Published on 25/02/2021 11:44:32 AM | Source: Motilal Oswal Financial Services Ltd

Hotel Sector Update - Corporate demand recovery – a key trigger By Motilal Oswal

Posted in Broking Firm Views - Sector Report| #Hotel sector #Sector Report #Motilal Oswal Financial Services Ltd

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We pored over the 3QFY21 results and management commentaries of key hospitality players – such as Indian Hotels (IH), Lemon Tree Hotels (LEMONTRE), Chalet Hotels (CHALET), and EIH. The following are our key insights:

Aggregate revenue for players up 105% QoQ

* 3QFY21 aggregate revenue of hotel players IH, CHALET, LEMONTRE, and EIH declined 62% YoY, but grew 105% QoQ. On a QoQ basis, the best performance was reported by EIH, which reported revenue growth of 149%. IH’s revenues grew 118% QoQ, and the revenues of each CHALET and LEMONTRE grew 44% QoQ.

* Excluding LEMONTRE and CHALET, all hotel players reported operating loss in 3QFY21. However, operating loss declined across players sequentially. LEMONTRE’s EBITDA grew 142% QoQ to INR201m. CHALET posted operating profit of INR104m in 3Q (v/s loss of INR23m in 2QFY21).

* IH’s consolidated operating loss in 3Q reduced to INR167m (from loss of INR1,503m in 2QFY21); EBITDA from standalone operations stood at INR480m (v/s loss of INR877m in 2Q). EIH’s EBITDA loss has reduced to INR268m in 3Q (v/s loss of INR1,000m in 2Q).

* Aggregate operating loss for hotel players reduced to INR131m in 3Q (v/s loss of INR2,443m in 2Q).

* On a QoQ basis, total expenditure grew 33% for hotel players, with revenue growth of 105%, which helped reduce operating loss.

* Among the key players, EIH reported the highest incremental EBITDA to incremental revenue on a QoQ basis, at 68% in 3QFY21 (v/s 97% in 2QFY21). LEMONTRE came in second highest with 57% (similar to 2Q levels). IH/CHALET reported EBITDA flow through of 44%/48% in 3QFY21 (102%/60% in 2QFY21).

Operational highlights – occupancy-driven RevPAR growth (QoQ); IHIN shines on RevPAR performance

* Hotel occupancy in India plummeted to 7% in Apr’20 from ~75% in Apr’19. A 55– 60% plunge is expected in ARR in 2020. As per Hotelivate, estimated loss of revenue for the Hotel industry over Jan–Dec’20 stands at a whopping INR1,430b.

* Across players (ex-EIH), RevPAR grew on a QoQ basis on the back of improved occupancy levels. IH has outperformed peers in RevPAR growth.

* IH saw the highest QoQ improvement in RevPAR (143%/125% for its domestic network / standalone operations). This was led by a 17.2pp (domestic network) / 15.1pp (standalone operations) revival in occupancy levels. On a QoQ basis, ARR grew 51%/53% for its domestic network / standalone operations.

* LEMONTRE’s RevPAR was up 25% QoQ to INR1,073 in 3QFY21, led by a 10pp improvement in occupancy to 42.4% (ARR de-grew 5% QoQ).

* CHALET’s RevPAR grew 31% QoQ to INR1,318 on an 800bp improvement in occupancy to 33% (ARR was flat QoQ).


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