LEMONTREE - Lemon Tree Hotels Limited Share Price

In the Q3 FY26 earnings conference call on February 10, 2026, Lemon Tree Hotels reported robust financial performance, with a record revenue of Rs. 407.8 crore, marking a 15% growth year-over-year, and an EBITDA of Rs. 206.4 crore, up 12% YoY. However, the net EBITDA margin decreased to 50.6%, influenced by increased investments in renovation, technology, and GST impacts, which contributed 1.8% to revenue in the strong seasonal quarter.

Management expects several key improvements moving forward. They anticipate the percentage of expenses due to renovations and technology will decrease from 6.4% to about 3.6% of revenue by FY28. GST impacts are projected to reduce further, from 2% expected in FY27 to 1.7% in FY28. The average room rate (ARR) grew 11% YoY to Rs. 7,487, with an occupancy rate of 73.4%. RevPAR, at Rs. 5,494, increased 9% YoY.

Key points shared include the signing of 17 management and franchise contracts adding 1,855 rooms, with an operational pipeline of 259 hotels and 21,942 rooms as of December 31, 2025. Management highlighted the commitment to technology investments, indicating a push toward AI and better customer loyalty programs, along with expectations for significant EBITDA growth, targeting Rs. 1,000 crore for Fleur by FY28.

Overall, the company claims a positive outlook, aiming for a 15% revenue growth from its existing portfolio, driven by ongoing renovations and the anticipated stabilization of its newly added inventory. The strategy emphasizes growing their asset-light model while enhancing operational efficiencies and customer experience through tech investments, aiming for a sustainable increase in RevPAR and occupancy over the coming periods.

Q&A Section Summary

Question 1: Karan Khanna from Ambit Capital asks about the RevPAR growth in comparison to industry performance.

Answer: Karan, we lack peers in the listed space "“ most are luxury-focused. Our portfolio faced negative RevPAR growth due to underperformance in Gurgaon, while Delhi saw 11%, Hyderabad 19%, and Bangalore 14%. We're still prioritizing occupancy, which has reached 79% in Bombay. Once Gurgaon stabilizes, we anticipate RevPAR growth aligning with broader industry improvements.

Question 2: Karan inquires about renovation benefits and future growth expectations.

Answer: We've seen significant improvement due to renovations, particularly in the Keys portfolio. As we work towards a full renovation by FY28, we expect RevPAR growth to stabilize and improve, benefiting from strategic closures of rooms for refurbishment during this period.

Question 3: Karan asks about growth plans for Lemon Tree and Fleur post-demerger.

Answer: We recently finalized the Aurika deal in Varanasi, planning to close additional opportunities soon. I anticipate announcing several acquisitions in the next 12 months, targeting around 2,500 new rooms to add to our portfolio by FY28, aiming for Rs. 1,000 crore EBITDA.

Question 4: Vaibhav Muley questions the renovation status.

Answer: About 65% of our 4,100-room renovation target is complete, with an average of 700-800 rooms shut at a time. The goal is to finish by next year before reverting to a standard refurbishment cycle, maintaining a lower cost structure thereafter.

Question 5: Vaibhav seeks clarity on RevPAR growth despite renovations in key markets.

Answer: The decline in Gurgaon has affected performance, but regions like Delhi saw notable growth. Our renovations are yielding better results. A fully renovated portfolio will lead to substantial growth, particularly in markets like Delhi and Hyderabad.

Question 6: Achal Kumar questions priorities before Fleur's listing.

Answer: I can't provide specific guidance, but we aim to show a healthy growth pipeline. Fee income growth typically lags behind room growth, taking time for new hotels to stabilize. For Fleur, we project substantial EBITDA growth as renovations complete, with fees ramping up.

Question 7: Rahul Jain asks about Mumbai's strategy transition from occupancy to ARR.

Answer: In Bombay, we prioritize occupancy to cover costs first before implementing further price hikes. As we stabilize our customer base, we expect to shift towards an ARR-led strategy, beginning to see results by next financial year.

Question 8: Sameet Sinha inquires about the GST impact and future expectations.

Answer: We initially expected a 3%-3.5% GST impact, but with anticipated pricing adjustments, we believe it will settle around 2% next year. Several external factors influenced occupancy, and we remain optimistic about upcoming quarters.

Question 9: Prashant Biyani seeks insights on Aurika Shillong's timeline and investment details.

Answer: We expect to start Aurika Shillong by mid-CY27, with an estimated investment of Rs. 200 crore. We have a favorable deal that allows significant borrowing at a reduced rate, enhancing the project's profitability.

Question 10: Vaibhav Muley asks about CAPEX and debt repayment.

Answer: Our CAPEX is substantial due to ongoing renovations, projected at Rs. 70-80 crore in the coming years. Post-demerger, Lemon Tree will be largely debt-free, allowing us to utilize fee income as free cash, focusing on technological and marketing investments without significant cash outflows.

This summary presents a comprehensive overview of key questions from analysts during the earnings call, along with detailed responses from management.