Indian Hotels Co Ltd Q3 FY2025 Concall Summary

Key Takeaways

• Record EBITDA, margin expansion: Quarterly EBITDA crossed ₹1,000 crores for the first time, with consolidated EBITDA margin expanding 80 bps YoY to 39.4% despite the lower-margin TajSATS consolidation.
• Capital-light engine accelerating: Management fees grew 32% YoY to ₹177 crores, driven by 13% net unit growth, RevPAR increases, and new fee streams like brand fees.
• New businesses scaling fast: The new businesses vertical delivered 40% consolidated revenue growth, with Ginger revenue up 43% YoY and EBITDA margin at 45%.
• Supply-demand dynamics remain favorable: Management asserts supply will not catch up with demand, and pricing today is still insufficient to attract greenfield capacity, supporting a long runway for rate-led growth.
• What to watch next quarter: Q4 top-line and RevPAR trends expected to mirror Q3; FY26 guidance to be provided after Q4 results; Sea Rock construction commencement timeline in H2 of this year; and whether London softness persists.

Performance Drivers

• RevPAR-led growth strategy: 13% consolidated RevPAR growth on a domestic like-for-like basis was driven by demand outpacing supply and asset management initiatives, with occupancy already at 78-80%, making ARR increases the primary lever for revenue and margin expansion.
• Hotel segment margin expansion: Hotel segment EBITDA margin expanded 230 bps to 40.9%, driven by 16% revenue growth, cost optimization, and initiatives to enhance operating leverage across the owned and stand-alone portfolio.
• Stand-alone profitability: Stand-alone EBITDA margin expanded 240 bps to 47.8%, with PAT margin reaching 30.9%, reflecting the high operating leverage in owned properties.
• Goa performance resilient: Goa enterprise growth was about 5%, operating at a reasonably high base, with some renovation displacement at Holiday Village and Fort Aguada impacting consolidated numbers but still performing well.
• Bangalore recovery: Bangalore saw 13% consolidated growth and 12% enterprise growth, rebounding from a high base last year.
• December softness denied: Management stated they have not witnessed any kind of slowdown in December; growth was stronger in October and November than December because December had the highest base and festival timing affects comparisons.

Chhatwal: "We are not taking just a view on a quarter or a half year or a year, rather the long-term competitive advantage. And because we have been doing it for several years now, we think that we are very well positioned."

New Businesses & Brand Evolution

• Ginger turnaround accelerating: Ginger consolidated revenue grew 43% YoY to ₹157 crores, EBITDA margin expanded 200 bps to 45%, with renovated properties performing significantly better than non-renovated ones.
• Qmin contribution to Ginger: Qmin contributed almost 25% of Roots Corporation Limited's revenue from F&B, demonstrating the brand's integration beyond standalone outlets.
• Qmin expansion underway: Qmin expanded to 60-plus outlets, established presence in 2 Westside stores through shop-in-shop format, and launched operations at Chennai and Kolkata Airports in partnership with TFS.
• amã Stays & Trails milestone: Reached 250 bungalows in portfolio with 119 in operations, with a redesigned website recently unveiled following the Taj Hotels website launch.
• Gateway re-launch: Gateway has been re-launched as a reimagined brand; management expects the same transformation trajectory that Ginger achieved over 3-4 years to play out for Gateway over the next 3-5 years.
• Premiumization positioning: All IHCL brands except Ginger are in upscale, upper upscale, or luxury segments; Ginger has been reimagined with a "Lean Luxe" feel, positioning the entire portfolio to benefit from the premiumization trend across sectors.

Chhatwal: "The premiumization of brands is a trend that one could say is common across sectors. It doesn't matter which sector you're in or the feeling of premiumization. And I think there, we are very well positioned because we are dealing only in the premiumization."

Capital-Light Growth & Pipeline

• Management fee growth drivers: Management fees grew 32% YoY to ₹177 crores, driven by 13% net unit growth in hotel rooms, increase in total revenue per available room, technical fees, and new fee income streams such as brand fee.
• Pipeline composition: More than 50% of the portfolio is in the pipeline, with almost 80% on a capital-light model, which management expects will mitigate risk should there ever be any softness in demand.
• Hotel openings on track: Well on track to achieve the committed target of opening 25 hotels in the current financial year, with guidance to go up to 30 hotels in the following financial year.
• Branded residence fees: Other fees of ₹10 crores represent operating fees from branded residence projects, a new fee stream management is calling out separately to show growth.
• Franchise model skepticism: A new hotel opening in Q4 in Uttarakhand under a franchise model is an exception; management considers India not mature enough for the franchise model, as evidenced by the Pilibhit House conversion from franchise to management contract after 6 months.

Chhatwal: "We don't think India is really that mature to get into franchise model."

International Portfolio

• San Francisco recovery: Campton Place was severely impacted by labor strikes and protests, which now appear settled; the JPMorgan conference performance was marginally better than last year, indicating market improvement, and Q4 is expected to be better than a normal Q4 due to presidential inauguration travel.
• New York steady: The Pierre in New York has performed well throughout the year; Q4 this year should be definitely better than Q4 last year.
• London softness: London market is softer with significant new supply; growth is not expected to be as previously thought 6-8 months ago, though IHCL has held ground due to strong brand equity with Indian travelers.
• London asset upgrades: IHCL has been upgrading the London asset including the courtyard, House of Ming, chambers, and all-day dining, with plans to renovate Quilon and increase chamber size.
• Sea Rock progress: Received IOD (Intimation of Disapproval), one of the most important permissions; height approval received up to a certain level with application for additional height in progress; construction could commence in the second half of this year.

Chhatwal: "I'm very happy to report that we have moved the needle in a very big way for Sea Rock."

Demand Environment & Pricing

• Supply-demand imbalance structural: Management asserts supply is not going to catch up with demand; even if demand softens, it will continue to outpace supply, supported by India GDP growth of 5-6.5% and the hospitality sector only beginning to write its narrative for India at 2047.
• Pricing below greenfield economics: Pricing today is not sufficient to attract greenfield capacity land acquisition; on a dollar per room night basis, IHCL continues to be lower than 15-16 years back, with currency tailwinds now favorable.
• Foreign tourist arrivals lag: Foreign tourist arrivals are still at the lower end of pre-COVID levels, minus 10-15%, when normally they should be at least 120% of pre-COVID by now, representing a recovery opportunity.
• MICE demand tailwind: A shift toward more MICE is possible in key markets like Delhi and Mumbai due to events at Bharat Mandapam, Yashobhoomi, and Jio World Centre; within a 5-km radius of such events, everything sells out.
• Q4 demand visibility: Large-scale events like Mahakumbh, concerts like Cold Play, and an extended wedding season support confidence in delivering all metrics and guidance for Q4.

Chhatwal: "The supply is not going to catch up that first with the demand. So even if demand softens a bit, still, it will continue to outpace supply."

Loyalty & Digital Transformation

• Loyalty base quadrupled: Since joining Tata Neu, the loyalty base increased 4x in less than 4 years, compared to 17-20 years to reach the previous 0.2 crore base; active loyalty users' repeat increased 5x.
• Scale ambition: Management expects to reach 1 crore members very quickly, which would make it the largest loyalty program domestically.
• Ginger loyalty contribution: For Ginger, 40% of enterprise-level revenue is loyalty-led, demonstrating the program's importance for the lean-luxe segment.
• Digital transformation progress: New websites for Ginger and Vivanta to go live in H1 FY26; significant progress on upgrading core systems including migration to SAP for finance and HR functions and industry-leading OPERA on cloud PMS.
• Repeat customer analysis: Management will start sharing repeat customer analysis similar to airline tracking from next quarter, though no such analysis exists currently.

Chhatwal: "We have 0.8 crore, we expect to get to very quickly to 1 crore once we have that it becomes the largest program. It's a very strong program on the domestic front. I doubt if anyone would come close to that."

Guidance & Commitments

Key Metrics