Ladies and gentlemen, good day and welcome to the Indian Hotels Company Limited earnings conference call for the quarter ended 30th June 2025. On the call we have with us Mr. Puneet Chhatwal, Managing Director and CEO, IHCL, and Mr. Ankur Dalwani, EVP and CFO, IHCL. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star, then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Puneet Chhatwal. Thank you, and over to you, Mr. Chhatwal.
Good evening, everyone, and thank you for joining our global conference call for Q1 2025/2026. We are pleased to inform you that we have continued our record performance for the 13th consecutive quarter, driven by sustained growth and strategic execution despite multiple industry headwinds. I will now outline the 10 key highlights of this quarter. Number one. Taj is rated again as World's Strongest Hotel Brand and India's Strongest Brand across all sectors by Brand Finance. We are very delighted to inform you that. And this is for the fifth time that it is India's Strongest Brand across sectors and World's Strongest Hotel Brand for the fourth time. By independent brand valuation consultancy Brand Finance. Taj has truly positioned itself as the crown jewel of India, and it continues to fly the flag high for Indian hospitality on the global stage.
We are grateful to our loyal patrons and dedicated colleagues who have played an integral role in making Taj the epitome of hospitality and luxury. Number two, robust performance in Q1 with key financial highlights. Our consolidated revenue grew 32% year-on-year to INR 2,102 crore. EBITDA grew 29% year-on-year to INR 637 crore, yielding EBITDA margin of 30.3%. Our bottom line grew by 19% to INR 296 crore. Hotel segment revenue and EBITDA grew at 14% and 15% respectively, resulting in 30 basis points margin expansion over the last year. On the standalone basis, we continued to deliver strong performance with revenues growing 13% year-on-year to INR 1,099 crore and EBITDA margin expanding by 10 basis points to 38%. Our standalone PAT margin stood at a healthy 22.2%. Number three, outperforming the industry and sustained margins despite temporary headwinds. The Indian hospitality sector faced multiple headwinds in Q1.
Demand was impacted by geopolitical tensions along the India-Pakistan border following Operation Sindoor and the unfortunate incident in Pahalgam. The impact was further compounded by the Israel-Iran conflict, which led to partial airspace closures and disrupted flight routes, resulting in numerous hotel cancellations. IHCL's strong brand equity, diversified portfolio, customer trust, and consistent focus on performance helped us remain resilient and outperform the industry in all key markets. While revenue got impacted due to aforementioned headwinds, operating efficiencies ensured that the hotel segment margins were sustained at a 31.4% for the quarter. This was despite an additional impact of change in payroll increment cycle, which we brought up from July 1 to April 1. Also. As an example, I would like to point out here that when we had the Operation Sindoor and 33 airports were shut down.
We were very close and present in a lot of locations, as an example, with Taj in Amritsar, Taj in Jaisalmer, Taj in Jodhpur, Taj in Srinagar, and Vivanta in Jammu, etc., etc. The list can go on. Number four is our portfolio growth. We continue to demonstrate industry-leading growth with 12 hotels signed and six hotels opened in Q1 2025, 20 26. This includes three luxury wildlife lodges in Kruger National Park, South Africa, expanding our presence in the African continent. With 249 operational hotels and over 143 hotels in the pipeline, we are nearing the milestone of 400+ hotels portfolio. We remain confident of achieving this milestone during this month itself, and as a reminder, our guidance under Accelerate 2030 is to have 700 hotels portfolio by 2030. Number five, traditional business continues to be strong.
RevPAR for our consolidated domestic hotels grew by a strong 11% on a like-for-like basis and 13% for our owned international hotels. Key business cities, which are important for our consolidated performance, continue to benefit from limited supply growth. Our international hotels performed very well, led by strong growth in U.S. hotels, especially The Pierre, which closed the quarter with a positive profit before tax. Number six, new brands and reimagined businesses. IHCL's new businesses vertical comprising of Ginger, Qmin, amã Stays & Trails, and now also Tree of Life continued to showcase strong growth of 27% year-on-year. Ginger grew 25% year-on-year, enabled by the stellar performance of the flagship Ginger Mumbai Airport Hotel, as well as a strong growth in F&B revenues driven by what we call humanization of Ginger. That means having Qmin-branded restaurants in our Ginger properties.
All this was despite revenue curtailment for the reasons I've already mentioned. Qmin has grown to 93 outlets across multiple formats. amã Stays & Trails has reached a portfolio of 309 bungalows, with 138 in operation, and Tree of Life is now a 20+ resorts portfolio with 18 in operation. Number seven, management fee growth through capital light strategy. Our capital light, not like-for-like growth, has helped grow our management fees by 17% from INR 114 crore last year to INR 133 crore in Q1 2025, 2026. Management fee growth, despite temporary headwinds, underscores the strength of our capital light strategy. We expect this growth in management fees to sustain with higher flow throughs to the EBITDA. Thereby also assisting and supporting our margin growth. Number eight, strong balance sheet with healthy cash reserves. Our balance sheet continues to be healthy with gross cash reserves of over INR 3,050 crore.
This is enabling us to reinvest in brand and revenue-enhancing CapEx through upgradation, expansions, as well as investment in new greenfield projects. We expect to invest INR 1,200 crore in FY 2025/2026 for assets under construction, renovations, expansions, and very importantly, strong digital initiatives, which we have shared in other investor meetings and calls, be it with SAP or be it the new ERP system. We continue to assess several inorganic opportunities while maintaining a disciplined and strategic approach to any potential investments. One such opportunity that was closed during the quarter is an under-construction hotel near the Kolkata Airport that was jointly evaluated by IHCL and the Tata Group. The asset has been purchased by the Tata Group and on completion will be operated as a revenue-based lease under the Ginger brand.
Over time, this could potentially lead to the creation of an asset platform, which could become a big strategic enabler for IHCL. Even without that, this is also strengthening Ginger brand's presence in key airports. After Ginger Mumbai Airport, we are under construction in Ginger Goa, the new MOPA airport. We will be opening within the next one year at the Ginger Bangalore Airport, and now we are adding Kolkata Airport besides the flagship properties in Ikhwanagar and the recently opened Ginger in Chanakya Puri, Delhi. Number nine, Pathya. Staying aligned with our ESG+ initiative, Pathya, the journey towards our 2030 target, remains on track. IHCL now uses 38% energy from renewable sources and has installed 371 EV charging stations across 163 locations in India. Continuing our journey of eliminating single-use plastic, IHCL has installed bottling plants at 69 hotels and achieved 49% recycling of water used in Q1.
IHCL currently partners in operating 52 skill centers across 20 states in India. Since 2020, we have trained over 31,000 youth and are well on track to reach our goal of skilling 100,000 youth by 2030. Finally, number ten, looking ahead to the remaining year. Despite base effect for July, which had five auspicious wedding dates last year. Overall outlook for Q2 also remains robust. As we have guided earlier that overall for the year, we remain confident of achieving double-digit revenue growth driven by continued momentum in MICE activity and high-profile diplomatic visits. We had a great April, that is what we said in the call for the full year. Then we had the temporary headwinds with the operation Sindoor and the unfortunate situation of geopolitical tensions, Iran, Israel, airline tragedy, etc. Notwithstanding that, we are expecting a strong performance in August, followed by an equally strong September.
In summary, we are well poised to deliver our revenue guidance with sustained margins. We are well on track to achieve our committed target of opening 30-plus new hotels. And this momentum will really accelerate as of September this year. So you will see that. When we announce the results that the projected openings will really start picking pace as of September. We are also opening three hotels on our balance sheet this year, of which two are in Ikhwanagar. And this also includes a very important opening for us of the Taj Grand Hotel, Hessischer Hof in Frankfurt. We remain very confident that our new businesses will continue to grow strongly over the coming years, delivering not like-for-like growth. Our focus also remains on evolving our brand scape or continuously evolving and evaluating our brand scape and strengthening our competitive advantages with extremely prudent capital allocation in strategic opportunities. Ladies and gentlemen, thank you very much for your attention, and we now open the floor for questions.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star, then one, on their touch-tone phone. If you wish to remove yourself from the question queue, you may press star, then two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Our first question comes from the line of Binay from Morgan Stanley. Please go ahead.
Hi,Team . Congrats on a good quarter despite all the events that went through. My first question is that in the presentation, we are talking about two major assets under renovation, and we've taken that out of the RevPAR calculation. Could you share a little bit about what are these two assets? What has been the impact? Is it regular renovation, or is this an upgrade? Any light on that? How to see that?
We have, Binay, thank you. We have two very important assets for us historically. That's the Taj Palace in Delhi, which is undergoing a 150 rooms renovation as we speak. This will be on for at least a few more months, and hopefully, the entire inventory is back as of 1st of October. And the second one is Fort Aguada in Goa, which recently celebrated 50 years. So we have 40 rooms there in the main block. Also under complete renovation. This is not soft. Kind of renovation. This is complete refurbishment where all those rooms have been taken out of order.
Can you explain to me this is more one-off and not regular, which is why you are calling it out this time?
So, Binay, hi. This is Ankur Dalwani. Can I ask you a question? I think, no, this is something which we do regularly. But anyway, whenever the assets are out of. Operation for six months and above, basically, they are adjusted in RevPAR, and that has always been the case. It's not a new sort of practice. Just wanted to bring that to your attention. This is a typical industry thing that if you have soft or temporary out of order, you don't take that inventory out. But if it's permanently out of order for a period. For a longer period, then it is taken out.
Thanks. Can you just follow up on the commentary that's being made about July, which is a robust month? Any context that was a higher single digit or RevPAR that we are talking about?
I think we should not look into a month. Each quarter or the year has 12 months, and quarter has three months. The trend is positive. Everything moves in the right direction. We feel extremely confident. I mean, I can't be more direct than this when I use the word extremely confident of delivering on double-digit growth for the hotel segment. For the year. And despite all the turbulences in the airline sector. We still feel very confident about delivering 20% top-line growth in the airline catering business f or the year.
Thanks. And lastly, Puneet, on this other news that you joined the Tata Neu board, what incrementally and I know we've talked about Tata Neu in the past conference calls also, and you have a slide where we do see revenue from there growing. How much of the opportunity has been tapped? How much more can IHCL shareholders look to gain from this partnership? Anything you want to share on that side?
I don't know if I should answer this very serious or on a lighter note. I think only IHCL can only benefit by me being on the board of Tata Digital. As we are the first founding member of Tata Neu, we have always communicated and always believed that this kind of capability for a hotel company to bring on its own with our size and capabilities would have been very difficult. We are very blessed to have this opportunity. And the Tata Neu membership, which was for us stagnating at around not Tata Neu, the loyalty membership from 2005 till 2020 or 2021 was somewhere between one to 2.2 million was the maximum it reached.
And in the last three years, by end of July, our loyalty members have crossed 11 million, which is less than 10% of the total active members of the Tata Neu system. So these are 11 million were transacted with us, with Indian Hotels, on that platform. I think it's just the beginning. This will be a very interesting and a very important competitive advantage, both at a group level as well as at IHCL level, in a few years from now. And already three years behind us, we see how our base has increased, and our loyalty-led revenue is very high. And just in the quarter, we had a 46% growth versus the previous year on the app revenue itself. So points-earning revenue had 17% growth and went up to INR 545 crore, and app revenue had a 46% growth and went to INR 75 crore revenue.
So we are very pleased with this development. And even before I joined the board, we have always been very, very strong advocates of Tata Neu.
Yeah. Yeah. Thanks, team. We'll come back in the meantime.
Thank you. Our next question comes from the line of Karan Khanna from Ambit Capital. Please go ahead.
Yeah. Hi. Good evening, and thanks for the opportunity. I had three questions to be answered. First, if we talk about the RevPAR growth of 13% that we've seen in the international portfolio, this seems to have surpassed that of domestic growth for the first time in a while with United Holdings and PM Hotels seeing sharp growth. Can you throw some light on this? What's driving the growth here, and what's the outlook for the rest FY 2026? Do you expect the international portfolio to in fact do a higher RevPAR growth compared to the domestic portfolio in FY 2026?
Karan, it's a very interesting question and a very good observation. The likelihood is there because of the investments over the last few years we have undertaken in London. And also, our undertaking this year, we are spending. Another between now and March of this financial year. Something to the tune of almost GBP 22 million. In upgrading and increasing the size of our private membership club, the Chambers, renovating the meeting. Space out there, having a new lobby in the St. James and a new bar and a new whiskey lounge and a new cigar lounge and everything that goes with it. These continuous upgrades have already happened in the rooms area.
And because the room renovation is finished, as an example, London is showing a very big increase in the month of July. I think it would be fair to say that. If we looked at just July, London could be anywhere +20% for us. Also, where we are seeing some benefit is in San Francisco. The problem is San Francisco had crashed as a market because of whatever we have been reading and seeing in the news, as you know. But slowly, slowly, it's coming back. Maybe to get to its old potential is still a few years away. But it has shown strong recovery in the quarters gone by, and the increase based on that has almost been 50%. But it had fallen so badly that even that 50%. Does not make us very happy. We need another 20%. Or more in the. Important months going forward.
Also, what has. Been good for us is that Cape Town continues to remain resilient, and The Pierre. Has. Performed quite well in terms of gaining market share. So. These are the ones which are. In a way where we own the P&L or own the assets. The others are on a capital-light strategy on the management fee business, most of them, except for some joint ventures or associates. So main impact, obviously, when you multiply pounds into rupees, could show. A positive result for us. In London if the market remains that way because the elections are behind us, the new government is there. A lot of things are changing in London as we speak. So this is helpful.
Just talking a bit about your domestic portfolio, and if I look at slide eight and 19 of the presentation, so about 74% of your domestic revenue comes from business cities. And if I look at slide number 19, where you highlighted the growth that you've seen, particularly in most of the key business cities. So help me reconcile these numbers because 11%-12% growth on a consolidated basis, but some of the markets, particularly slide number 19, are seeing almost 19%, 50% kind of a growth rate. And so are there some cities or some markets or some hotels where the RevPAR growth or possibly the RevPAR growth is lower than what we are seeing for the rest of the portfolio? If you could identify that. And also in Hyderabad, what's driven such a sharp 50% growth during the quarter? So it's again a very good question, Karan.
And the one which you see IHCL consolidated is the Falaknuma Palace. And the Falaknuma Palace has done very well. The other assets are in the entity called TAJGVK. So when you go into enterprise level, it drops to 20%. So Falaknuma has done really, very well for us in the quarter. It's been doing very well for the last two, three quarters now, three quarters, I would say. Places where we expect significant improvement going forward will be as and when Goa gets renovated for us. And Goa, in general, has been at a low level in terms of growth. But if you look at the numbers, 10,700 on that slide is Goa's number, which is number three among the top markets. But we think it can go up further once the Fort Aguada renovated rooms come back.
And also, when we start the season, which is as of October, an increase is expected. We also have our own event, which also has an impact. We have a very large event of our annual business conference, which is usually Q1, but because of operations, Sindhur, etc., we changed it. It's happening next week, 20th, 21st, and 22nd in Goa that will also help the enterprise-level numbers in Q2.
Sure. And third, if I look at the openings during the quarter, so there was Taj Alibag, and Gateway Kurk, and these hotels were essentially affiliated with other brands in the past. So are you seeing a trend where more and more asset owners are perhaps looking to partner with top brands such as Taj and Indian Hotels? And what sort of an impact are you seeing on the pay trades and the management contract because of this?
Karan, another good question, brother. If you look at those six openings, five of those six were not planned as one of our hotels. So the Claridge's was the Claridge's. Alibag was another brand. Kurk was another brand. So was in Lakshadweep, those two properties. So of course, we are doing some things right that we are and these are all different owners that we are becoming a preferred choice of owners when it comes to rebranding to another brand. And we don't see any change in this trend. Actually, we see it we would actually like to accelerate on that trend, especially in the boutique segment, as was outlined during our AGM, or with Ginger. I think the country and the sector within the country and with all the locations coming, we are very well poised to help grow the mid-market, which is the fastest-growing segment in India.
It's gone from 7% from 25 years ago to now 28%. It's a 4X growth. So I think with the Ginger brand, we are very well- positioned. And that's why you keep hearing "We have invested in the Kolkata Airport asset." We have invested in the Goa Airport asset. We invested a few years ago and opened last year in the Mumbai Airport because it gives your brand both the visibility as well as the presence. And these are also all large hotels. Even in Bangalore, we have some small amount of skin in the game of the combined hotel, which will open 750 rooms, 400 rooms Vivanta, and 350 rooms Ginger. And also Ikhwanagar, which I said earlier, will open end of September as a Ginger, and Vivanta will open in October. So these are assets that are fueling the rebranding preference towards our brand.
Sure. And my last question to you, Puneet, how does the MICE pipeline look like for you, particularly in the social wedding segment, etc.? Because second half, again, has a lot of auspicious dates. So are the contracts getting negotiated at a higher rate compared to last year? And the number of contracts, how is that trending for you? That would be my last question.
Yeah. I think we don't see much change or any kind of pressure on the rates, let's put it this way. But some of the high-profile weddings just take the rates up. At the moment, I can't think of any, which is there. But those high-profile weddings are also not planned several years in advance. They just come. So we are hoping that something will come. But on the slide 15, you will see we have outlined certain events that are happening between now and March. And whether it's the Women's World Cup Cricket or the convention facilities on the AI Impact Summit, etc., etc. They're all outlined on slide 15. So we do see a very robust second half of the year. Plus the diplomatic visits you can also plan.
Yeah. Sure. This is helpful. Thank you and all the best.
Thank you.
Thank you. The next question comes from the line of Shaleen Kumar from UBS Securities. Please go ahead.
Yeah. Hi. Good evening. Thank you for the opportunity. And yeah, definitely good set of numbers given whatever is happening in the quarter. So Mr. Chhatwal, I have. Am I audible?
Yes, you are.
Yes . All right, sir. So sir, I want to ask you first thing about the Ginger, right? Ginger Kolkata, where we could see that Tata Sons is getting in. So I want to pick your mind here. What's exactly happening here? Why not we are going ahead and building and why we are partnering with Tata Sons? Is there some kind of plan over here? What's the thought process?
Yeah, Shaleen, there is. We have been discussing with Tata Sons the opportunity. These things we started many, many years ago, they just don't happen overnight. That if we could have a platform as we would not like to invest in everything ourselves. So instead of going with a third-party investor, if the deals have good fundamentals, why not keep it within the group? And it is also the beginning of a nice journey. Where Tata Sons could gain from an asset platform. And we still gain in doing a revenue share. And we stay capital-light but benefit fully without having the other impacts of. Any kind of development risk, construction risk, delays. Depreciations, investments going forward. So.
We would choose that very carefully. And. We'll leverage that wherever it is possible, based on our cash needs, we will invest. As you know, we don't have—we are net debt positive. And we have a good amount of cash. But we need cash for the construction of Cedoc, which we call Bank Stand now. We need. Cash for many other commitments, including Lakshadweep, which we have communicated to all of you. We need for that. We need for renovations, upgrades. So we are very pleased to have. We used to have a—we still have a platform with GIC, but we are very pleased to have another platform and another source of capital. Sorry, not income. Capital. And I think it's a very important strategic step for both the group as well as IHCL. And something very interesting to watch out for. So sir, it's something like a platform.
So we could see more happening in this direction. Yes, that is correct. You could see more happening in this direction, similar kind of projects.
All right. All right. That's great.
And it does not mean, Shaleen, that we will not invest. It's not that we will just keep sitting on cash and never invest. As I said, we are investing. There are many such situations when you have tenders, and I think it's important to understand that. Like Ikhwanagar, we have invested. Now, there are certain conditions in the RFPs that come and the tender terms in which you have to own it for a certain minimum number of years before you can flip over the asset. So there are many such places where we are tied up. And. This is the time we're in a high-growth phase as a company. And it's good to have another source of capital. It's also very good for the group because otherwise, they would not have access to these kinds of assets.
Fair enough, sir. I understand. And I believe these will be like you will be taking them on lease, so the returns on our investment will be meaningfully higher in these kinds of properties.
Absolutely. Otherwise, we keep it and we invest also ourselves. So the risk-reward balance has to be there in at arm's length and keeping all those rules of engagement as we would have had with anyone else.
Got it. Got it. So you mentioned about. August, September. Is it that some of the cancellations are coming back to you? And I know you said, "Let's not look at the month," but. Is there any confidence that we can deliver. Double-digit growth in Q2? Is there a possibility given high base of July but you're seeing momentum coming back? I like the way you ask your questions. Basically, you want me to confirm to you that we'll have a double-digit growth in Q2 also, right? If I can add then. The momentum on the RevPAR, it will be similar. Can we have a strong RevPAR also coming?
The sector is going through a good phase. Demand remains strong. Supply is constrained in the key markets. And normally, if all goes as we have seen in the last so many quarters. I think it's—and I've said it in the last call, and I've said it in some television interviews—I think there will always be some headwinds. We don't know what and when, but this is the beginning of a very long journey for a nation that is aspiring to become the third-largest economy. When there we compare the GDP growth and the infrastructure development that is expected to happen, the sector is very undersupplied.
Right, sir. Sir. I missed, I think, Ankur's remark. Sorry, it was your remark, sorry. On the wage hike, you said something on the wage hike. So we have taken a wage hike this quarter.
Typically, we— Yes. So we always did. We always did it in the month of July. And then we had the nine-month impact, and then it could come in Q1, the same base. But we tried to streamline now and done all the wage hikes as of 1st of April. So it has an impact of INR 11 crore on our reported results. And that shows when you look at the wages, the payroll cost, you see a certain increase. But in Q2, Q3, Q4, because it gets distributed over 12 months, the increase level will be less. So in Q1, there would have been nothing, and everything would come for the nine-month period. Now it comes divided over a 12-month period.
Got it, sir. Got it. Got it. That's it from my side, sir. Thank you so much. Appreciate it.
Thank you. Our next question comes from the line of Sumant Kumar from Motilal Oswal. Please go ahead.
Yeah. Hi. So my question regarding license fee in Q1 FY 2026, we have seen increase by 30%. So any specific reason for that? Because can we consider the license fee growth in line with—sorry, higher than revenue growth?
I think there are two reasons. One is, of course, this also business model call in terms of the organic growth on the Ginger side, which happens, which is largely a variable fee. But also, in this quarter, there is a one-off in the numbers, which is about INR 2-INR 2.5 crore of license fee which was paid for a particular hotel, which was actually pertaining to past license fee, which was sort of under litigation and dispute that got paid in this quarter. So to that extent, the numbers have gone up.
And also the base. As mentioned earlier, it was a bit curtailed. So the base effect is there in all the costs. So you want to normalize for the denominator, but also the fact that there is a INR 2- INR 2.5 crore impact of one time which I just mentioned. So can we assume the normalization with the growth in Q2 or maybe the Q2 onwards, this percentage, why is it likely to be flat or decline? It will grow in line with revenue because. The quarter also has the impact of CPI being reset, which is. In some cases, there is a CPI adjustment to license fees. So that also comes in here.
Okay. And now coming to the US business g ood growth. So what is the mix of ADR and occupancy in US?
So US is very strong. Actually, if I look at the RevPAR growth in US, both the hotels combined was about 18% RevPAR. And with Campton actually close to 30%. And that was an incredible performance. And PR also in the mid to high teens.
Okay. So the ADR growth is higher, right?
ADR growth is slightly higher. That's right.
So can we expect the—what is the RevPAR growth? You are 18%, you said?
Yeah. 18%. Yeah.
So can we say 18% ADR and 8% occupancy?
No, sir. It's a mixture. Occupancy, for example, in Campton went up quite high. Actually, it was a very high quarter for Campton. So ADRs are a little lower in Campton. So if you look at it on a combined basis, RevPAR has gone up by 18%.
Okay. In the room addition, when we talk about owned room. In Ginger, you have retained capital-heavy and capital-light. So any other brand do not have a capital-light leasing model?
The capital-light is basically where the owner gives us fully-fitted lease. And therefore, from that point of view, we don't have to incur. We have leases in other brands, of course, but there we are incurring the capital. So that's something which we do as a normal course. But that's the reason we classify these because this is important to clarify. When we talk about the business model, this is where the license fee kicks in. This is a revenue-share model.
But any hotel, except Ginger, we have a Taj, Gateway, and other brands. Except Ginger, all are leasing or own hotels?
There are some—no, Sumant, you'll remember that Taj Man Singh is like that. Taj Palace with DDA is like that. To some extent, Taj Mahal Palace in Colaba is also a leasehold. So there are some like this where Malabar in Cochin is like that. We have another one.
No, I'm talking with pipeline, Puneet.
In the pipeline, we have many in the pipeline, but mostly it's almost all exclusive to Ginger.
We have to incur CapEx in those situations. So for the other brands, Taj and Gateway or Vivanta, we have to incur CapEx. That's why they are not capital light in nature.
So incur CapEx means own land, own building, right?
It could be leased land, but building is where we have to take the structure we are incurring CapEx. Those are many examples of those.
Okay. Thank you. Thank you, Puneet. Thank you, Ankur.
Thank you.
Thank you, Sumant.
Thank you. Our next question comes from the line of Ashish Kumar from HSBC. Please go ahead.
Yeah. Hi. Thanks for taking my question. First of all, I just want to understand a bit on the balance sheet. And that's in the context when you mentioned that Ginger's Kolkata airport is entering. And then you mentioned that you need to spend a lot of money on other things. So just want to understand. Are you—so for example, Taj Bankstan, are you still looking for some investor or somebody who could strategic investor or anything like that? And I mean, given that interest rates are low, are you thinking about raising some debt? Because anyway, you're generating very high ROIC, ROE. And so. Do you think it's a good time to raise some debt? Or you are just pretty well satisfied with what you have in the balance sheet?
So I think the first question is that whether we're going to get an equity partner for Taj Bankstan. I think the answer for that is no. It was a yes earlier. Earlier, I think the thinking was when our balance sheet was constrained. That is no longer the case. So this will basically be a contracting arrangement. We'll try and do a contracting arrangement in which we are able to box the development risk onto the contractor, onto the general contractor. So that's something we have explored, but not as an equity partner. So that's question one.
The other thing on—I think what was the second question answered?
About the raising debt or are you pretty well satisfied with what?
As of now, we don't feel the need. And I agree with you. Obviously, it enhances ROE. But at the end of the day, if your treasury is running X and you have to pay higher than X on borrowing, that might make sense to sort of use your cash flow, which you have availability. But it's an ongoing thing. We keep our eyes open in case something interesting comes up. We will definitely explore. But as of now, we don't feel the need to rush into raising debt on the balance sheet.
Okay. Fair enough. My second question about this Germany property. So basically, just want to understand how do you see the German market? And I'm asking because, so for example, Lufthansa and I cover Lufthansa. So these guys, these guys have been facing some bit of challenges. Germany is in a bit of trouble now. So generally, could you please give it a bit of a color in terms of how do you see the German market in terms of profitability, in terms of margin? And obviously, there are a lot of strict controls in terms of labor policy and laws. So any color would be very helpful, please.
So it's a 130-room property which was very iconic in Frankfurt. And it's expected to open end of January. And there is enough Indian diaspora, Indian companies to give us the base business, and the rest we'll get anyways. We have a full Germanic team out there. It will not be people from Mumbai or Delhi going and running that place. Maybe a few just to support in terms of the values and culture part of it. But the majority of the team that is being hired are experts in the Frankfurt market.
We have so many airlines flying into Frankfurt from India. With so many flights, I mean, whether it's Lufthansa or it's other carriers. We don't think it's a very important gateway. Which is next to the India house. If you stand with your back to the property, on the left, less than 100 m is the Indian consulate. And on the right, diagonally across, is the Messe Turm, which houses the head office of TCS for Europe. And obviously, the Messe Turm is next to the Messe, which is your fairgrounds. And that is the part of the city where all the development is coming and happening, and the growth is there.
And we feel very confident about doing a good job. And very important, they still be also bringing in another Chambers. So look at the private membership club proposition. London is doubling in size, the Chambers. First, there was no Chambers in London. Now it's doubling in size. Frankfurt gets one. Dubai already has one. And India, we opened in Bangalore, which never had one. So Hyderabad, Chennai, Bangalore, two in Mumbai. The Mumbai is also doubling in size in Colaba. The Taj, and we increased the size and have renovated fully. Delhi, we already doubled in size three, four years ago. So it is in Kolkata, very beautifully renovated. So I think this whole club business internationally is also complementing the hotel but also creating a lot of business opportunities for us.
Right. Okay. Fair enough.
And sorry, and it will also have, sorry, Aashil, I forgot, it will also have Bombay Brasserie. So like Cape Town Taj has Bombay Brasserie, San Francisco has Bombay Brasserie. We're going to stand alone in Singapore. We have Bombay Brasserie in Dubai. And now the next Bombay Brasserie will be in Frankfurt. So even there is brand equity being created in brands like this, which we have had for ages. Also, Chambers. And London also we have Bombay Brasserie. So there is some value to the brand also. Right.
Right. No, fair enough. And finally, I also wanted to understand your thoughts on. The sort of overall changes, probably. In terms of—so a lot of—I think I asked this question last time also. There's a lot of international players coming in, and you can see that we have a bit of equity investments coming through.
Equity partners are sort of investing in the hotel properties as same as we have the structure in the US. So how do you see these kind of changes. In the structure, in the competition, all that? Would really appreciate your thoughts on that, please.
See, players, if we are also going to Frankfurt, the Frankfurters also have a right to come here, right? If you go to New York, the New Yorkers can also come here. I think competition helps the sector to improve, and it's very good because you learn from each other. And everybody has some kind of a USP, both as brands, as companies, as organizations. So. It would only be a challenge if you saw some kind of a slowdown with us because others were coming in. Actually, others are just following us. So we have had year after year most signings, most openings.
I don't see that trend changing even this year. So. That's how we look at it. And. We always say, "Let our results speak for themselves." See the growth in the management fee income. What we have in a quarter used to be the full year management fee income six years ago or seven years. Aashil, you would recall when we did the first capital market day in the last six, seven years, that was our annual management fee. So all that is coming through that kind of growth. And with 143 hotels in pipeline, even if we stopped growing today, we'll keep opening 30, 40 hotels per year for the next three, four years.
Yeah. Yeah. I mean, you're right there. Aashil's right, Puneet. Competition is good. But I just wanted to understand because it's tough competition. And I'm referring to the Indigo's decision to sort of add so many keys. So. How would that impact your ARIs? Because at the moment, the industry is definitely in a very strong up cycle. But if you have so many people, so many investors coming in, adding the hotels, don't you think that could add pressure. On the?
It's a good question. But there is a difference in this time and the last time. See, we get this question all the time. The last cycle. See, the last cycle was limited to metros. India's landscape is changing. And in our opinion, more than 50% of the new supply is coming in tier two, tier three, or markets which don't even have any hotels at all. So that is the bigger difference on this occasion.
Main business is even today driven by those top 10 cities, whether it's Delhi, Mumbai, Goa, Rajasthan, etc. These are those top 10 markets, right? There, the increase in supply is very limited or contained or constrained. Whereas you will suddenly hear, including us. We are going to locations. Which we have a Vivanta in Pakyong in Sikkim, or we have a Vivanta in Arunachal. Overlooking the Chinese border. We have opened—so these are all new markets. So this is not. That there are many other hotels coming into that market, so suddenly the revenue and the rate, etc., will drop. Right.
Right. No, perfect. Perfect. Thank you.
And then another trend, which you should know—I don't know the reason; you might be knowing it better—something has changed in India in terms of spiritual tourism. The number of people going to Chardham or to—what did we have this—Mahakum. These kind of numbers have never been witnessed in the history before. The way our properties performing in Benares, where we are adding another 100 rooms, should open very shortly, doubling the size of the Taj Ganges.
And many other hotels with other brands that we have in our portfolio will also be opening in Benares. So there is something that has changed in terms of. Trips to spiritual destinations. We never had a hotel in Tirupati. Now we have a Taj also and the one under selections also. We never had a hotel in Puri, but since seven, eight months, we have a Taj in Puri also. So these. Are very. Resilient, I would say, in their performance.
Thank you so much, Puneet. Those are really helpful. I'll just come back in a few—I have one question, but I'll come back in a few. Thank you. Thank you.
Our next question comes from the line of Prateek Kumar from Jefferies. Please go ahead.
Hello. Yeah. Puneet, my first question is on your CapEx guidance. So we have talked about INR 1,200 crore CapEx guidance, like the highest in the past years. So how do we see with a bunch of other greenfield assets which have not been approved for rollout as of now? I see they add up to around 1,000 keys, and 500 keys also added to be added in 2027, 2028. So is this sort of CapEx going to accelerate from INR 1,200 crore to a much higher number, or is this the number we should build for years beyond 2026? That is my first question.
We would try to—before we followed the policy of CapEx should not exceed depreciation. But now that we are in a high growth phase, the CapEx will not increase or exceed the free cash flow.
Yeah. I think we did give a long-term guidance on CapEx in our Accelerate 2030. When we put out the plan, we said we're looking at INR 5,000 crores over the period of four to five years. I think we are still on line there because all these are assets which take time to get built. They will not get built in a year. So the typical time for an asset in India is about three to five years, depending on which asset, which location, etc. So I think that's how we are looking at the situation. I think INR 1,200 odd crore this year, give and take, let's say, 10% here and there, both sides.
And I think it's going to play out in the range of INR 1,000-INR 1,500 crore over the next two, three years. And then we'll see how it goes, depending on what opportunities are coming our way. I think more importantly, Prateek, is that every asset, we have to make sure it is ROC-accretive, and it makes the right IRR for us from a cost of capital perspective. So that is something we are very particular about.
Okay. And you mentioned of some 300 under lease finalization. Is this some new additions to hotels which are not around? Does that mean that?
Yeah. These are some of the leases which are not public, but yes, we are close to getting signed up. And as we sign them, we will keep on announcing them. But you see also in this one, you have the Taj Pushkar Palace which got added this year, which wasn't there earlier, but the Taj in Ranchi is finally getting signed. And we had actually announced this last year, the Ranchi one, but finally, it is getting signed now. So I think a lot of that is work in progress. And as they get to market, we will be announcing it. But there is good momentum on that side. There is good interest from the state governments to sort of get IHCL-owned hotels in the state capital. And we are seeing that momentum continue.
Okay. And one related question related to platform. So I know you talked about it, but how are we sort of deciding this CapEx will be done by us and something by platform? And another question on platform is when you're building hotel in platform, so management fees, are these management contracts the hotel it will come in our books, or would that be a fully fitted lease in the hotel?
So the first one which we have started off is a fully fitted lease. It's a 195-room hotel close to a 200-room Ginger hotel, Kolkata Airport. So this will be similar to any other Ginger hotel would have done with a third-party owner. We would have paid them a revenue share lease. This asset comes with the land, which is fully being purchased as part of the transaction by the Tata Group. So we have that as also a good thing because if tomorrow FSI changes, we can also add more room, etc.
So in going forward, I think, like it was mentioned, this is a first step in the direction of creating a platform. And over time, it could open up another source of capital. There are assets which are strategic and synergistic with the group investments, and it could make sense to do more of those there. It could also help in scaling up the Ginger platform because, like in the case of Ginger, we work with a lot of third-party owners. And then why not that owner being the Tata Group itself? So I think those are two sort of big areas where we think more hotels could get added under this platform. And because there's some form of related party, particularly, so how are the lease rates here versus a third-party sort of decided?
Because it seems like a fiercely competing segment because of management contracts also, like the Takeaways. So this is not a management contract, Prateek. This is a lease, which is a revenue share lease. And like Mr. Chhatwal mentioned earlier, it's all at arm's length. And from the Tata Group, that's the lease you would expect. And so this will as well be an arm's length lease which will be entered into going forward.
Sure. Thank you. These are my questions. Have a nice day.
Thank you, Prateek.
Thank you. Our next question comes from the line of Sreetika Rare Mohapatra from JP Morgan. Please go ahead.
Thank you for the opportunity. Just one question from my side. You have spoken about the international business. Wanted to understand how you see the U.K. market improvement or changes coming through. I think you alluded to a bit in your remarks earlier, but anything in particular with respect to margins that you are already starting to see or expect in the near term?
I mentioned that earlier, that U.K. is performing well. Especially this month of July with Wimbledon and the cricket has been extraordinary for us because both of them have come together. And with our renovated rooms back in operation and some public areas investment that we are making. So the renovated rooms will give us good average rate and occupancy. There will be some displacement in the public areas, but we see it as a very positive investment as London is among the top two lodging markets of the world. And it has always worked well for us, and it has always been driving good margins also.
So anything in terms of the sequential improvement that you may see in 2Q or FY 2026 that you are expecting? It should keep improving upon the numbers that we did last year in a double-digit growth, as we have said for others. And double-digit growth in markets like U.K. or London is a very significant number.
Thank you. That's also my side.
Thank you. Our next question comes from the line of Amit Sinha from Macquarie.A Please go ahead.
Yes. Thank you. A couple of questions. First is, Puneet and Ankur, you can talk about the margins. How do you see that? How do you see the cadence throughout the year? Because this particular quarter wasn't as impacted by, of course, you had large stats. You probably had some revenue shortfall. You had the pull forward of the salary increases, and you mentioned the digital spend.
Can you talk about. Obviously understanding the fact that the wage hike, you've explained that? Can you talk about the digital spend? Is that going to continue throughout the year, or is that going to end at some point, and you could see margins start to go back up? And I just want to double-click because. You mentioned sustained EBITDA growth. Sustained EBITDA margins and double-digit EBITDA growth. So I just wanted to get more clarity around how you see that working through the year. And then I have a couple of follow-ups.
I'll let Ankur answer in detail, but very simply. We have delivered 35% EBITDA margin last year. Given the nature of our portfolio, including assets outside of India, delivering 35% on consolidated is possibly an industry-leading figure on a global benchmark basis. And on a standalone. That relates to more than 40%. So.
That way, if we can maintain or marginally increase those margins, would be like a great situation to be in. And the initial trend of this quarter gone by shows that we are absolutely in line with it. Actually, even higher than Q1 of last year if we just made that adjustment for the wage increase that we have taken as of April, which will benefit us going forward in Q2, Q3, and Q4. So. All in all, that is more important to see that it is a sustainable increase, whether it's on a top line, or it's at the EBITDA level, or it is at a PAT level, or it is at a margin level. Ankur, go ahead.
Yeah. I think, no, I think you've covered it. I think. See, the two-three drivers for margins. In the short term or the medium term. Like you said, there are obviously costs which are going through the P&L, which are relating to technology. Even this quarter, we had some costs which did go through. The P&L. I think they will continue because the nature of the technology investments are more OpEx. But I think as the base gets built for the year, then obviously that comes into the base and therefore will not keep on growing from there at an exponential rate. But this year, with this quarter also, we had some costs going through the P&L. The other thing is that on the margin side is a mix of the business. I think the mix of the business, we have given you a breakup in the pie chart. You can see. Various sort of drivers.
I think the growth rate for both new business and management fee is higher than the overall business, and these are higher-margin businesses relatively. And also, if you can see our Chambers too, that's almost like 15%-16% of our revenue, which is actually growing at a higher rate and has a relatively higher margin profile. In our existing hotels, we've guided towards a long-term RevPAR of high single digits. I think if we sort of get to that in the next two-three years, there is no reason why operating leverage will not kick in. Having said that, there are always segments which Chhatwal also referred to. And so we have to be prepared for some of these as they come in. So yeah, I think that's the broad picture on margins. As you know, we don't guide specifically for the year or for the quarter, but directionally looking okay.
Got it. Okay. The second question is in terms of this wage hike that you had to pull forward. I mean, there have been media reports talking about how there's a shortfall in the industry, qualified people, especially as we see all the growth in all these properties. So can you just elaborate on that? What are some of the steps that you're taking to kind of offset some of these increases and HR needs?
I think that's a very good question. We have spent a significant amount of money in upskilling our people at all levels, especially at very senior level. We have enabled people to get European, international experience, education, degrees. And also at all levels, whether it's apprenticeship level, management trainees level. That's one part of it.
The second is, as our commitment on Pathya, which we launched three years ago, we committed to skill 100,000 people by 2030. And I mentioned that we're already close to 31,000 that we have already skilled, opening 52 skilling centers, including in places like Ikhwanagar, where we are opening a Vivanta and a Ginger in the next few months. So yes, there is indeed some kind of shortage or crunch because the demand came back very strong. And a lot of people left the sector because the fear was implicated that if you work in a hotel or you're exposed to people, you get COVID. So some people permanently left the sector, or others, unlike our group, who just got rid of the employees because there was no business. So when demand comes back, then they try to take employees from each other.
So I think we have not done any of that. And what is paying off well for us, especially on our attrition rates, is the way we looked after our people, especially during COVID, and them and their families. Obviously, people have always been loyal to the brand and to the group, but now they are even more loyal. Especially our brand in the way we take care of our people.
Got it. Thank you very much.
Thank you. I think. Thank you.
We will. Yes, sir?
Sorry, go ahead. I think we can maybe take maximum one more question, and then.
Sure. We'll take one last question from the line of Prashant Biyani from Elara Securities. Please go ahead.
Yeah. Thank you for the opportunity. So last year, we have been running at around 78%-80% occupancy between Q2 and Q4. So is it that despite demand being there, technically, we may not be able to increase occupancy beyond that point because of the weekday-weekend dynamics?
Yes, Prashant, you've already answered the question yourself. If you're running at around 70% at 80%, it means most of the time you are sold out. There will always be some shoulder period. Some religious things like you have this Shraddh and. Sometimes it's the Shahraz, sometimes it's Diwali. Many days where it's not hotels where you are in, you are actually with the families or at home. So. With those kinds of occupancies, you can only yield better on rates. Right. And so it will give you pricing power to choose more profitable customers? I heard this for the first time, that we can choose more profitable customers. I mean, customer is customer, Atithi Devo Bhava. Guest is God, not profitable or non-profitable.
So I'm sorry, I just could not stop myself. But. What it does is definitely it gives you a pricing power. At a high occupancy level, and that is what the sector has witnessed in the last. Few years.
Sure. Thank you.
Thank you. Ladies and gentlemen, I.
Sorry. Sorry. Go ahead. Go ahead.
I now hand the conference over to Mr. Puneet Chhatwal for closing comments.
Thank you, everyone, for joining this call, and thank you for all your questions. We look forward to interacting with you. This quarter and at the end of quarter two, and thank you for all your support. Have a wonderful evening and see you soon.
Thank you.
Thank you. On behalf of The Indian Hotels Company Limited, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.