Q1FY23 is likely to be a historic quarter for Royal Orchid Hotels: Amit Jaiswal, CFO

Amit Jaiswal, CFO, Royal Orchid Hotels talks about demand situation, bookings, margin, profitability, prices, new launches, occupancy rate, expansion plans and CapEx among others during a candid chat with Swati Khandelwal, Zee Business. Edited Excerpts:

Q: Tell us about the kind of demand you are seeing and do you think that the summers will be good this time?

A: Robust business. The business, generally, remains quite dull from the 15th March to the first week of April but all barriers are being broken this year. We haven't seen such a business on books in April and May before. So, the business is running well and it seems that the first quarter will be one of the best quarters of the year.

Q: Do you want to say that this is going to be a historic performance for the company?

A: Absolutely, this is likely to be the historical performance. We haven't seen much traction to date. In fact, I have been associated with Royal Orchid for the last 15 years and have seen that the business goes down after 15th March but this has not occurred this time. Instead, the business started to grow after it. We have never seen this kind of traction in April and May as well as the bookings earlier.

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Q: Can you please quantify the kind of bookings you have are you completely oversold in all the resorts and are you seeing any trend of demand in any particular region?

A: As far as numbers are concerned, then the resort properties like we have our hotels in Sri Nagar, Mussoorie among other leisure destinations are sold-out completely. We have never seen such a demand. In the case of the business hotels, we are receiving good business on books in these hotels and we never expected this. In fact, after the third wave, we expected that the business will take another six months to bounce back but surprisingly, the business started increasing from March in a way, which was beyond our expectations. Occupancies have increased a lot and average rates have also started moving up, now, and is going up by almost 20-25%. I am not talking about leisure destinations as the leisure destinations are breaking all the records. I am talking about business hotels where the average rates have started going up by 20-25%.

Q: What kind of upside do you see in your performance from the point of view of margin and will you be able to clock in one of the best profitability?

A: There will be a great performance and we will touch the pre-COVID levels in the first quarter. As far as this quarter is concerned, January was washed out because of the third wave. The business started moving up from 15th February but we will remain in the green, despite a bad performance of one-and-a-half months. We will remain in green because of the good performance in March. We have great expectations of the first quarter's performance as we will move above the pre-COVID levels.

Q: What about booking going ahead as on your website there is an ad for a spring sale that reads about a 30% discount on room bookings? What kind of traction is this creating and why this discount when you have good demand?

A: Online marketing is a gimmick to attract customers. The visible discount is not on all the rooms. It is similar to the Airlines where you can get discounted price, which ends and goes up as soon as three to five seats are booked. So, this is a kind of marketing campaign where these facilities are shown to attract the customers and the guests. Actually, it is not a discounted price on all rooms and we sell just two to five rooms at the discounted price and as soon as there is traction, we start rising our prices.

Q: India is going to start international flights from 27th March and we can expect a very strong momentum on that front as well. How much will it impact your business and how are you gearing up to cater to the demand that will possibly come in form of international tourists?

A: The arrival of international tourists is a big positive sign for the entire industry because the luxury hotels, the big brands, including the luxury five-star deluxe segment was taking away some part of the business of our segment because they were not getting international travellers. Now what will happen is that due to the arrival of international tourists, the price of our segment will also go up a bit. Thus, the pricing challenge that was there will gradually go away with the arrival of international travellers.

Q: How much was the occupancy rate and how much is it expected to be going forward?

A: Most of the hotels have already crossed 70% occupancy and going forward it looks like we will be able to touch the 80% barrier.

Q: What about pricing and how much have prices gone up in the leisure hotels due to the increase in travel?

A: The leisure hotels are being sold above the pre-COVID levels not a single one is pointed out. So, all the leisure hotels are being sold above pre-COVID prices and the occupancies are also above the pre-COVID era. As far as business hotels are concerned, their occupancy is getting back to normal due to which the prices are moving upward by around 20-25%. It is expected that it will go up by another 10-15% over the existing prices and most probably by Q2FY22, we will be able to touch the pre-COVID level prices.

Q: What are the expansion plans for the company as the demand is quite high and what kind of CapEx has been lined up and how many new hotels will be launched in the coming time? Recently the company has launched Regenta Suites Gurugram, so, is there any specific category where the company will focus more?

A: We started a successful asset-light model in the industry, where we used to take the management of the hotels. We have started Regneta - a 91-room hotel - in Gurugram and it is based on a revenue-sharing model. In the revenue-sharing model, we offer a certain percentage of the revenue as lease rent to the owners. So, we are working a lot on this model as well and have also lined up 2-3 more properties, which will be launched in the same model from this year. Of course, we are also taking on the management. We have a target of opening at least 20 hotels this year, hopefully, we are on track on that of which two to three hotels will be based on a revenue-sharing model to increase our top line. So, this is the strategy and we are focusing on our bottom line at present. Corona has taught us a lot and we have been able to control our costs a lot. If you will study our financials then we have worked a lot on our fixed overheads due to which our margin of profits will grow a lot in the coming future.

Q: Commodity cost has jumped a lot and has raised worries of inflation how do you see the trend of increasing prices of steel, cement and increasing interest rates in real estate and how will it impact your business?

A: As far as CapEx is concerned, we do not have any plans to make a big CapEx apart from regular repairs and maintenance. However, some CapEx will come for the two to three hotels that will be launched on the revenue sharing model. So, as far as the CapEx is concerned, it is not that huge. When it comes to price increases then definitely, it will have an effect, then ultimately, if there is a price rise it is passed on to the customer as we will not be able to bear the pressure. There is inflation and let's see what the government does. The war has escalated it more. So, there is a stop-gap, which is a trouble of a month or two but I think, overall things will get down.