Good day, and welcome to The Indian Hotels Company Limited's Q3 FY 2020 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' 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 any 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. Giridhar Sanjeevi. Please go ahead, sir.
Hi. Good evening, all of you. Thank you for joining us for the Indian Hotels analyst call after the Q3 results. I think we welcome all of you and for the first taken to join the call. I now pass on the phone to Puneet Chhatwal to start the conference.
Good evening, everyone. Let me start immediately with the financial performance highlights of the third quarter. Our revenue was up 5% on INR 1,338 crore last year to INR 1,409 crore in Q3 this year. We had a 32% growth in EBITDA, totaling INR 462 crore. Our EBITDA margin reached 32.78%, which was a 662 basis point increase, and a profit after tax of INR 203 crore, which is an increase of 26% over last year. I think if we look at the same on a nine-month or a year-to-date basis, we again have the top line growth of 5% and EBITDA growth of 44% to a figure of INR 854 crore, and an EBITDA margin of 24.44%, aided by 116 accounting standard change, but still totaling 660 basis point. A PAT of INR 280 crore, which is 63% more than PAT of last year.
If we did this pre 116, then it would have hit INR 310 crore, which is higher than the full year PAT for last year. We are kind of pleased with the performance on all four parameters. This is well illustrated by the last 10 years if we see, that we have had the best Q3 and the best nine months financial performance in a decade. It does not matter which metric we look at, whether it's the revenue, it's the EBITDA, it's the EBITDA margin, it's the PBT or the PAT, both for the three months and the year to date. In all metrics, we are ahead and have had the best performance in the decade. I think this has been aided by revival of the Indian hospitality landscape.
In Q1 this year and in Q2, the demand versus supply, the gap was negative in Q1 and marginally positive in Q2. The gap has improved in Q3, and I think this is good. The Q1, the reasoning might have been because it was a one-off, as this is an election year. In the election year, we know that especially the government business, which is a significant part of our business, especially in our conference properties like the Taj Palace or the Lands End or the Coromandel, did take an impact of that. I think the entire industry did, as it happens once every five years. Thereafter, there has been slight recovery, which got accelerated in Q3. Having said that, the Q3 recovery could have been far stronger.
That was the belief that we had in the last financial year if we were asked about this year. We all know and have been reading in the news about the general sentiment in the market or certain destinations, especially for us, which were hit like Guwahati, where we have an IHCL property or towards the end of December in Delhi. Generally, we are very pleased with the performance and with this trend. This is evidenced in the next slide that we show to you on the RevPAR growth, which seems to be back on track, which had fallen to less than 3% in the previous two quarters and is coming back to around 6%.
6% growth on RevPAR is good because the occupancies have been at a high level for quite a number of years now. That means the most of the growth that is coming will be driven by the rate and not by the volume. On our Aspiration to execution, we wanted to give you a brief update on the key highlights. As a reminder, that pyramid, where we said we will go from 17% to 25% EBITDA margin, that was 800 basis points increase. We will sign 15 new projects every year and have a balanced portfolio that our growth will be more driven by asset light or management fee contract business versus owned and leased hotels. I think going forward, we want to take you through as to what we have done on that front. We have all-time high on hotel signings.
Last year, we signed more than 3,000 rooms totaling 22 hotels. This year to date, we have already signed 24 hotels totaling 2,800 rooms. I think we will exceed the number of rooms signed for last year, and definitely we have already exceeded the number of hotels signed. Today, we can tell you very proudly that we have an industry-leading pipeline in terms of the number of rooms added this year, which is far higher than anyone else. Some of the statistics is going to be shared by some companies like HVS or JLL in the months to come at their events. They have shared with us. We will let them share with you, but we feel pleased to be having the industry leader position in the number of signings.
When it comes to the asset light model, you will see that we have given the guidance of going towards 50/50 in terms of managed and owned contracts. As things stand today, we have a portfolio of 197 hotels totaling 24,000 rooms, and the share of management contracts in this, it stands in January at 42%, and we'll continue to increase this number to get to 50% first on the total portfolio. As a next step, in terms of number of rooms in operation, and without accounting for those in the pipeline. That's a very important factor in the change in our business model in terms of our margin expansion. We had said that we will open a hotel a month in 2019. I think going forward, we'll open more than a hotel a month.
We have already opened nine hotels in the first nine months of this financial year. We have had one opening in the month of January, the Fateh Prakash Palace in Udaipur to complement our Lake Palace as well as our convention and wedding resort destination of the Taj Aravali, also in Udaipur. This is our third property in Udaipur. After that, as we speak today, we are opening the Devi Ratn in Jaipur, which will be a part of our SeleQtions plan. That takes the total number of openings to 11. We have also giving you for the first time guidance on our pipeline. You will see that Taj has 12 hotels in pipeline totaling 2,547 rooms. Under SeleQtions, we have three. Vivanta, there is another 12 properties of Vivanta and 13 for Ginger.
84% of all these hotels in the pipeline is managed. We have one hotel which we have guided, The Connaught, which is a licensed asset. About to open in April, but we are very pleased to see the trend, that what we had promised of adding contracts on a fee-based model is what we are demonstrating to you here on this slide. When it comes to the RevPAR growth in the Q3, the RevPAR growth in the market was 1.8. We did very well by doing double the market at 3.6. In Q3, the growth was at 5.5. We did 5.6%, and we did trade off by not changing our rates, especially towards the last week of December. We could have gone for occupancy, but that's a short-term thing.
We decided not to compromise on rates and to maintain them at a level which obviously results directly in the profitability because your operating cost per room after a certain level, does not translate always into profitability unless you go for a higher rate, and the higher rate translates directly into profitability, and the flow through is much higher. Just a snapshot on the RevPAR growth in key cities. These key cities are very important because we are very heavily represented in these key cities. The RevPAR growth in key cities remains very strong. Mumbai is at +8%, Delhi at +7%. Chennai has seen a growth after the water scare in Q1 and Q2. The Q3, Chennai came back very strongly with a double-digit growth of 10%. Hyderabad was also at +9%, Bangalore also a double-digit growth of 10%.
As we have also guided to you, we have been very focused on alternative revenue streams. We had relaunched The Chambers. We have had 200 additional global members. Some upgraded their membership to global. Some are new members. I would say half is new and half is migration to global. That created INR 30 crore in terms of incremental revenue for us. We've remained focused on a smart strategy, we said, which is a combination of asset light and asset heavy. Whenever there is an opportunity to have a brand enhancing proposition like we had with the Fateh Prakash Palace or like we have with The Connaught. We would take small stakes or small investments, or we'll go for licensing or leasing.
Otherwise, we will be very focused on margin-enhancing growth which is fueled through asset management, that's the A, with strong relationship with the owners that do more hotels with us, and a continuous tracking of our portfolio. Further, we have taken some of our food and beverage brands also global. We have had the relaunch of Bombay Brasserie in Cape Town. We have added Shamiana in the newly opened Jumeirah Lake Towers in Dubai. For those of you who know Shamiana from Taj Mahal Palace in Colaba in Mumbai know that it's a very well-recognized brand. We are taking House of Ming, which is from Taj Mansingh to London, will be opening in a couple of months. We are also expanding Golden Dragon.
We just upgraded our Chinese restaurant in Coromandel in Chennai to Golden Dragon, and are going to convert the one in Santa Cruz also to Golden Dragon, as that's a brand people really like. We are also now scaling up our salon brand, the niu&nau, and the first brewpub or the microbrewery with the name Seven Rivers is to be launched in Bangalore. Works are almost 70% complete, so by April, we think we would have opened our first microbrewery, followed by the second in Goa, and more to come. We have now 13 amã Stays & Trails bungalows operational with another six in pipeline, which will be opening over the next two months. That's an update on some of our new initiatives.
We are more proud to announce that Ginger, which we are very much focused on in the last few years, has now achieved the 50th opening and totaling 4,500 keys across 35 locations. You must have noticed that it has another 13 in the pipeline. Actually, that number is already been overtaken. We'll be very soon announcing another one which we just signed today. We have another 14 in the pipeline. Now we will also be going for some big box Ginger properties, as some of you know and have read, starting with the one which is in Santa Cruz, where we received the initial planning permission for the IOD from the government a few weeks ago. 12 of the Ginger were repositioned into the Lean Luxe segment . They were renovated, and 50% would have been done by the end of this financial year.
Within the very first few months, the average growth in Q3 for the average room rate in the repositioned Ginger in the new Lean Luxe segment is around 26%. RevPAR growth for the first nine months in Ginger is 7.4%, really aided through the repositioned brand and the repositioned new customer proposition, and the highest ever TripAdvisor score of 4.27. Also, we wanted to give you a highlight on our operating cost base. That is pretty evident that our raw material costs have, if we compare the nine months of the last four financial years, has gone down from 23.3% to 21.6%. The payroll cost has gone from 34.9% to 33.1%. Fuel, power, and light has gone down from 6.6% to 6.2%, and other expenditure has also declined from 28.7% to 27% for the first nine months of this year.
Some of you might wonder that in Q3, there may be a number that shows increase, but that is really because of certain wage settlements which as per law come in into certain properties. Like in Q3, we had for Taj Mahal Palace Tower, which will now come the next time in three years from now, which might distort the figure for a quarter. I think we have to take some of these costs on an annual basis, because on a quarterly basis, they do show certain deviations. We have also continued our journey of margin expansion, which we already started in Q4 when we announced the Aspiration 2022 in February. Those of you who were there will remember when we did the first capital market day.
We had a very good Q4, and we've still been able to build on that base and have been continuously expanding our margins at an EBITDA level. I think the highlight has been that for this year to date, we are already sitting at 660 basis points for the first nine months of this year. In summary, before I hand over to my colleague, Giridhar Sanjeevi, there is a strong performance exhibited across parameters with highest number of hotels signed in any financial year ever. We have significant growth in portfolio on the basis of an asset-light model. We opened one hotel a month in 2019, and we are geared to open more than a hotel a month in 2020 based on the pipeline that we have.
We have higher Q3 RevPAR growth compared to industry in 2018, 2019 and 2019, 2020. We have created alternate revenue streams as well as going forward, these revenue streams will create values in those individual brands. Ginger reaches a milestone of 50 hotels. Lean Luxe positioning of Ginger is beginning to deliver strong results for Ginger, which we will keep you updated on quarter by quarter basis going forward. We are continuing on our journey of cost optimization and EBITDA margin expansion. Over to you, Mr. Sanjeevi.
Thank you. Thank you. Over to the financial update now. Building on what Mr. Chhatwal said, I think the consolidated reported P&L statement for Q3 essentially reflects the different parameters that were highlighted. The revenue for operations grew as a result of our working all the different revenue levers. Number one being the room revenue, number two being the F&B growth, number three being the alternate revenue streams like The Chambers, et cetera. Number 4 is the growth in management contracts. All of these have helped us in terms of driving the revenue from operations. The non-operating revenue represented sale of apartments that we did in this quarter, which got us about INR 30 crores or so in terms of profitability. As a result, EBITDA margins went up. The finance costs were well managed.
We had an event in terms of the refinancing of debt, which we were able to do at lower cost. That also will help going forward. On the provision for tax and other items, there are no other exceptionals to note. Fundamentally, the profit after tax came up at INR 203 crores, which is a significant increase from the previous quarter. Exceptional items, nothing much to note except on other income, had a sale of flats of INR 30 crores or so. On a nine-month basis, the performance effectively reflects the cumulative performance of the first three quarters. It reflects our efforts, as we just said, on revenue cost parameters, finance cost, sale of non-core assets and others, and also the deferred tax impact, the positive impact we had in the previous quarter. All of this translates to INR 280 crores of PAT.
I think what is to be noted is that last year we ended the year with INR 287 crore. I think in nine months, pretty much we have kind of hit the same number in the current year. I think that is a positive development here. On the exceptional items, again, this year there were no specific exceptional items which impacted. Sale of flats included in non-operating revenue has been about INR 62 crore or so. In terms of the network revenue, I think what we saw was that the domestic business clearly grew. Room revenue grew by 11%, and F&B revenue grew by 7.1%. RevPAR was 5.6% as highlighted. On an international basis, this is of course a network related growth. The U.K. and the U.S. properties have done very well, and I think that is reflected in the performance of the U.K. and U.S. properties.
On the F&B revenue and room revenue, there has been some decline. I think you should look at the owned properties which matter, which is U.K. and the U.S. properties. In terms of the network revenue, nine months, essentially, it reflects again the RevPAR growth, room revenue growth of 8.5%, F&B revenue growth of 4.4%. The international business did better on a nine-month basis actually. U.K. in particular has done extremely well. U.S. losses have been also contained actually. Moving on to standalone. The standalone reflects the total revenue growth of 9% to INR 890 crores. EBITDA was at INR 353 crores. The PAT was INR 168 crores for the quarter. If I look at the quarterly numbers, it effectively reflects our efforts in revenues, cost optimization, finance cost optimization, leading to a Q3 PAT of INR 168 crores.
On the exceptionals, nothing much to report on exceptionals for the quarter. On the nine months performance, total revenue crossed INR 2,000 crores, a 6% growth. EBITDA was INR 646 crores. EBITDA margin at 30.43% and PAT of INR 309 crores. You will see that the PAT went up from INR 99 crores for the nine months in the previous year to INR 309 crores in the current period. This was aided by number one, improvement in operating performance. Number two, the non-core asset sales. Number three, interest cost optimization. Number four, the deferred tax credit of INR 87 crores that we received in the previous quarter. All of these have helped. Plus, of course, last year we had exchange losses which impacted the performance. This year we did not have any, what do you say, the translation losses actually.
All of these factors helped in terms of a significant increase in PAT from INR 99 crores to INR 309 crores. That is what the nine months P&L reflects as we just discussed. Exceptional items we discussed again. I think one point to note in exceptionals is that you will notice that the U.S. losses have been lower by about INR 5 crores, INR 27 crores for the nine months as compared to INR 32 crores, reflecting our continuous efforts in terms of trying to manage the U.S. cost actually. Cost optimization, as we alluded, the corporate overage has gone down from 7.7% in the previous year to 6.8%. Raw material cost has gone down by nearly 1% to 21.6%. The heat, light and power costs have dropped and payroll costs have also dropped actually.
We continue to focus comprehensively on our cost optimization. In terms of unlocking value through simplification and monetization, we sold land in Pune, which was done yesterday, about INR 63 crores or so. Residential apartments, we sold about INR 73.2 crores. Through simplification and reorganization of shareholding, we realized sale proceeds of our shareholding in Taj Madras Flight Kitchen of INR 29.8 crores, giving us a total monetization of approximately INR 175 crores or so. That effort will continue, and these monies are being used to reduce debt actually. This will continue to simplify and unlock value as we have said as part of our Aspiration 2022. The next one is really the improvement in net debt to EBITDA and net debt to equity.
As you can see, right from March 2016, when we were at a peak of 6.47 net debt to EBITDA and 1.65 of net debt to equity, it has come down to 1.76 now in terms of the net debt to EBITDA and 0.34 in terms of net debt to equity actually. I think that is where the presentation ends actually. We'll be happy to take questions at this point in time.
Thank you, sir. Participants, if you would like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speaker phone, 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 request everyone to say their name and the company they belong to before asking a question. We will now take our first question.
Hello? Hello.
Yes, please go ahead, sir.
Sir, Himanshu from Dolat Capital. Thanks a lot for the opportunity, and congratulations for a great set of numbers. First up, a bookkeeping question. There has been profit from joint ventures through associates in this quarter, whereas there has been losses in last two quarters. Can you just help to clarify this? The reason for losses in previous two quarters and the profit in this quarter.
I think, let me answer this question. I think basically, Himanshu, I think if you see what we have tried to do is to try and make sure that not just Indian Hotels standalone, but also the rest of the network, which is all the other companies also improve on performance. What we have seen this time is that there is an all-round improvement in performance across the network. Number one is that the Roots Corporation we said has improved. Benares Hotels has improved. U.S. losses have come down. St. James' Court has done very well. In terms of GVK Hotels has done better. TajSATS has also improved despite the loss of jet business which happened. Therefore, we have seen all-round improvement across the different entities actually.
Okay.
If we got any more specific details, maybe we can pick it up offline. I think message to the analysts and to those on the call is that it is not just the standalone which is where the performance improvement has taken place, but also across the network.
Fair enough, sir. Secondly, if you can just provide some color. I know there is almost a pipeline of 5,600 room and 84% of that is management contract. In terms of room count, if you can provide in standalone, like what will be the room count that will come in standalone over the next 12-18 months, 15 months?
What happens in standalone is that all the management contract income is booked in standalone actually. As far as the entire pipeline is concerned, except the Ginger, which has its own P&L, I think you will see that it comes in standalone. In standalone, the three properties which have come onto the P&L having touched Kumarakom last year, which came back after the renovation. As you know, we signed up to the Fateh Prakash Palace which we took over on January 1st. That we take on the P&L. Third, the Connaught in Delhi will come on stream sometime in the month of April or May. I think these will be the three which will kind of come onto the P&L. Andamans, of course, came on stream about a year ago.
These are the four, Andaman, [Kanimura], Fateh Prakash Palace and Connaught will be the two properties where we get the benefit of the full P&L. The all other management contracts except Ginger, we book the management income in Indian standalone actually.
Fair enough, sir. Thank you. That's it from my side.
Thank you. We take the next question.
Hello. Hello.
Please go ahead, sir.
Congratulations on good state of number. This question to Puneet. Puneet, in your initial remark, you have mentioned that end of December because of this protest against CAA has impacted, which has largely now happened in January. Any color that how this occupancy is getting impacted because of this protest?
The occupancy has stayed quite resilient. As I said, I think I would clarify once more. We could have gone for higher occupancy, but the rate, if you reduce the rate, then the climb on that staircase takes much longer. We took a conscious decision, instead of going for 100% occupancy, to go for a lot of our properties and assets, 90+, but we maintained the rate. That was a long-term decision because once you start reducing rates, it's a very difficult climb back up. It has an impact also on your profitability. Your occupancies have grown and will continue to grow.
Okay. Second thing, Puneet, in Q3 because of the reduction on GST, how much that has helped us? Ultimately with the increase in the rate, customer ultimate billing may not be getting impacted. Benefit of that we have seen and going ahead, how do we see that?
I think policymaking does not have immediate impact, whether negative or positive. It takes a bit of time.
Okay.
Unrest or like current health hazard kind of coronavirus, these things have immediate impact. Policy making, it takes time because you have also got contracted rates for a long time.
Okay.
You have contracted certain rates, and you have sold a part of your inventory in advance. I think the move is positive in the reduction of GST. We think it was a very important step towards the right goal, so it will eventually assist. Having a 28% GST on certain category of rooms is very counterproductive because of who we are competing with. I think that we have to thank the government and the policy making people that they have taken the step in the right direction. It takes a few quarters for that to help. It does not happen overnight, that if you announce something in the first week of October that it is relevant as of October 1st, then October 10th, October 11th, your margin in terms of rates starts getting added by the difference between 28% and 18%.
That just does not work.
Okay. Sanjeevi, how much CapEx we have done in FY 2020, and how much we have planned for FY 2021?
I think for the current year, nine months, in The Indian Hotels Company, we have spent about INR 204 crores or so, and another INR 98 we hope to spend, which means around INR 302 crores is what we would have spent for the first nine months across The Indian Hotels Company and other parts of the network. The forecast is that we will do about INR 335 crores in standalone and maybe another INR 165 in others. We will spend a total CapEx on renovation of about INR 500 crores by March 2020.
Next year, any plan?
Next year plans are we are working through. I think we will continue to sort of focus on revenue enhancing, renovations actually. We will come back to you on next year's numbers once they have been firmed up. We'll come back to you in the next couple of months too, maybe by the next investor call also.
Any color on this starting work on this Ginger at our domestic airport near which we have the property in the place? Any color on this movement on this Taj Lands End near the property that we had? Where is the current status?
On the Santa Cruz property near the airport, we are waiting now for we got the IOD, which is the Intimation of Disapproval, which means basically approval. We have applied for the commencement certificate. We hope to get it so that we can start works in six weeks' time. As far as Sea Rock is concerned, we communicated in the last quarter that we will be negotiating to close and acquire 100% share in that business. We are very far ahead in our negotiations. It will take a little more time, and then we will have the certainty if that comes to a closure.
Apart from this Santa Cruz Ginger, are we building any new property in near future?
Nothing immediately on the plan. I think what we're doing is really the Mansingh renovation which is going.
Is your question related to Ginger or is it related expansion capital?
Any new expansion, new property.
We are doing a lot of hotels, but where we are spending money is on the renovation of Mansingh, on the repositioning of The Connaught, and we will spend money on building this flagship Ginger near the airport. We already own the land for 25 years, so there is no cost on that.
Sorry.
Other than that, at this point of time, as on this call, we neither have a plan nor are we in negotiations to build something out of our own pocket.
When do we expect this Taj?
No, go ahead.
When do we expect this Taj Mansingh renovation, complete renovation will be over? At what level that property is currently operating or it's not operating at all?
No, it is very much operating. It has four floors out of order. That's how we will do floor-wise renovation. We are six weeks delayed because of the construction ban that was imposed by the Honorable Supreme Court because of the pollution in Delhi. The first few renovated products, the all-day dining Machan and The Chambers will be opening within the next 6- 10 weeks.
Okay.
Which are very important because of the value proposition of The Chambers. The real new value proposition of The Chambers will be seen at the Taj Mansingh first.
Puneet, you said RevPAR increase for our major cities. What is the status of Goa, which declined in Q3 also? What is the status for Goa, RevPAR? Where do we see, because there we have a lot of many properties in Goa?
It is true that Goa did not have the kind of year we are used to for last 10 years. Goa did for us, our Taj properties, Goa still did an average rate north of INR 14,500. In a very high RevPAR. We've had a RevPAR increase, although the market went down for us, Goa went up by 3%. We are very pleased to announce that Taj Exotica has been the RevPAR leader in its comp set for the full year last year. Both Aguada and Holiday Village have seen significant investments in the last 12 months, we are renovating further to reposition them where they've always belonged, as these are very iconic assets which bring back memories to a lot of people who really like to go back to Holiday Village, or they like to go back to Fort Aguada.
We are backing our crown jewels, and definitely these two properties will continue to see enhancements and capital improvements and renovations and nicer pool and a nicer gym. We just opened a new gym in Holiday Village. We renovated around 40 villas there. For us, Goa has done very well and we will continue to back Goa as, of course, there has been a slowdown this year, but it's at a very high level.
Okay.
It's the highest rate market still in India.
Okay, great. Can I squeeze one more question to Sanjeevi?
Yes, of course.
Sanjeevi, this derivative contract that we have taken for acquiring the property in the U.S., and so what is the outstanding now derivative amount, and when do we expect that full unwinding happening?
Yeah, the full unwinding will happen in 2021, sometime in July or so. One of the contracts we unwound, there were four contracts totaling up to about INR 108 million. Half of it was unwound about a couple of months ago. The balance, we will hold till maturity because these are MIFOR contracts, and it doesn't make sense to cancel before because the market is thin and illiquid. We will unwind it in July 2021 or near about that date.
Okay, thank you. That's all from my side. I wish you all the best.
Thank you.
Thank you. We take the next question.
Thank you so much. This is Nihal Jham from Edelweiss. First of all, congratulations to the management for the good set of numbers. My first question was the INR 500 crore number that you mentioned for CapEx, was that the system-wide CapEx or the consolidated CapEx that Indian Hotels will be doing this year?
That's the system-wide, but it's consolidated.
No, it's system-wide because the CapEx number-
System-wide
We have guided that on the previous calls also, that is almost 4%-5%, which is half of that number. As the system-wide revenue is around INR 8,000 crores, that number comes to INR 400 crores-INR 450 crores.
Fair enough. I am guessing that for Indian Hotels, that number will be 4%-5% of the INR 5,000 crores of revenues approximately that we had.
Correct. That's correct.
Absolutely. The second question was that, obviously signings and openings are something which are going great guns. Just in terms of the management fees, I'm not sure what is the YoY growth in revenue there, but where do you see when that can also start seeing such strong traction and growth? I know that as a part of Vision 2022, you have a proportion of rooms that you want coming out of management contracts. Do we have an internal guidance about somewhere the share of revenues that should be driven by management fees?
Yeah. No, I think the management fees for the first nine months has been about INR 223 crore, which is roughly around 6% or so growth. The forecast this year is about INR 234 crore or so in terms of management fees, which will be at least 5% +. I think these continue to grow well, actually. Also bear in mind that some of the openings. Yeah. I think the other one is that this year is the first year where we are seeing the openings. You will start seeing the full year effects starting with 2021. We expect that the pace of growth will be higher going forward, actually.
Absolutely. I'm guessing from the year ahead, considering the number of rooms that we opened, there is at least will be a 20%-30% increase in room count itself that will be done, and I'm assuming that the room rates or the management fee on these rooms is more or less the same. Can we expect that the management fees can grow at a rate of 25%, 30% after this year?
It sounds like a very optimistic number. Either the base you're working off is only on standalone and not consolidated. If you're at 20,000 rooms, you're saying we will open 30% more rooms would mean 6,000 more rooms. There are only 5,600 rooms in the pipeline.
Yeah.
So-
No, only in terms of management program.
That's what I'm saying. It will not be that kind of number. Let's say a little less. If we sign every year 3,000-3,500 rooms, we would open approximately 1,800-2,000.
Yeah.
Because it just takes time and some things happens in a marketplace. This year, we think we have opened up till now 1,400 rooms. We are opening a large property in Goa, which is 300 rooms. We are opening Devi Ratn today, which is another 100. It comes to 1,800 rooms. Maybe next year it will be 2,200 rooms, and with the exception of Connaught, everything will be on a managed contract or an operating lease basis. There is no project coming online where there is investment CapEx involved. That's the number we're very confident about. Confident in terms of also absorbing the growth in a very good, professional, and a profitable fashion.
Absolutely. Just last question on my side. I'm sorry, I missed, but what was the reason for the fall in the international business RevPAR and the F&B portion?
I think the international business, see, that is a network thing. If you look at properties like Sri Lanka, which was impacted because of the terrorist attack, I think those were some of the reasons which impacted actually. Other than that, for us what matters is really U.S. and U.K. actually. U.K. did very well. There was a 9% growth in RevPAR for London because that matters, because we consolidate actually. The U.S. was kind of about -3% or so. In fact, Campton was flat. Pierre was about -4%. Other than that, the rest of the properties was daily management contracts. I think it's more information in terms of-
That's only for Q3. What Mr. Sanjeevi said is only for Q3. If we looked at year to date, London is 15% growth.
Yeah.
U.S. is more or less flat at -1 %. For our portfolio. That together, we have to look at London and New York and San Francisco together. It's still collectively a very healthy increase.
Fair enough, sir. I'll get back in the queue. Thank you so much and best wishes ahead.
Thank you.
Thank you.
Thank you, sir. We take our next question now.
Hi. Good evening, everyone. This is Satyam Thakur from Morgan Stanley. Puneet, my first question is to you. Hi, can you guys hear me?
Yes. Satyam, please go ahead.
Okay. Yeah, sorry about that. Yeah. Puneet, my first question is that I noticed that on the slide where you talked about the key micro markets and what the RevPAR performance was in them, and those were pretty much all the big metros. It covered that and Goa, I think. In all of those, your RevPAR growth was 8%-10% range on a YoY basis, whereas your network same store is 5.6%. Which are the cities or markets which are bringing down this average? It sounds like most of the smaller towns and the frontier markets which you're getting into, that is where RevPAR growth is just not happening.
That makes me worry because I was analyzing all your growth in properties that you have signed in the last 18-24 months, and that is tilted more towards these frontier markets than your portfolio, say, two years back. Is there any structural challenge in these markets that supply growth is much stronger or maybe the appetite for or the demand for five-star properties is not as much, which is why right now RevPAR growth is going to continue to be a challenge? How do you think about this?
I don't really agree with the comment. I think technically what you said is right, that the growth in these markets is 8% or 9%, but the overall growth in the portfolio is 5.6%. That also comes from the fact that all the secondary, tertiary markets that you are talking about, they are very much related to Ginger and Vivanta branding. As we have reimagined our brandscape, some of these brands are very relevant for those markets. We are not building a Taj in Chikmagalur or in Tawang or in Shillong. We have a Vivanta in Shillong, and we have identified strategically Northeast as a very Vivanta and a Ginger-driven market. As an example, because maybe one day it will be a very good market for Taj branding, but today, the state capitals in the Northeast are just right for a Vivanta or an upscale kind of branding.
In those markets, these kind of hotels will do well. There is definitely a challenge when the times are a bit difficult. In Guwahati, if there is some kind of rioting that happens and the market kind of shuts down, then it has an impact. We had a closure of a hotel in Langkawi in Malaysia because one of the pipes which was bringing water burst down. Things like this happen in a marketplace, but the world is not built only on Mumbai, Delhi, Bangalore, Rome, London, and Paris. There are markets which in their respect are very good markets over long term and for different kinds of brands. As I said, as long as we are not investing in a Taj branded property, then it's fine. It also costs much more to build a Taj than to build a Ginger or a Vivanta.
I think we have to look at it from a brand point of view by brand, by geography, and by contract type.
Okay. Fair enough.
I have to share this with you, Satyam. When we meet, we can do that analysis for you in terms of openings by brand, by geography, and by contract type.
Yeah. That would be good to look at. Okay. Then moving on to something which I thought was more positive, that in this quarter, despite the economic growth being where it is, and despite this quarter having been affected by the whole CAB protests and things like that, we still did 5.6% RevPAR growth, which is definitely better than what we did in the first half, what the industry did in the first half. Incrementally from here, as we go into the next year or rather this calendar year, we will have the pricing renegotiations that we have done on the corporate side that also will kick in. From channel checks, it seems like that has also gone well.
Net net, would you agree that this kind of RevPAR growth can continue or maybe even better, or how do you see this calendar year shaping up on RevPAR growth?
It seems like a leading question, Satyam. You are trying to put in a question where we say yes or no. I personally feel that given the fact that last year or this year, Q1 was impacted by one-off, that's the elections. Given the fact that we had some macroeconomic challenges in the GDP growth number, where we stand the market with the little bit of outlook we have, if we get through this current virus situation, on the coronavirus, I think coming from a lower base, we can safely assume a higher RevPAR growth than this year. If you're coming from a higher base, it's difficult. But if you're coming from a lower base, which is sub 7%, I think we should aim for 7% plus. That's what we have guided.
If you're starting at a 5.6, the average of two years should it be 7%, then I think we should perform definitely better than 5.6.
Okay. Lastly, Mike, I had one other question on Ginger Roots Corporation, because you shared this time that you have completed moving 20% of your portfolio already to Lean Luxe, and there you have managed 26% improvement in ADR, which is very handsome. Has this started kind of filtering into EBITDA growth or better EBITDA growth for Roots Corporation already? Do you see that starting to shape up soon, at least because this year, I suspect, you might be charging off the renovation costs and things like that. How are you reading the performance of Roots Corporation from here?
Just say that again, Satyam.
Yeah, I'm saying-
What was the question?
I'm saying the ADR improvement is very good in Roots Corporation.
Yes.
Yeah. Has that started to kind of flow into better EBITDA improvement at Roots Corporation yet?
Oh, no. Absolutely. We are very focused on Ginger brand since last two years. We believe in the Ginger story. We have opened now 50th hotel. We are very strongly, if you follow some of our signings and announcements, we have accelerated significantly the growth of Ginger. Now we are talking about big box Gingers, like the one in Santa Cruz. One hotel will have 370 rooms. We'll be aiming for a few more bigger boxes near the airports in city centers totaling 300 + rooms, so that we give that final touch to the Lean Luxe brand. Obviously, on one, we are monetizing on our land bank which we had, and the others we will go into an operating lease or a management contract model or a combination of these.
Hopefully before the end of next quarter, we will be able to give some guidance on that where we stand. Have we commenced construction or not? It will not be like 100 rooms over 10 hotels on an average. It would be three properties giving 1,000 rooms.
Okay. Great. That makes sense. Thank you, and all the best.
Thank you.
We have time for a couple of questions. Yeah, we have time for a couple of questions now.
Okay, sure, sir. Thank you. We take our next question.
Hi, this is Sumant Kumar from Motilal Oswal. My question is regarding corporate rate negotiation, how it is going on currently and what is the expectation in the percentage term?
Yeah, business and corporate, as you know, Sumant, is only about 15% of the total business. I think you should assume that the corporate rate negotiations have given us maybe 4%-5% in terms of rate growth, actually.
Right.
Average, yeah.
Regarding the despite of muted top line show by the subsidiary business. We have seen a significant improvement in operating profit. Can we say that St. James and Piem and Roots Corporation have performed better?
I think St. James is the best performance in terms of improvement. I think Roots Corporation has improved. One second, I'll just come back to you. I think Roots has improved, St. James has definitely improved. Taj has improved. It's been across the board. I mean, across the board improvements across the different categories, actually.
Okay. The Piem Hotel also has a better performance?
Piem, because of some renovations, has been a bit down because we had some dividends last year. Operating performance has been okay, actually. Operating level has been fine.
We can say that St. James and Roots Corporation has driven overall sustained performance.
I think so. I think you should make a comment that across the board, all the companies have improved. St. James' in particular has been very good, actually.
St. James has also been very good because it had this year of Cricket World Cup. We have Wimbledon, we have all this, but this year with Cricket World Cup, we did get an additional boost. Especially as an Indian brand or a brand coming from India, we did get a very good occupancy and rates in those months driven by Indian customers.
Okay. Thank you so much, sir.
The last question, please.
Sure, sir. Thank you. We take up our last question.
Hello. Thank you for taking my question, sir. This is Ritika Agarwal from Quest Investment. Sir, could you throw some light on the demand-supply scenario in the market that we will be seeing in the medium term according to your analysis?
I think we have explained that in terms of the green shoots that we put up in the presentation. We are certainly seeing the uptick in terms of where the demand-supply gap, the balance has shifted to the demand being higher than supply. We have started seeing that. The luxury will, of course, see the biggest gap because supply is low in luxury. Upper upscale and upscale is also the similar situation. Midscale and economy also, we are seeing that the demand is higher than supply. I think on a medium-term basis, we should see the demand kind of being better than supply. If you see, it compares well with the international passenger arrivals, the domestic airline passenger growth. All of this, if you see, it's consistent with those underlying macro parameters, actually.
Mm-hmm. Okay, sir. My second question is regarding the strategic partnership that the company has announced with GIC Singapore and the deployment of INR 4,000 crore. Has there been any steps taken, any hotel finalized in that regard?
Yeah. We did announce last quarter the acquisition of one of the properties, and that should be completed before the end of March. I think we should be completing it. We are evaluating now three or four other properties, and we will update as and when we kind of are ready because these are all, as you know, pre-NCLT or NCLT type properties. It takes time to sort of announce, but we are working on those.
Okay, sir. Sir, last question would be, are there any major renovations currently the company is undergoing in any of the properties?
No, I think our renovation plan is consistent with what we have always said, actually. I think the major renovation is really at this point in time, Mansingh, which we are kind of doing it after we won the auction about a year ago or so. That continues. Other than that, I think the others are all in line with what we have always spoken about.
Okay, sir. That's it from my side. Thank you so much, and all the best.
Thank you. I just want to take the opportunity to thank all the participants for participating in this call. I think we are, of course, available for separate meetings and questions. I think do write to us, and we'll be happy to take them. Many thanks for coming and joining this call today.
Thank you. This concludes today's conference call. Thank you for your participation. You may now disconnect your lines.