour drive, guests will not only visit the hotel but also pay you a high rate. Vanyavilas is a perfect example of that. Albeit, it’s not a new hotel but you can see that it demands or it achieves.
We don’t share Vanyavilas data with you, we don’t share individual data, but Vanyavilas achieves a very high occupancy and a very strong ADR or Average Room Rate. – So, really, there’s no one answer and I think we need to be flexible with our approach, we need to be really diligent in the analysis we do whether it’s owned or managed hotels on P&L project and the cost of development and, therefore, the enterprise value and the internal rate of return.
So, that’s how I would answer that question. And we do get into a lot of detail whether it’s an owned hotel, a JV, or even with a management contract to ensure that we are running hotels that provide a return either to us and our JV partners or to the owner whose hotel we’re operating. We have that moral responsibility and, of course, we’ve got a responsibility to our shareholders and to the Board as well.