Lemon Tree Hotels Ltd (BOM:541233) Q2 2025 Earnings Call Highlights: Record Revenue and ...
Revenue: INR284.8 crores, highest ever for Q2, 24% growth year-on-year.
Net EBITDA: Grew 25% year-on-year, with a margin of 46.1%, increased by 53 bps year-on-year.
Gross ARR: INR5,902, increased 12% year-on-year.
Occupancy: 68.4%, decreased by 328 bps year-on-year.
RevPAR: INR4,035, increased 7% year-on-year.
Management Fees: Total of INR31.8 crores, increased 32% year-on-year.
Debt: Decreased by INR90 crores to INR1,822.6 crores as of 30 September, '24.
Cash Profit: INR69.8 crores, increased 43% year-on-year.
New Contracts: 19 new management and franchise contracts, adding 1,373 rooms to the pipeline.
Operational Hotels: 112 hotels with 10,318 rooms as of 30 September, '24.
Release Date: November 18, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Lemon Tree Hotels Ltd (BOM:541233) recorded its highest ever second quarter revenue at INR284.8 crores, marking a 24% year-on-year growth.
Net EBITDA grew by 25% year-on-year, with a margin increase to 46.1%, up by 53 basis points.
The company reduced its debt by INR90 crores, bringing it down to INR1,822.6 crores as of September 30, 2024.
Management fees from third-party owned hotels increased by 32% year-on-year, reaching INR31.8 crores in Q2 FY25.
The company signed 19 new management and franchise contracts, adding 1,373 new rooms to its pipeline, and operationalized five hotels, adding 193 rooms to its portfolio.
Negative Points
Occupancy for the quarter decreased by 328 basis points year-on-year to 68.4%, partly due to renovation activities.
The company is undergoing significant renovation expenses, which will continue into FY26, impacting short-term profitability.
The Bangalore market underperformed due to a combination of room shutdowns and high dependency on IT hiring, which has seen a dip.
The RevPAR for Keys Hotels remained flat year-on-year, indicating a need for further renovation and repositioning.
Renovation activities have led to a temporary reduction in available inventory, affecting potential revenue generation.
Q & A Highlights
Q: What factors contributed to the decline in occupancy despite a 12% increase in ADR? A: The decline in occupancy was partly due to 9% of our inventory being shut for renovations, affecting about 530 rooms. Additionally, Aurika Mumbai, which is 15% of our inventory, had a lower occupancy rate of just over 50% at an ARR of INR9,000, which deflated the overall occupancy by about 3 percentage points. (Patanjali Keswani, Executive Chairman and Managing Director)
Story Continues
Q: Can you provide insights into the wedding season bookings for Aurika Udaipur and Mumbai? A: We have confirmed 21 or 22 weddings at Aurika Udaipur and expect to close around 25 weddings. Aurika Mumbai also has significant banquet demand, including weddings, social events, and conferences. (Patanjali Keswani, Executive Chairman and Managing Director)
Q: What is the expected impact of ongoing renovations on debt reduction and cash flow? A: We are investing heavily in renovations, with plans to spend INR250-300 crores over three years. Despite this, we aim to be debt-free in the next 3 to 3.5 years, potentially sooner if we list Fleur. Renovation expenses will decrease after FY26, allowing more cash flow for debt reduction. (Patanjali Keswani, Executive Chairman and Managing Director)
Q: How is the management fee income expected to perform, and is there a revision in guidance? A: We expect management fee income to be north of INR65 crores, likely closer to INR70 crores, due to seasonality and incentive fees. This is slightly below previous guidance but reflects a 30-35% growth in third-party fees. (Patanjali Keswani, Executive Chairman and Managing Director)
Q: What are the renovation plans for FY25 and FY26, and how will they affect room rates and EBITDA margins? A: We plan to renovate about 4,500 rooms over three years, with a focus on high-value markets like Delhi and Hyderabad. Post-renovation, we expect an EBITDA margin increase, aiming for INR60 crores from the Keys portfolio. The renovation is expected to enhance room rates and occupancy. (Patanjali Keswani, Executive Chairman and Managing Director)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
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