LEMONTREE - Lemon Tree Hotels Limited Share Price

Here are the key questions and detailed answers from the Q&A section of the earnings transcript for Lemon Tree Hotels Limited:

1. Karan Khanna (Ambit Capital): "What kind of margins are you expecting in the Aurika Nehru Place project over the next 5-7 years?"

   • Answer: "We expect an IRR north of 15%. The lease rent is Rs. 27 crore, escalating at 5% yearly. Given its prime location, we estimate the ARR could reach Rs. 12,500, contributing significantly to our revenue. Our forecast suggests robust profitability akin to our established hotels."

2. Karan Khanna (Follow-up): "Is your strategy to position upcoming rooms under the luxury segment and expand via the asset-light route for mid-scale?"

   • Answer: "Our approach is brand-agnostic; we pick based on market demand and expected returns. While Aurika represents a luxury focus, we're flexible to adopt Lemon Tree or Premier brands as market conditions dictate. It boils down to IRR rather than a fixed strategy."

3. Karan Khanna: "Why did Bengaluru only grow 6% and Gurgaon decline by 10%?"

   • Answer: "The declines relate to our renovation efforts which temporarily reduced room availability. Post-renovation, we expect significant demand recovery and RevPAR improvements in H2, evidenced by successful renovations yielding substantial increases in ARR."

4. Karan Khanna: "What is your expectation for RevPAR growth in the second half?"

   • Answer: "We anticipate mid-teens RevPAR growth this quarter, driven by festive demand. While October was muted, November is showing promising recovery, and we expect to exceed last year's performance as occupancy rebounds."

5. Sameet Sinha (Macquarie): "How many rooms did you renovate, and what are the expectations for the second half?"

   • Answer: "We've renovated 3,000 of 4,600 rooms, with more planned in H2. While we've faced short-term pain, we aim for a full portfolio renovation by next year, recovering operational efficiency that will drive future revenue growth."

6. Sameet Sinha: "What changes have you noticed since GST rate cuts?"

   • Answer: "We're observing a modest 7-8% revenue increase. As more rooms exceed the Rs. 7,500 threshold, we anticipate improved margins, expecting to reduce the current 2.5% GDP impact on EBITDA to near-neutral if trends hold."

7. Abhay Khaitan (Axis Capital): "On Aurika Mumbai's occupancy and ARR trends, what are your expectations?"

   • Answer: "We've balanced occupancy through negotiated contracts with growing retail business. I expect the retail ARR to rise from Rs. 8,500 to Rs. 12,000 as we phase out lower-value business, enhancing overall revenue per available room."

8. Vikram Shah: "What caused the muted quarter across the industry?"

   • Answer: "Q2's performance was affected by a high base last year and adverse weather, impacting travel. However, we remain on track for our full-year targets despite the temporary downturn due to windfall renovations."

9. Vaibhav Muley (YES Securities): "What timelines do you foresee for opening managed portfolio hotels?"

   • Answer: "Currently, we estimate operational openings to grow from 4,000 rooms to about 5,000 next year, with strategic plans to double our pipeline due to rising demand and management capabilities expanding to 35-40,000 rooms."

10. Kushal Shah (Individual Investor): "What ranges of RevPAR growth can the industry expect amidst demand-supply mismatches?"

    • Answer: "Post-COVID catch-up suggests 20% lower rates than in 2007-2008. As occupancy exceeds 70%, we foresee price adjustments becoming significant, potentially manifesting in noticeable rate hikes in the next few years."

The detailed answers collectively provide insight into Lemon Tree's performance, strategy, and future growth expectations.