Good day, and welcome to The Indian Hotels Company Limited's Q1 FY 2021 earnings call, being hosted by Mr. Puneet Chhatwal, Managing Director and CEO, IHCL, and Mr. Giridhar Sanjeevi, EVP and CFO, IHCL. As a reminder, all participants line will be in listen-only mode and there will be an opportunity to you for asking questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch tone phone. Please note that this conference is being recorded. At this time, I would like to turn the conference over to Mr. Puneet Chhatwal. Over to you, sir.
Thank you. Good evening, everyone. Thank you for joining us on this presentation of the quarter one results of this financial year. Let me begin with a piece of good news, as we don't have much in the industry in general globally, and also not on the Indian subcontinent. The piece of good news is The Taj Mahal Palace, Mumbai was rated the number 1 hotel in the world by TrustYou for the third year consecutively. I think being the flagship and the most important revenue generator for the company, including the EBITDA generator on the absolute amount, this is a piece of good news. Definitely in line with what we had started to communicate of us being the most iconic and the most profitable company. There's nothing more iconic than the Taj in Mumbai.
Moving on to the difficult part of the news, that this is an unprecedented downturn for the global hospitality sector, but also for the Indian hospitality sector. The estimated revenue in 2019 for the sector was around INR 160,000 crore, and the loss in revenue in this year is expected to be around INR 90,000 crore. More than 50% of last year's revenue is going to get eroded. With an occupancy loss of almost 32 percentage points, a RevPAR decline of 88%, and this is based on the information that we received from STR. This includes the main share in the organized sector, let's say 80% or more than 80% of it. Sorry, INR 40,000 is in the organized sector, and the unorganized account for INR 8,000 and INR 41,000 respectively.
Moving on further, given what we are facing as an industry we announced that time to sharpen the saw, and we said we will re-announce our Aspiration 2022 with the new goals as we had achieved almost 70% of those outlined in less than 50% of the time. This was not the time to focus on 2022, but more to RESET what we have on our hands in 2020. For us, the RESET stands for revenue growth, E for excellence in whatever we do in guest experience and operations. The S for spend optimization, the next E stands for effective asset management, and finally being thrift and financially prudent. These became the five very important parts of our strategy in terms of whatever we are going to communicate in this quarter and the following two quarters.
Some results were already reaped, and we will take you through those initiatives. The revenue growth accounted for INR 55 crore of revenue, which is coming from not like for like initiatives last year. The spend optimization resulted in savings of INR 52 crore. The effective asset management resulted in INR 22 crore, and being thrift and financially prudent, another INR 19 crore. The RESET initiatives added INR 77 crore to the top line and INR 104 crore to the bottom line in the first quarter of this year. Moving on to the highlights of RESET. If I may start first with the hotel occupancies. What we saw from 20th of March to 20th of May is unprecedented, and that's very evident also when you see here on the slide. It's only after the 20th of May that things started turning.
Till 20th or till 13th of May and starting at 20th of March, the two months very difficult on operational inventory or on total inventory. If you look at available total inventory, because more than half of it was shut down, we were for most part of the month of April and the early part of May, we were in a single digit occupancy percentage. If you took an average from 20th of March till 20th of May, that would still come to single digit. This started changing around the 20th of May. Then we went into higher followed by June, and the numbers crossed more than 20% for us, touching 25%.
On the operational inventory, we started getting close to even 40% occupancy, all these at very low rates because some of these rates are the sources of business were regulated by the government. There is an interesting thing which emerges in the next slide, if you see. The Ginger brand has had a far stronger rebound and has already crossed 40% towards the last 10 -days of June, and also in the early part of July, which is not a part of this presentation, but in terms of giving a trend in occupancy. The rest of the portfolio of IHCL, the Taj, SeleQtions and the Vivanta are in the category of north of 20% occupancy. In terms of RESET growth initiatives, which contributed 31% in the first quarter, that's your INR 55 crores.
44% of it came through the quarantine Vande Bharat repatriation flights, another 25 to the BMC, Bombay Municipal Corporation, and medical fraternity, where we were hosting on average more than 500 room nights per day in different properties of ours. Some incorporated some very new initiatives, which we are very excited about. Some of our new initiatives launched even towards the end of June, like we've launched app in July. The home delivery business started in June. Also the Hospitality@Home in terms of selling hampers. That yielded almost 11% in this total. That was very encouraging because it helped us create incremental revenue of ₹55 crores when you're coming from a zero revenue base. Some of the other things after the revenue initiatives is on the excellence.
We've communicated in all media by way of videos in-house, by way of videos in social media. In terms of Tajness, a commitment restrengthened. As our company is known for the outstanding Tajness that it exudes, we thought the best was to communicate under the Tajness name as a commitment which we have restrengthened and come up with the new norms which comply with the Ministry of Health, with the WHO regulations. Also us taking some of those commitments to safety and security standards to a new level. That has been rolled out in all our hotels that are operational. You would always see that if you enter any one of those in any of the cities that are open to the guests. Very important, a few days ago, we also launched or communicated the IHCL zero touch digital transformation.
The first pilot was done at the Vivanta in Whitefield in Bangalore. This is the digital journey of the transformation that is needed in such times. Otherwise, I think digital plays more and more important role in terms of contactless check-in, check-out processes, invoicing, where you don't touch the invoice, in terms of menus, QR codes, and intelligent conversation platforms. I think this is a very exciting transformation that the industry goes through. We are very happy and proud to be at the forefront of this. Moving on further, I think is the spend optimization. When it comes to spend optimization, over 51% reduction was witnessed in Q1 in total expenditure. I think I will take you through this in the details, where our fixed cost was reduced by INR 90 crore and variable by INR 365 crore.
Our reduction in total expenditure comes 89% from raw material cost, which is obvious. If your occupancy levels drop, if your restaurants are shut, the raw material cost goes down. I think with the kind of business we had, we had a very strict control and renegotiation on all our vendor prices to come to this kind of figure of 89% lower raw material cost. Admin cost went down by 64%. Heat, light and power down by 58%. Fixed lease cost, which was renegotiated, and we were able to seek some lease waivers, giving us another 51% reduction, and manpower reduction of 35%. That combined gave operating expense reduction of 51% in Q1.
The waivers that we secured in terms of leases across all our brands and different companies, which starting with IHCL at INR 22 crores, subsidiaries at INR 6 crores, group companies at INR 24 crores, total INR 52 crores. The benefit received in Q1 for IHCL and subsidiaries accounted net for INR 19 crores. Moving on further to some of the challenges. I think we have been discussing some of the issues for a very long time. This quarter, we had couple of significant developments where we were able to resolve or take the first step in resolving the legacy issues of Sea Rock. Now we control 100% of the shareholding with Sea Rock, and we'll have a phased payout on the remaining 15% that we acquired.
We also acquired 50% of the shareholding of Tata Africa, and now we own 100% of the Taj Cape Town property. We will enter into the second phase in getting the permissions and for building the Sea Rock property and start Cape Town in restructuring that investment. Moving on to the next slide. Corporate overhead is a very important one. We saw a decline of 36% in Q1 because strict prudence was kept in all corporate expenditure. There was obvious reduction in sales and marketing activity because of the lockdown, and we have entered into serious redeployments and renegotiations on all fronts. Redeployment in terms of talent redeployment as some of the call centers which were taking calls for 80% or 75% occupancy, the people who were not needed in that kind of strength, as an example, were redeployed in other businesses, in other group companies.
Renegotiations definitely with the unions, which you don't see all in corporate, but you will start seeing very soon in the P&L in the following quarters, in terms of wages, wage settlements, postponement, and coming to a zero base increase of wages. In terms of liquidity, IHCL has taken multiple steps to enhance liquidity. We've secured debt lines, raised INR 500 crores of long-term debt in Q1. Additional lines have also been secured should there be any further requirement. We are very keenly exploring all monetization opportunities like in the previous two years. Only thing that will happen is a bit of acceleration on that front. However, the price has to be right. There are no bargains that are available.
As we possess some very iconic assets and properties, we are not in a rush like we were not there before, but monetization of non-core assets for sure, and monetization of certain assets and getting into a more asset-like model remains the focus of the management even going forward. Any kind of non-essential CapEx and renovations have been deferred to preserve liquidity to the extent possible. Moving on to the next slide. I would say that here we have the Q1 numbers, the actual numbers versus Q1 last year. On the Q1, the revenue decline has been 83%. We only did a massive decline of 83% on the revenue front. Operating expenses declined by 52%. Depreciation level stayed the same. Finance cost stayed more or less the same. A PBT which was a negative PBT of INR 422 crore versus a INR 25 crore positive last year.
However, I think one is some shareholding we have where the shares went up, so we had a gain there, plus a gain in acquisition of Taj Cape Town, which my colleague CFO will walk through in his presentation also. That resulted in a negative profit after tax of INR 280 crore versus an INR 6 crore profit last year. With that, I hand over to my colleague, Giridhar Sanjeevi, who is the EVP and Chief Financial Officer.
Thank you. Moving on to the financial numbers. These are the detailed numbers. As has been just explained by the managing director, we had a revenue drop of 83%, but through prudence on cost control, we were able to reduce the different costs significantly, helping us with the total expenditure reduction of 52%. On finance costs, we were broadly in line. Exceptional items fundamentally represented an exceptional gain of INR 80 odd crores on the Cape Town acquisition because we had earlier written off and this is fair value under accounting standards we had a gain. We ended the quarter with INR 280 crores of profit after tax of loss after tax. Exceptional items as just described is the change in fair value of derivative contracts, which is INR 4 crores, and the acquisition of Cape Town, INR 82 crores.
We did sell one flat apartment during the quarter, which gave us about INR 3 crores of profit. On a standalone basis, we had a revenue of INR 117 crores as compared to INR 608 crores in the previous year. This represented an 81% drop in the top line. Like the consolidated numbers, we did see the reduction in cost, which was as much as 44%, and therefore, which resulted in EBITDA of INR 140 crores negative. Finance cost was steady at INR 63 crores. Exceptional gain and loss was about INR 38 crores as a loss. I will come to it in a second, leading to a loss after tax of INR 239 crores. As far as the exceptional items are concerned, as you know, whatever funding we do for PIF, we do not allow it to below the investment block, and we always provide for it in the standalone.
It was INR 42 crores in Q1, resulting in a net exceptional loss of INR 38 crores. The gain on sale of flats was about INR 3 crores. In terms of standalone revenue metrics for April, May and June, as you can see that the occupancy steadily went up from April to June, at 33% and for the quarter at 20.5%.
ARR was 7,600 in the month of April, and then in June it was about 4,000, largely driven by the kind of business we have, which is Vande Bharat and the quarantine flights. The RevPAR, obviously, was impacted as a result. Room revenue was INR 40 crores in this, and F&B revenue was INR 20 crores. In terms of the debt position, we continue to manage debt on a prudent basis. The consolidated net debt as of June 30th was INR 2,328 crores as compared to INR 1,950 at the end of the previous year, and the net debt for standalone was INR 1,690 as compared to INR 1,400 crores. The weighted average cost of debt remains competitive at 7.9% and 6.9% for consolidated. Net debt to equity is still at 0.38%. Net debt to EBITDA, of course, has gone up given the drop in EBITDA.
On similarly consolidated, the net debt to equity was 0.48%. Net debt to EBITDA worsened as compared to the previous year because of the drops in EBITDA. That is really the summary of the presentation. Open for questions.
Sure, sir. Thank you. Participants, if you would like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star one to ask a question. We'll pause for just a moment to allow everyone an opportunity to signal for questions. I would also request everyone to state their name and company they belong to before asking a question. We will now take our first question. Participant, your line is open. Please go ahead.
Hi, sir. Good evening. This is Nihal here from Edelweiss. I had three questions. The first one obviously, hoping you could crystal gaze and just wanted your sense on the recovery part specifically. In your interactions over the last couple of months after we interacted in Q4, just wanted your sense, do you believe that for things to get back to pre-COVID or normal levels, is it totally contingent on a vaccine coming in, or how is the way you are seeing it based on your interactions that you've had?
Your second question.
Sir, the second question was on Ginger. As I see that we have been purchasing our remaining stakes in a lot of entities. Even in case of Ginger, we have a 36% stake which is owned by a PE owned by Tata. What would be the arrangement for that?
Okay, the last one, Nihal.
The last one, sir, was on Sea Rock, and now that we have completed the acquisition of the 100% entity, just wanted a sense that do we have any firm plans at this point in time about the different possibilities of that parcel of land?
Okay. Let me try, and Giri, please feel free to add as and when you want. There are three terms that are being used by the hospitality industry and all the associations, which is called the survival phase, the revival, and eventually thrival. The thrival is the one which is linked to the post-vaccine. That may take anything between 18-24 months or 30 months is anybody's guess, because it's not just when the vaccine comes, rather when the people have also been vaccinated, right? The question is on the survival. As I said, the toughest phase that the industry went through is now we could debate if it is from 20th of March or 22nd of March, which was Janata Curfew, and then you had this lockdown on the 24th of March. Is it from that?
To keep it simple, let's say it's the two months, 20th of March till 20th of May, and I think that was a very dramatic phase. We cannot count it as a survival. Since 20th of May till, I think, 20th of August is the survival phase, and the revival already started somewhere towards the third or fourth week of July. There is an overlap. It's not like a switch on, switch off button that now it is survival, now it is thrival, or now it is revival. The revival started, albeit at a very low level. It is better than 0 because some of the hotels that are still shut are at 0 level revenue for the industry. Does not matter where and in which part of the world, a lot of industry has been shut down, so opening up already helps.
I think at the moment, we are in a combination of survival, revival phase. We as management feel optimistic that towards mid-September or latest mid-October, we will start seeing a pickup in the activity. I was yesterday at an event in Taj, in Gurgaon, and there was a lot of activity in the hotel. That's what we are also seeing in Mumbai in our properties. It was good to go out of Mumbai and see it in another place too. That answers on the recovery. On the Ginger. As you must have noticed, Nihal, that since last two years, we work very actively on Ginger. It's repositioning, it's redesigning. Ginger is a commitment we made to ourselves as a brand, which we think has a great future over long term on the Indian subcontinent.
That all is already being seen in the results. At this point of time, such discussions about having 100% control on Ginger is not there, as we will need some capital if we had to buy somebody, whether it's Ginger or another company or another joint venture. We don't want to do it if we are not doing it out of free cash flow. That question does not arise. We own the Ginger brand 100%. It's only the company in which it sits as the management company, which is a Roots Corporation, that you have another couple of shareholders in it. We are very excited about the future of Ginger.
When it comes to Sea Rock, yes, it is our firm belief that together with Lands End and Sea Rock, this is building the next icon for Mumbai, just like 100 -years ago, Taj Mahal Palace & Tower was built. This will happen. The only question which we might debate or which would definitely not be our choice at this point of time, is to use our own capital. Our strategy will stay to use some partner to help us build it, and we would manage it, and that's what we have been doing. As you know that the majority of our pipeline of what has contracted in the last two years are based on that model, that we said we will be 50/50 balanced portfolio in terms of owned and leased versus fee-based business, and that remains a clear priority for us.
We are very excited about this development, and we will now set the design and all the planning wheels rolling so that hopefully in foreseeable future, which is not foreseeable, I don't mean two, three, four years. 12-18 months time that we get the permission so we can break ground and start going.
That's very helpful, sir. I'll come back in the queue for further questions. Wish you all the best. Thank you.
We will now take our next question. Participant, your line is open. Please
Hello.
Yes.
Hello. Sir, this is Zakir here. This is Zakir Nasser. Hello.
Yes, Mr. Nasser.
Sir, I have two questions, sir. Number one is, like you mentioned that the model of the hospitality industry, it was always based on, centered around the price of property. Do you think this will shift towards brand-centric and service-centric? That is my first question, sir. My next question is a follow-up of this, is that whether a hospitality company like Indian Hotels, would it not be better that it run as a debt-free company? Do you have any plans to make this debt-free in the next three to five years, sir? Thanks.
I will answer the first part of the question and give an introduction to the second part and let my colleague answer the second part. I think your first question is a very interesting question, and I am glad you asked it. The industry has already evolved into being brand centric and service centric, but the change that we are witnessing now and we will witness much more strongly going forward is that the customers will go to the brand they trust. Especially our backbone is the Taj, and the Taj stands for trust, awareness, and joy. In our very strong belief, not just in India, but globally, it will not be in the short term, it will not be the third-party websites, it will not be other people, intermediaries, booking as much as they used to do before.
People are hesitant to travel, but they are happy to take the risk and travel if they know which airline they are flying, if they know what destination they are going to, what are the facilities available there, and which property or which brand they are going to spend their time with. I think there we feel we are very well-positioned, and definitely that shift is also going to last for longer because brands in such time are more important than ever before. As you have seen that Taj was voted India's Strongest Brand across all sectors. I think we stand very well-positioned. With our other brands too, whether it's Ginger or Vivanta or SeleQtions, but especially with the Taj, I think we are very well-positioned to take advantage of that.
In terms of being debt-free company, yes, in an ideal world, one would be debt-free, but a bit of debt always is good in structuring. Without getting too much there into the detail, why don't I request my colleague to answer that part of the question?
Thank you. In fact, I think if I look at the pre-COVID world, I think we were always kind of managing debt. As you know, between 2017 - 2020, through various efforts, we were able to bring down the net debt to equity and the net debt to EBITDA. In a pre-COVID world, I believe we would have liked to bring it down to about INR 1,000 crores or so. On any case, our asset-light strategy was helping. Our target was to go to 50% on an asset-light basis, and that could have required much lesser capital on the balance sheet side. On the P&L side, very clearly, we were driving through EBITDA margin growth. Now, I think what is likely to happen is that the profitability targets in terms of driving through performance improvement continues.
All our cost efforts are going to lead to a very different operating model and cost structures once the business recovers, and our asset-light strategy continues. Our sense is that we will be very focused on this. As you know, we are also monetizing assets, and that has always been part of our strategy. A combination, I guess, of asset-light growth, monetization, improved profitability, and flow-throughs, all of these will help us to keep the objective of keeping debt at optimal levels intact. I'm not sure, as Puneet said, zero debt is the right solution, but a level of debt which is kind of small and meaningful is really what our objective remains, Sanjeevi.
Thank you. Just an add-on question. Sir, in some parts of the world, the way we see hotel rooms are priced, in India, we have not seen that happen as yet. For example, let us take example of Cherab. If the cost of the room on an average is INR 15,000, and if you don't have occupancy, would your thinking lead you to give it at INR 7,000 so that you have an optimum kind of occupancy? Would that thinking come into the pricing of rooms? Thank you, sir.
Nasser, I don't know what makes you say that. This is not accurate because globally, revenue management has become a core part of any company's business. The revenue management on the room side of the business from the food and beverage definitely is a combination of the right occupancy, the base occupancy, and the right pricing strategy. We always try to get to a certain level of base occupancy before you start moving rates. If you're operating at 85%-90% occupancy, you don't try to book it to fill the last 10%-15%, because that is counterproductive in the long run. I think the industry actually has suffered in its ability to charge the right rates. It is very important to maintain certain integrity with the rates.
It is better not to build very fancy hotels and spaces that are not used by all guests, which is also called the renaissance in hotel business, because that has happened. The non-room space is being built less and less, not in the five-star category, but definitely in what you call the upscale, the upper upscale, the mid-scale, or in the economy segment. That will continue to happen. Revenue management has been a key focus for any serious hotel company having world-class brands. We've been practicing that very diligently.
Thank you, sir. On the issue of standalone hotels, sir, do you think in the post-COVID world, could a standalone hotel survive and thrive, or it has to be necessarily a part of a brand and a service network?
When you say standalone, you mean unbranded?
Unbranded, single owner, single running kind of a place.
I think it depends on the capitalization of their asset. If they are capitalized, of course, we will survive and thrive. That's not our business. IHCL is in the business of running our own branded hotels. Yes, there would be an opportunity for us to go for conversions because we do believe in six, eight, 10 months from now. Hello?
Hello?
Hello?
Puneet, I think they are not able to hear you.
Yeah. Now I can. It's got back. Thank you. Hello.
Yes, please.
I think we were not able to hear you, sir.
Were you able to hear me or not?
No.
No, for a few minutes, no, sir.
Yeah. Yeah.
For a few minutes, I think.
Right. I think there will be a lot of stressed assets, properties that will come onto the market, and it's also a good conversion opportunity for us. It's not appropriate for us to comment. In that side, I would really do a larger share of this, that what we are seeing, the reality is that the depth of this crisis has been so strong that it will not be an easy way out.
Thank you, sir.
We will now take our next question. Participant, your line is open. Please go ahead.
Hi, good evening. This is Vikas from Antique. Thank you for taking my question. The color you have given around RESET initiative and cost management is truly great. My first question is, I just want your view. Once we are done with the pandemic, do you think the most property owners will prefer to partner with Indian Hotels than many of the other players, as the COVID would have, by now, made them realize the importance of having a good partner? What I'm trying to make sense of, the management contracts, it would be more in favor of Indian Hotels once we are done with this pandemic.
Even pre-COVID, if you look at what we were able to acquire for our pipeline was more than seven years' time, and that last. I do feel that the group will also look at how and what especially we have done in terms of serving the community has created a goodwill for the brand, which. Definitely the empathy and sympathy factor for our company and for our group is very high because that is a core value of the foundation of this group. When Sir Jamsetji Tata founded the company, he said the community is not just another stakeholder. I think in times like this, the hard times for the hotel sector or in general strengthens us more and takes trust level to a totally different way of looking at things. We are already seeing in terms of getting more management contracts. It is about getting a share of the pie.
Yeah.
Yeah. I think I got some part of it because your voice was going in between.
If I can build on what Mr. Chhatwal is saying, I think as you know if you see the history in the last three years, we have been getting more than a 50% share of the management contracts. The feedback from all our owners has been excellent in terms of the time and attention that we give and the access that is provided to the senior management. Unlike some of the other brands where they end up talking to a multinational manager who comes across. I think we have been very agile and responsive to the owners as well. My sense is that this will continue in the current environment as well. We will continue to maintain a disproportionate share of all the new management contracts.
Sure. Thank you, Giridhar. Also regarding the employee cost, I can see on standalone it's down 11%, on consolidated it's down 37%. Where is the disconnect there? First of all, I understand Tatas were pretty accommodative to employees and vendors. Where is the difference between that standalone and consolidated? Why consolidated numbers
No. Essentially, what's happened is that our ability to sort of manage the cost in London and the U.S. especially has been very significant. As you know, in London, the government came up with a subsidy plan where employees earning up to GBP 2,500, where 80% of the cost was subsidized by the government, that scheme is still going on. Albeit it will taper down over the next couple of months. But that has been a big implication. Secondly, in the U.S. market, what has happened in the New York Union, the New York Union rules have allowed hotels in New York to sort of furlough the union employees for a period of six months, paying only the healthcare insurance thing. We have been able to take advantage of that. Significant cost savings on the labor front have been achieved in these two markets.
Even in India, I think we have been very careful. I think there are three classes of employees, and as the chairman also advised in the AGM, I think as far as the contractual employees are concerned, where we deal with agencies who appoint them, we have been working with agencies in terms of managing their headcount. As far as the fixed-term contracts are concerned, we have honored all the contracts. At the time of renewal of contracts, we have been taking a case-by-case call, and as far as the full-time employees are concerned, people have taken pay cuts up to a certain level in the organization. That's been the approach in terms of managing the employee costs. We are also working on redeployment, working on different operating models. All of these will come to bear fruit in the next few months as we go forward, actually.
Sure. That's helpful. I just have one last question. What is the overall debt level you are comfortable with in case the occupancy remains subdued for a period of time than expected? What point you will maybe accelerate the sale of non-core assets or maybe look at the divestment? Also if you can just give me the CapEx levels you are targeting for the current year. That's about it. Thank you.
Yeah. No, fair enough. I think as far as the debt levels are concerned, very clearly this is a very big focus area, and I think it's a combination of the monthly spends and the CapEx and all. At this point of time, as far as the debt level is concerned, what we believe is that monetization will be a very key objective. We are in discussions on monetization of some properties. Our idea is that whatever we monetize, we will use it to reduce debt, actually. That is something that we would do. As far as the debt level itself is concerned, I would simply say that you have seen the 30th June numbers. I think our debt to equity is still at a manageable level. I suppose there will be some increase in debt.
With monetization, hopefully by end of the year, we should come back to meaningful levels, actually. That is as far as debt management is concerned. The second question, sorry, I missed the second question you had.
What is the CapEx levels you are targeting for the current year?
The CapEx level is a combination of two things. One is CapEx, which is the current year, which is really Mansingh and Connaught, et cetera. The second is the payments from the previous year. Combined together, we think that the expenditure may be approximately about INR 250 crore this year.
Okay. That's helpful. That's enough. Thank you.
We will now take our next question. Participant, your line is open. Please go ahead.
Hello? Hello? Hello?
Yes, your line is open.
Yes.
Go ahead.
Yeah. Hi. Sumant here from Motilal Oswal. sir, can you discuss more on U.S. and U.K. hotels, the hotel opened, what is the occupancy and all?
The U.K. hotels have just opened. I think St. James' Court just opened on July 4th under the government rules. At this point of time, the business is slowly coming back at this point of time. In Q1, for instance, we had an occupancy of very nothing because it's only the July business, Q1 there was no business in St. James' Court. Similarly, in The Pierre and Campton Place also, it was minimum business. Therefore, I think the real opening up of U.K. has happened from July. As far as Pierre and Campton are concerned, we think that by end of September, Pierre should open, Campton by October. I would say that you will start seeing the business happening from the second and third quarter. From the end of second quarter is what I would say.
U.S., you said opening in July?
No.
The Pierre?
The Pierre will open by end of September. That's the current thinking. Taj Campton Place sometime in October.
October. Okay. U.K. hotel already started.
Yes, July 4th. Yeah.
Okay. When talking about overall the total room, how many rooms are operational currently? I am talking about the IHCL and subsidiary, not group level.
How many rooms are operational?
It's around 14,000.
Yeah.
Around 14,000 as we speak now. If we include all brands. There is around 5,000-6,000 that is still not operational.
Okay. What about the management contract rooms is under operation? How many rooms are operational? You said 1,400 is own hotels, right? 14,000.
No, I said 14,000 total, but we can send you that information if you-.
Okay. No worries
we don't have it ready, how many in management and how many in lease by brand, by country, we don't have that.
Okay.
We have that information, but not on this call.
Okay. Can you discuss more about how is the actual customer mix currently and how is the actual demand coming up in particular geography like Goa and Bangalore and any other market? Overall level, what is the mix of the actual demand or actual customer, you can say, ex-quarantine?
Right. Some of the initiatives that were launched based on the opening and closing of the markets, they were able to show results. When we launched the 4D experience as an example, which was you dream, you drive, you discover, and you delight yourself. When we started it went very fast, and there was a lot of pent-up demand or the revenge travelers, people call it. A few days later came the lockdown. This was from Bangalore going to Coorg. We launched it first in Karnataka. It was very strong, and suddenly the lockdown was imposed again, so it dropped. At the same time, when we launched this in Rajasthan, Udaipur is one of the biggest beneficiaries, followed by Coorg as I mentioned. The third one is Jaipur. There is a lot of demand which is not seen historically.
People driving to a destination. There is tourism or leisure is the one which is leading. Business travel still remains very subdued unless you're talking about a Ginger-branded category of hotels. That is also right because your business travel has to come in cities like Delhi. Business travel will be taken charge by cities like Mumbai, the national capital and the commercial capital of the country, right? If both are not fully open, then the business travel remains subdued. Goa has some difficult quarantine challenges, so Goa at the moment is subdued. It's still at number three for us or number four for us, but we do feel it can go up much faster and much higher depending on when the quarantine rules are relaxed or they become a bit in line with other different states of the country.
Okay. Okay, thank you.
We will now take our next question. Participant, your line is open. Please go ahead.
Good evening, sir. This is Deepika from JP Morgan, and thanks for taking my questions. Sir, just regarding this point on the customer mix, barring FY 2021, do you foresee business travel to remain subdued for longer? As a result of which, do you see other, let's say, lower margin customer mix basically gaining share and hence impacting RevPAR even 12- months out?
Not really. I think the day we get the communication right in all the media in terms of travel is safe, and the industry is working collectively on it. I think one of the industry colleagues from MakeMyTrip did a very good video on that. We're going to push those efforts very strongly collectively as an industry from all branches of tourism, not just hotel business. For some reason, hotels have been not treated the same way as airlines or shopping malls or standalone restaurants. I do believe that this should come shortly. This opening up should happen within the next few weeks. It's quite imminent. Once that happens, the business travel will start coming back. See, it's a psychological thing. People have to feel comfortable that it's okay to travel.
People have to feel comfortable that the number of cases in the capital of India are limited to 1,000 and are going down consistently. People have to feel that the curve is flattening in Mumbai and it's a sustainable thing. Once people get used to that, I think they will also start traveling, and people will travel with precaution. At least that has definitely started happening in Europe. People are traveling, but they're taking all the necessary precautions, and I think it should soon come here too. It's also happening in parts of Southeast Asia. It's not that it's not happening there.
Got it. Sir, if you could give us some color. I know it's early days, but towards end of July, August, what are the occupancy levels like, both for Ginger and for the luxury brands? Just to follow up on that, on your Aspiration 2022, maybe it's a little early, but are you looking to still maintain all those targets of 800 margin improvement and 23,000 rooms?
Let me start with the last one. That 800 basis point margin improvement we already achieved at the end of 31st March. If you look at that, it was 25%, and 23,000 rooms as a total portfolio was also more or less achieved. That's why we thought it's not the time to keep counting rooms. It's the time to focus on the current thing, and that's why we came with the RESET. If you go back and look at the last financial reporting, you'll have all those numbers in there. That's why I said that we had achieved already 70%-75% of all our goals of Aspiration 2022 already at the end of the financial year 2019/2020. We do think we will provide guidance or fresh guidance at the end of next quarter.
Got it. Sir, any updates through August? Yeah, on occupancy?
Through August on the occupancy you wanted, right?
Yes.
Let's see. Occupancy levels, as I said in the presentation, Ginger is kind of around 40% or higher, and the rest of the portfolio is north of 20%. That is all available inventory. If we were to look at hotels that are allowed to open, then there are hotels even operating today as we speak at 70%, 80% occupancy, but at lower rates. There are a lot of hotels, and that's the maximum they can have. For example, in city like Mumbai, because of the lockdown, and for safety reasons, we are not allowing the staff to go home. Either they are staying in nearby locations, or they are staying on the hotel premises.
We can't have more occupancy because the rooms are occupied by own staff also, as it is the safety and security of our associates is of paramount importance, and if they are safe and secure, our guests are safe and secure.
Got it, sir. Thank you so much.
Thank you.
We will now take our next question. Participant, your line is open. Please go ahead.
Yeah. Hi, good evening, everyone. Thanks for the opportunity. I had a couple of questions. First of all, what I wanted to understand is that, of course, the cash is the king and everybody is sort of dying to preserve cash. In the same context, don't you think this is a good time for the conversions because you get the cheaper properties? I mean, a lot of consolidations are happening and a lot of people are dying without cash. What is your view in this regard? Do you think it's a good time to convert? Are you planning to do more conversions? How does the situation look like?
Giri, you want to try first, I'll add later?
Yeah, sure. No, I think as I understand there are two parts to the question. I think part number one is the whole conversions in terms of management contract. It is absolutely true that in times like this, the conversion opportunities are greater in terms of hotels which are operating and owners switching. That is definitely one part of it, which we are pursuing. The second part of it, if you're talking about acquisitions, clearly there are stress tests that are going up and there will be opportunities therefore. However, such acquisition has to be done with the right kind of money. It cannot be done with debt, and to the extent that we can also leverage our platform with GIC, we will do so. We are not lost. We are not losing sight of those, but we'll have to do it at the right time.
Right. Okay. The other thing what I wanted to understand more about the customer mix, following on the recent question. The corporate travel is not happening at the moment, and as you rightly said, that occupancy is more in the Ginger brand. Does it indicate that the high-paying customers, like the corporates, like the international travels happening in India, I mean, those are the guys who pay higher rates as compared to with otherwise a general customer. Do you think the RevPAR would remain under pressure even going into the FY 2022?
Yeah. I don't believe that would be the case. I think on the contrary, it depends what the balancing act on the demand and supply would be. Based on some of the surveys done, especially by HVS which was shared with us, the CAGR on demand is expected to be at 3.3% between 2020 and 2024, and the supply is a little less than 2.8%. This is something different than the previous financial crisis, where there was a lot of supply coming on the market in 2009 and 2010 and 2011. That is one. The second is, at this point of time, as I said, it is uncertain how much of the supply may continue to function as a hotel or might be used for alternative uses. That will depend.
The likelihood that it comes back stronger is higher than the likelihood that the RevPAR stays subdued for a very long time. As I said before, all the figures that we are reporting are on hotels as if all of them were open. If we started giving a report on hotels that are actually operational, the occupancy levels are quite high.
Yeah. I agree on your point and you are sort of trying to look at the demand and supply and of course I agree with your point. The demand which you are talking about, isn't it the sort of lower paying customers who are actually staying in the hotel? I mean, so of course the quarantine and all, but otherwise also, don't you think that kind of demand is there? I mean, not the high-paying passengers, which are more of international people and then more of corporate people and all. Don't you think that is the case?
That's what I'm saying. Today, this is what is there, which is not bad in the survival phase of the industry, but it will start to revive once the lockdowns start getting lifted. Either we believe that lockdowns will be now for the next six months, then that demand is not going to come back. I personally believe that the phased-out lifting of lockdowns has already started happening. A few days ago, Guwahati was announced to have opened. Mumbai already kind of has seen a phased opening. We are already talking Unlock 3.0. I do believe in the next few weeks, unless something happens that we all don't know today, with the opening up of the markets, the normal level of demand will start coming back. Albeit slowly for the first six, eight weeks, but then it will gain momentum.
Right. Okay. The other thing which I wanted to understand and if you could please help me. Basically, look around the world and then you go to Europe, and then you go to the U.S., and you go to even China, people are actually avoiding air travel, and they are looking for more for staycation kind of thing, and they are sort of driving down to the nearby places. How is that trend happening in India? Have you noticed that kind of trend, that kind of passenger coming in?
Yes, it's the same here. See, man is a social animal. You can't lock down human beings for five, six months. If they want to go out, they will go out, right? We have seen it in a very negative fashion when some shops were opened in Delhi and how people lined up without maintaining any social distancing. Now to come to concrete staycation, drive-cation, people taking driving holidays. This has started happening in the last few weeks. It wasn't there as strong, let's say in April, May, and even parts of June, where the real demand was coming only from the Vande Bharat and the quarantine guests and the medical staff. Of late, we are seeing these green shoots. Also we did in some of our places in June we did do some weddings. Again, up to 50 persons only as allowed by the government.
You'll see it starts changing, and we are seeing some trend. Yesterday while talking to my heads of operations in our company, my colleagues, we got confirmation that we are seeing some very good signs of large weddings again happening. Large when I mean in terms of the volume of payment the kind of service and the kind of attributes they want. Again, in Rajasthan as an example in destination wedding. They're like three, four, six months out, when the wedding seasons come and when those dates are available.
Right.
Staycations for people who are in the same city would check in into hotel. We saw that happening very much in Bangalore. We have had first few queries of that in Mumbai at the Lands End especially. There are things like this that are definitely happening. It's a common trend globally. It's not just a trend in China or in the U.S. or Europe.
Fair enough. I also wanted to understand about your mix between F&B and room with the new initiatives which you've taken the home delivery and all, or otherwise also, if I'm in Mumbai and I don't want to stay at the hotel, but of course, having food, probably it's safe and then it's a bit of outing. In all those scenarios, do you think the mix between F&B and room revenue could change? Or do you think that's not going to happen?
I don't think over long term the change will be that dramatic, but I'm glad you mentioned about the home delivery. That is, we have built our own app. We are not using a third party so as to drive higher margins, and we have already opened in five cities. Five more will follow over the next five weeks. The app which has now been launched in Mumbai will be launched in four more cities. Eventually in all first 10 cities. At the moment we are operational in Kolkata, Chennai, Bangalore, Delhi, and Mumbai, and then five more will follow. Very positive, very excited about this part of the business. In the pre-COVID world, maybe it had a potential of less than 7%-10% of our total revenue. On the bottom line it is far higher because everything is incremental.
You're not building new kitchens, you're not adding new staff. You're using what you have, and it's being delivered to people's residences. I think it's a high margin business and very exciting because at least people are getting something brought to their residence. Giri, you want to add something?
No, I think what is very good is that when we started Hospitality@Home and also the Qmin, I think the Hospitality@Home the pricing was INR 5,000, INR 10,000. Even Qmin the average ticket size has been maybe around INR 4,000 or so. These are all high margin businesses. I think it's good to see that.
Right. I have two more questions. I'm really sorry for the long list. I have two more questions actually. One is about the cost. If you could please talk more about cost. As you rightly said, in the first quarter you cut down the cost by 52%, other expenses were down 60%, employee cost was down 35% and all those sort of things. How should we expect these costs to evolve over the next quarters? Of course as the business comes back, as you start opening more hotels, your cost will start rising. How do you see the cost evolving over the next few quarters? The second question I also wanted to understand, Puneet just talked about the demand and supply and sorry I forgot to point out at that point of time.
Do you expect this year demand and supply both to grow year-over-year? How the demand supply situation looks like? I'm sorry if I missed something on that. Thank you.
Giri, you can take the second half. The first half is there is always something good that comes out in every downturn or in every crisis. In this crisis, I would say for the industry in general and for us also in particular, we've been able to reset the cost base. A lot of these costs, if you think they're only variable costs that have gone down and the occupancy that comes back and the costs will go up, that is not going to be the case. We'll be working out of a different cost base going forward. I think even if we get to 80% of the revenues that we have achieved before, it will come to the same margin level as we had before because of the readjustment of the cost base.
Yes.
Just think about it from the new standards of hygiene, social distancing, et cetera, in the spaces that we have. You don't have the same number of seats in a restaurant like we used to have before. You don't need the same kind of staffing, cleaning, heating, air conditioning. It automatically starts going down even if the restaurant was full.
Right. No, but I was talking more.
The same thing on different fronts in terms of security, in terms of heating, lighting, power. You get smarter after every crisis.
Sure. About the supply-demand issue, please give me some bit of.
I think as we spoke earlier on supply-demand, I think very clearly, basis the HVS report, we are definitely seeing supply being lower than demand. Also in terms of new supply which is coming up, we do see that because of maybe funding constraints and all that, we definitely see slower in supply happening at least for the next one year or so, until there is better clarity on funding availability and things like that. As far as demand is concerned, right now, of course, the demand that we have seen in the main cities of Bombay and Delhi have all been more of the quarantine and business kind of demand. As the leisure travel picks up with 4Ds and all the other initiatives that we've launched, I would say that the demand pickup will happen more driven, I suppose, by leisure.
People start getting more comfortable with air travel, I think the business travel also will pick up actually.
Perfect.
The main season is still ahead of us.
Yeah. Perfect. Thank you so much, and good luck.
We will now take our next question. Participant, your line is open. Please go ahead.
Good evening, sir. Thanks for giving me the opportunity. I'm Kaustubh Pawaskar from Sharekhan. I have two questions. Sir, post-pandemic, as we see that once demand starts recovering and everything is in normalcy, should we expect even the room rental to go up? Is there an opportunity for large hotels to increase the prices, considering the fact that as you said, travelers would be more keen to go into the trusted brands. Will it give an opportunity, player like Indian Hotels or large player to increase the room rentals?
It should give the opportunity in the medium to long term, but not in the next few quarters. I think at the moment, if we get that kind of customers coming in who are willing to pay higher, we are very happy. That happens when the business travel picks up or high-end leisure. High-end leisure, we have seen some green shoots, but we have to have some form of business travel because of the nature of the business travelers end up paying more. Also meetings and events they have to start. Eventually the ability to charge for any trusted brand, as we said before, is going to be higher than for anyone else. I do believe that in a period of nine months, 10 -months time, we would have a higher ability to charge.
This is assuming things open up in the next two, three months time. In the six months thereafter it will start showing what you asked in your question.
Right, sir. Same thing I was asking, you were expecting a recovery in September. Maybe post the vaccine or when demand actually starts seeing a proper grip there should be an opportunity for the increase in the room rate. My second question is with the recovery in the room demand, should we also expect the F&B part should also recover or it will take some more time for F&B business to come back on track?
No. Actually, first I have to correct. What I said was I expect opening up end of this month or September, and then it will take always around six weeks for any business to pick up. If the lockdowns are over, it will still take four, six, eight weeks for business to restart. Once that happens, and then you get into the wedding season, it will be fine. F&B is a very important source of revenue on the Indian subcontinent, and I think it will continue to be. We don't see much difference in F&B going forward. As I said before, people will go to the place they trust. They will not just go to any other restaurant, whether it is a standalone or it's in a hotel or it's a part of some chain of restaurants.
If they trust the place, if they trust the people who are serving them, if they trust generally the atmosphere, they will go there.
Thank you.
We will now take our next question. Participant, your line is open. Please go ahead.
Hi, everyone. This is Shaleen from UBS. Most of my questions are already answered. Please, just one confirmation. What is our monthly cash loss right now, including the finance cost, and how much is our cash balance now?
Sorry. You wanted the monthly cash. I think monthly cash is approximately about, I would say currently we are spending maybe about INR 100 crores or so, including CapEx, including all of it. It's not just operating itself. That's the cash run rate, actually. We have adequate cash, I think, and we have lines of credit. I think between cash and lines of credit on hand, it will be about INR 1,000 crores plus. I think we are fine in terms of liquidity.
All right. Puneet, on the operation front, as Puneet has alluded, it takes six to eight months for any business to stabilize kind of thing even after opening. Since we have cut down our costs significantly, what is the break-even occupancy level at the hotel and ballpark, what percentage of hotels are at break-even level? If you can share this number, I don't know whether it's handy with you or not. Any sense for us to make assumptions, whatever you can share.
Yeah, Shaleen, it's a very difficult question to answer because the break-even point for a Taj or a Vivanta or a Ginger or SeleQtions is not the same. If you put everything in one basket, maybe it's around 42%-43% occupancy at a system-wide rate of around INR 5,000. That would mean a RevPAR of around INR 2,500 is needed at that level. This is only the rooms part. You need, again, some activity on the F&B side also. I think if we looked at a total revenue per available room, then we have to look at around INR 4,500 to have a break even on Taj, SeleQtions and Vivanta brand, and on a Ginger, we could easily do it at INR 2,000, INR 2,200 level.
I think it's important to look at total revenue per available room and not just the room rate and the occupancy part of it.
Fair point. I completely agree with you. Another question.
Sorry, Shaleen. If you are, like Giri said, if you are in the U.K. or in the U.S. and you get all the subsidies from the government and payment for the employees, then that number can change significantly. The waiver in property taxes like they have done in the U.K. Sometimes it becomes a big cost. It depends. It's by geography, it's by brand, and also by contract type. If it's a management contract, then it's only a question of how much lower or higher your fees was, as you don't have all these costs. Your break-even point is more on the fee income derived versus a service provided.
Fair point, Puneet. Agree with you. One more question, something related, and if you can share, up to you. As per your internal assessment, what are the operating metrics, either revenue side or the occupancy or RevPAR, etc., whatever, you need to come at EBITDA break-even levels? Because I don't know if you open new hotels, you have to be decisive of whether you want to operate all the properties or you want to be selective about it. What are you looking at it?
Shaleen, I'll answer the second part and the first one because it's Giri's favorite, and he's just done a presentation today on that, so I'll let him do that. The second one is, as I said before, with the exception of The Connaught in New Delhi and a couple of Ginger properties, everything is on a management contract basis. The cost to us out of pocket for opening, launching, setting up is not there. The Connaught is relatively a small property, it's 100 rooms only. We are actually looking forward to the growth because all that growth should be EBITDA additive. It will add on to the EBITDA. It's not going to create losses. As we said, there is a rationale behind why we went for this kind of growth in our pipeline.
Giri, maybe you want to give a level at which we are both EBITDA and PAT positive.
Yeah.
Neutral.
I think, yeah, that's right. I think obviously EBITDA neutrality, at least at a consolidated level, and maybe PAT neutrality at a standalone level, is obviously the standard that we are all kind of seeing what will it take. I guess it's a combination of recovery in the third and fourth quarters and also the kind of monetizations that we can do. I think both are going to be very important. My sense is that at around a 50% occupancy level we should aim to get closer to the EBITDA neutrality at the consolidated level is what it looks like.
RevPAR wise?
RevPAR will be what it is. I think it's more driven by, I guess, what is the performance vis-a-vis the previous year. I think in terms of what I would say is that at a 50% level as compared to the previous year, we should definitely aim, I'm not saying we are there, to get to the EBITDA breakeven for the consolidated level. As far as standalone is concerned, I think it is more appropriate to look at PAT neutrality, but that depends on operational and non-operational incomes. Operational, of course, the business service and non-operational based on monetization. We'll see. I think both these factors are important. I think recovery in Q3, Q4 and the monetizations. Those are what we are kind of aiming for in any case. We'll see how far we get there. Yeah.
All right. Great. Just last one. Obviously we have renegotiated leases, et cetera, and rentals. Have our partners also tried to renegotiate management contract fees with us? Are there any cases like that?
Of course, Shaleen. There are always cases like that. It's also an opportunity because nobody renegotiates and say, "I'm not going to pay." That's not the thing. What people try to say is to protect liquidity or cash. What can be done, maybe if we can give them that and get something else in return is good. There's nothing like a one-sided way of negotiation. That doesn't work because we don't own the assets. There is no upside to us, right? The fees that we charge are very much in line with the market. It's not that we are charging 50% higher fees, we start reducing it. I think the ethical way of doing business is appreciated by owners and partners, especially with, as I said before, with our group, that level of integrity helps us also in a crisis.
There is not one kind of formula that you can apply. If we have a 40+ year partnership with a royal family in Rajasthan on a management contract basis, it is of a very different value than having a management contract in south of India or in northeast in a secondary market for 100, 150 room property. One could be an iconic asset, well known globally, the other one, it is not really that much brand enhancing and something which leads your branding charge or creates the halo around the brand. Also not such a long-term relationship. For relationships to last 40- years, 50- years, it's a very long time, and those people need to be treated differently than where you've just started.
Right. Great.
It's one kind of contract at a time, and there is no one-size-fits-all.
Got you. Great. Thank you so much, Puneet, Giri. That's it from my side. Best of luck for upcoming quarters. Thank you.
We'll now take our last question. Participant, your line is open. Please go ahead.
Hello. Hi, this is Vinod here from Templeton. Am I audible?
Yes, please.
Hi. I just wanted more clarity on your cost cuts that you have planned now that in a standalone business you have a 44% drop in costs, 45% per room basis, but it's a mix of both your own cost cuts initiatives, also inventory not operating. Let us say if all inventory was back, what would that number look like? The other way to put it is once, let's say after second quarter, where would the cost per room be vis-a-vis what they were last year?
Yeah, I would let Giri answer that question. I would just say one thing. When we started with the lockdown, nobody expected this to go on till August, right? The first date that was announced was till 13th of April, which was then extended to end of April, and it kept getting extended. Maybe the agility in Q1 on cutting costs was missing to some extent. By that, what I want to say is that in Q2, you will see a much more improvement in also the cost initiatives that we have taken or the spend optimization initiatives that we have planned. As the first phase, it was like a wait, watch, and see, and maybe after 13th April everything will open, or after April everything will open.
There was communication from the government, which was first communicated, then there was a different ruling by the Supreme Court that you have to pay salaries. I think you all recall that. That definitely has certain impact on the Q1 cost structure, which is going to be maybe a little bit reversed in the Q2. With that, I hand over to Giri if you want to elaborate on that, Giri, or add on to it.
No, that's fine. I think building on what Puneet said, I think very clearly what is happening in the cost is that we are getting into much more sustainable kind of models actually, because people are learning how to operate at a lower level. As opposed to purely tactical steps in terms of cost control, I think it is now becoming strategic. For example, if I talk of shared service centers. Now shared service centers we started, but now those will get accelerated. Digitization, for instance, is getting accelerated. Some of those initiatives are getting as you sort of do online, what do you say? Check-in, check-out under the I-ZEST, which is contactless. It will have an implication on the manpower which is being used.
I would say that the cost efforts are moving from tactical to much more strategic, and that is definitely going to have an impact. The second thing is that as the hotels come back into operation and as business picks up, we will also see some of the other revenue lines also pick up. For example, The Chambers is an example. They represent some of the safest places to meet, we believe that some of The Chambers' revenues also will start picking up. I think it's very difficult to just look at one part of it. My sense is some of those initiatives also will start picking up actually.
Also as we open hotels, we have now learned how to operate hotels, and the ability to switch on, switch off in terms of loads and also clustered approach where certain hotels will be more occupied than the others. I think those are being done in a very significant fashion. In terms of supervision, as I've been moving on to the fundamental thing, what I spoke about, in terms of supervision, I think the supervisory frameworks are getting modified, where I think you will find we would go to much more cluster operation. Training of people is changing, that people are being multi-skilled trained, where they can not only do housekeeping, but also do front office, banquets, et cetera. Some of those, we call them the A team. Those are also being implemented.
My sense is the quality of cost control is definitely changing, and you will see that come through as we go forward as well, I would say.
Sure. From what I understand is that A, the cost controls were implemented during the course of the quarter, and therefore only reflecting for the part of the quarter, and that we'll see the full quarter impact in 2Q. Second, is it fair to say whatever controls you had to apply, whatever cost cuts you had to do, you have achieved all of that? The number that we see in 2Q would be the full quarter sustainable cost control that you will see? You don't have to put in more initiatives now.
No.
Is that-.
No.
Okay.
No. This will be ongoing. There are certain things you can't do immediately. A lot of initiatives are there that have taken place, but it will be built upon, and also it has to be seen in line with a certain level of occupancy. I think the real metric starts coming once we start hitting 50% occupancy level, which we hope to do easily system-wide in Q3. As I said, in certain hotels, we're already operating north of 70%, and in some even north of 80% occupancy, the hotels that are operational. We will have those impacts. The negotiations are still ongoing with several partners, landlords, et cetera. Also sometimes you have to look at till what extent this lockdown is going to be, so you get the right outcome. What you see is maybe already 70%.
30% has to be done, and it's not that easy. Certain things are negotiations with the unions, et cetera. Things take time, and you will see more important test is Q3 and Q4. Q2 should be an improved number on Q1, and Q3, Q4 will be a further improvement.
Right. If I may just follow up on the same thing. Let us say in fiscal 2020, you had about an OpEx all put together, F&B employee, other OpEx above the EBITDA line of about INR 4.5 million per room for the year. On a percentage basis in Q3, when you expect to hit 50% occupancy, what percentage reduction can we look at in the OpEx per room?
Giri, I think we have reported 52% decrease.
Correct.
That is because of a low occupancy level. We had a revenue decline of 83%, right?
Correct.
Once it starts going to I mean, we can give a guidance, but let's put it this way that a lot of work is still left to be done. Is not because the efforts have not been made, but the efforts have been made, but certain things will happen with time, especially they've got accelerated in Q2. There will be certain impact coming in Q3 and Q4, but it's very difficult to make that forward-looking statement. All we can say is whatever you see now, you've seen mostly on variable cost, but you will see certain changes coming in fixed cost also. I think Giri had mentioned something. As an example, I give you redeployment. If your hotels are operating at 50% occupancy and things open up and we start opening again a couple of hotels a month, then we can redeploy some of our staff.
Today, if they're all shut, what can you redeploy? That's the opportunity we have because of a very strong pipeline.
Right. That explains. Thank you for your time.
Thank you.
It appears there are no further questions at this time. Mr. Giridhar, I would like to turn the conference back to you for any additional or closing remarks.
No, I think I would just thank the participants who have dialed in and heard us. It's been 90 minutes. We are, of course, available to answer other questions. Do write to us, and we will also be doing the usual investor meetings in any case during this or after this. Thank you.
Thank you, everyone. Thank you.
This concludes today's call. Thank you for your participation. You may now disconnect your lines. Thank you.