Home » Core Investor Group » The Indian Hotels Company Ltd – Q1FY26 Result Update
Sector Outlook: Positive
Strong quarter performance, driven by robust demand
Q1FY26 saw a robust performance, with revenue reaching Rs. 20,411 million (up 31.7% YoY), despite geopolitical headwinds such as Operation Sindoor, Iran-Israel conflict and flight disruptions. These headwinds result in a marginal decrease of 90 bps in the occupancy rate to 74.3% in Q1FY26. However, due to a lower base in Q1FY25 caused by the extreme heat wave and elections, the ARR grew by 12% YoY to Rs. 14,552, resulting in RevPAR to increase by 11% YoY to Rs. 10,810. Additionally, the company experienced a strong rebound in key international markets, such as San Francisco and London, which had been sluggish in the last few quarters. The company’s consolidated EBITDA is Rs. 5,760 million, resulting in a 78 bps decrease in the EBITDA margin to 28.2%. This decrease was attributed to the change in payroll cycle from July 1 to April 1. Aligning with the ACCELERATE 2030 strategy, the company added six new hotels and signed contracts for 12 hotels in Q1 FY26, bringing the total pipeline to 143 hotels with 20,200 rooms. The company currently has a portfolio of 392 hotels, comprising 249 operational hotels and 143 pipeline hotels. Looking ahead, the company is confident of achieving double-digit revenue growth, driven by strong performance and sustained momentum in new businesses, strong domestic demand, over 30 new hotel openings in FY26 and limited hotel supply. The management anticipates future growth through price hikes, improvement in ARR and increased foreign tourist arrivals.
Key Concall Highlights
- The Indian hospitality sector faced multiple headwinds in Q1FY26. Demand was impacted due to geopolitical tensions, such as Operation Sindoor, which was further compounded by the Israel-Iran conflict. This led to the partial closure of airspace and disrupted flight routes, resulting in numerous hotel cancellations.
- The company was able to outperform the industry and remained resilient due to IHCL’s brand equity, diversified portfolio and customer trust.
- The EBITDA margin for the quarter was impacted by higher payroll costs resulting from a change in the company’s payroll cycle, which shifted from July 1 to April 1. The impact of this payroll cycle change is expected to normalize over the course of the year.
- In Q1FY26, the company opened six new hotels, including three luxury wildlife lodges in Kruger National Park, South Africa, expanding its presence in the African continent, and signed 12 new hotels, bringing its total to 392 hotels, with 249 operational and 143 in the pipeline, aiming to reach 700 hotels by 2030.
- The Taj Palace in Delhi has 150 rooms under renovation until October 1st, while Fort Aguada in Goa is refurbishing 40 rooms in the main block. According to the company’s policy, RevPAR calculations are adjusted for rooms out of operation for six months or more.
- On the international front, the company achieved double-digit revenue growth, driven by a strong performance at The Pierre in New York. The management remains optimistic about sustained growth in international markets. The London hotel is benefiting from a surge in leisure and corporate bookings, reaffirming its place as one of the world’s most important hospitality markets alongside New York and Paris. Cape Town’s performance has strengthened, marking it as another bright spot in IHCL’s global footprint and adding diversity to its revenue mix.
- IHCL is exploring a new platform partnership with Tata Sons for hotel assets, beginning with the Kolkata Airport Ginger property, where Tata Sons owns the asset and IHCL operates it under a revenue share lease, with the arrangement structured as an arm’s-length transaction that could strategically enable IHCL’s growth.
- Despite the base effect for July, which had five auspicious wedding dates last year, the overall outlook for Q2 also remains robust, driven by continued momentum in MICE activity and high-profile diplomatic visits.
- Ginger Goa near the Mopa Airport to open in the next one year.
- Long-term capex guidance remains at Rs. 5,000 crores over the next 4-5 years, with an annual spend expected to range between Rs. 1,000-1,500 crores over the next 2-3 years.
Valuation and Outlook
With a strong Q1FY26 performance, IHCL’s management remains confident in delivering double-digit growth in FY26, focusing on improving cash flows and maintaining a healthy balance sheet. The new business segment is expected to boost the company’s overall growth. The company will focus on growing the management fee segment to improve EBITDA margins. Tata Neu’s loyalty program is anticipated to increase revenue by enhancing repeat customer rates. The management anticipates the growth trend to continue in the coming year, driven by increased foreign tourist arrivals, additional wedding dates in CY26, rising tourism, and growing demand from the MICE sector. On the international front, it is expected that the company will maintain its momentum and boost its margin. Furthermore, the company’s expansion strategy, which aims to reach 700 hotels by 2030, positions it well to capitalise on the ongoing demand-supply gap in the industry, where demand is outpacing the supply rate, thereby strengthening IHCL’s market position and reinforcing the company’s optimistic outlook for the coming years.
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