Sector Outlook: positive
IHCL reported robust growth with revenue reaching.
Table of Contents
Strong Performance driven by demand recovery
In Q2FY25, IHCL reported robust growth with revenue reaching Rs. 18,261 million, up 27% YoY, driven by a 77% occupancy rate (+2% YoY) and a 9% increase in ARR to Rs. 10,800. Adjusted PAT rose 54% YoY to Rs. 2,745 million, supported by better cost control and operational efficiencies, with consolidated EBITDA margin improving to 27.5% (+270 bps YoY).
Key highlights:
- Domestic same-store RevPAR grew 66%, showcasing strong brand trust.
- New Business revenue surged 47% YoY to Rs. 143 crores.
- Six new hotels were opened, advancing the FY25 target of 25 properties.
Outlook:
- Growth drivers include a strong wedding season, increased foreign tourist arrivals (+8-9% YoY), and rising MICE demand.
- Hospitality sector imbalance, with 7% YoY demand growth against 2% supply growth, supports a 14.7% CAGR in revenue (FY24-FY26).
- Occupancy is expected to reach 70% by FY26, with an 8% ARPU growth.
- IHCL’s capital-light model boosted management fees by 10% to Rs. 100 crores, further enhancing EBITDA margins.
Key Concall Highlights
Hospitality Sector Trends:
- The sector remains in an upcycle due to strong domestic demand, limited supply additions, and favorable demographics.
- Q2 demand grew 7% YoY, while supply increased only 2%.
- Growth drivers include rising disposable incomes, new tourist destinations, and evolving traveler preferences.
Hotel Performance:
- IHCL brands reported double-digit RevPAR growth, with the Taj brand achieving 13% RevPAR growth and a premium of 66% over the industry.
- Average room rates also saw double-digit growth due to robust luxury travel demand.
Expansion Milestones:
- Between April and October 2024, IHCL signed 42 hotels and opened 14, reaching a portfolio of 350 hotels, with over 230 operational.
- Focus on growing market share in operational and active supply inventory.
New Business Segment Growth:
- Consolidated revenues grew 47% YoY in Q2.
- Ginger revenue rose 55% YoY, with 70 operational hotels out of a 100-hotel portfolio.
- Qmin expanded to 52 outlets via TFS collaboration.
- Ama Stays & Trails has 227 bungalows, with 116 operational.
Brand Expansion:
- Relaunched the Gateway brand for CBDs, metro cities, and Tier 2/3 locations, targeting 100 hotels by 2030.
- Contracted with Claridges Hotels to manage Claridges New Delhi from April 2025.
- Acquired a 55% stake in Rajscape Hotels for INR 18 crores, owners of the Tree of Life brand.
Loyalty Program & Sustainability:
- Tata Neu loyalty program has nearly 7 million members, contributing 42% to enterprise revenue.
- Sustainability initiatives: 38% energy from renewable sources, 45% recycled water, and 37 skill centers across 15 states.
Future Outlook:
- Anticipates double-digit revenue growth in FY25, excluding TajSATS impact.
- H2 growth driven by 30% more wedding dates and increased foreign tourist arrivals.
- Targeting 25 hotel openings in FY25, with a pipeline of 120 hotels and plans to scale new businesses.
Valuation and Outlook
IHCL aims for double-digit revenue growth in FY25 (excluding TajSats) while focusing on cash flow improvement, maintaining a strong balance sheet, and becoming debt-free. New business initiatives like Ginger, QMin, and Ama are expected to drive 30-35% YoY revenue growth, while the revamped Gateway brand targets 15-20% growth. Management fees are projected to grow, contributing to a 15% CAGR in EBITDA.
The company plans to open 25 new hotels in FY25, with a goal of 100 hotels by 2030, leveraging the 7% YoY demand growth against a 2% supply increase. Payroll expenses are expected to account for 26-27% of revenue, while the Tata Neu loyalty program boosts repeat customer rates. Growth is supported by a strong wedding season, rising foreign tourist arrivals (8-9%), and increased MICE demand. IHCL is well-positioned to capitalize on the demand-supply gap, reinforcing its optimistic outlook for FY25.
