Ladies and gentlemen, good day and welcome to The Indian Hotels Company Limited Q3 FY 2023 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 participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the call concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. At this time, I would like to hand the conference over to Mr. Puneet Chhatwal. Thank you, and over to you, sir.
Good evening, everyone. Thank you for joining late in the evening. We're very pleased to report our Q3 results with a record level on all key parameters: revenue, EBITDA margin, PAT, strong free cash flows, and being net cash positive as we have communicated. I am just hoping that everyone has had a chance to look at the presentation because that has been uploaded, so I would not be going in that sequence. So I'll just pick up some key messages. The first of those is that as we informed post Q2 result, that Q2 is the weakest quarter in the year and Q3 is the strongest. You can see the difference that between Q2 and Q3, the 27% margin has become 37.6%. Q4 is traditionally the second strongest quarter of the year.
With the month of January gone by almost tonight, we see the momentum continuing. We have a fair idea and depth of the business on the books and the pickup the way it is coming. The outlook is very strong, albeit it is all built mostly on domestics because foreign inbound is still lagging behind 2019-2020 numbers. A lot of events which are happening this year, including G20, including Cricket World Cup, should further boost the demand or provide the necessary buffer should there be any form of headwinds coming from anywhere. One of the key highlights of the PAT this year is on most of the numbers that we have. They are the highest ever, even when compared to our best full-year number. The INR 383 crore PAT for this year surpasses the best ever financial year in the history of the company.
We think that after three consecutive record quarters, the Q1 was a record, Q2 was a record, Q3 is a record. We see no reason at this point of time as management of the company why Q4 should be any different. We've seen strong weddings business is taking strong conference business pickup. We are also witnessing very good leisure demand, which is holding, you know. It's. People thought it was pent-up in Q1 or in Q2, but I don't think after nine months of the Covid wave, we can still keep calling it pent-up demand. I think there's a permanent shift in the way the customer behavior is impacted in taking, you know, combining more business with leisure or taking more extended weekends by driving to a destination and working out of there.
I think, also in the presentation year-on-year, for the quarter as well as for the nine months, the chart clearly shows that we are as a sector on the right track. I think the sector is doing very well. Within that sector, we being the largest hospitality ecosystem serving the needs of the consumers both on the ground and in the air. We stand in a very good position to take advantage through our diverse portfolio of over 125 plus destinations, excluding our homestead business, to cater to the needs of all segments. I think the other positive news is that there are green shoots of recovery in international travel. MICE business is beginning to come back. We have seen already, seven events of G20 that alone Taj has hosted.
I think that momentum is going to only accelerate going forward. Very pleased to report that I think we are, we are of the belief that we have industry-leading RevPAR growth. We have industry-leading brands in all segments and the portfolio growth. In the calendar year we've signed more than 30 new agreements and added 14 hotels which opened alone in this financial year and add 17 for the full year. For the calendar year. We also feel we'll end this financial year anywhere between 17-18 hotels, as we have consistently communicated about 1.5 hotels opening a month and almost 2-2.5 hotels as a signing per month. Travel is coming back. Of course, foreign travel is not as strong as it used to be.
Domestic has been very strong, especially in the month of December. Demand will continue to outpace supply. See, supply growth will remain constrained for a variety of reasons, what we've all experienced in the last 2 years. The demand will grow, but also even as new supply is coming, there are a lot of new destinations that are coming in the country. Alone with the government's focus on infrastructure, on building new airports, that will bring in some supply. What we have to see is how does the supply in each of the markets, which are very important and critical for, let's say, a company like us. Say Mumbai, Delhi, Goa, Rajasthan, Bengaluru, to name a few. These are very important market source. How is the supply in these markets?
I think there the supply levels are lagging far behind in terms of the demand, and that we start seeing the difference in the average rates or the ability for the brands to charge. Moving forward, I think, on our hotels in pipeline, which I think is also an industry-leading pipeline. We have a smaller base though, that is correct, but our pipeline of number of rooms is almost 35% of the total portfolio on operations, and we expect to open more than 40 hotels in the next two years or two and a half years. Seventy percent of our pipeline is management contracts. There are few leases for Ginger, which we have communicated that model on a low revenue, but that small percentage of fees doesn't make sense. More importantly, we are now reaching certain milestones with certain brands.
Taj is today at a portfolio of 95 hotels. It has 75 in operation, 20 in pipeline, it's getting close to 100. Ginger has 85, also getting close to 100. O ur homestay has already reached 108. I think the scale in each of these individual brands is very critical, and we hope to be giving the similar news on selection and Vivanta reaching 50 hotels in each of these respective brands and platforms in the next 3-4 quarters. Some of our openings we have shared with you on the investor presentation, under our Ahvaan 2025, we guided that we will have a 50-50 balance portfolio, and we are very in that range today. Almost 48%
46%-48% is on the management contracts and the remaining on the leased or owned portfolio. Very important is that also today, Taj and the rest of non-Taj portfolio is almost 50/50, and that is very, very healthy. Although Taj is our crown jewel, Taj is the one that has always been driving revenue and profitability. It is nice to see other businesses grow and start contributing because their flow through and their margin is higher. When it comes to in terms of EBITDA split, of course, Taj takes more than three-fourth of the EBITDA of the enterprise level. If you took it at a standalone level, it's, the number is maybe 10% lower. Important we thought we must share this time is our growth in our flagship brands.
We didn't share this in the last 4, 5 years because this was work in progress. Five years ago, we had 31 hotels under Taj in operation, today we have 75. That's a 2.5x growth. We renovated, or better said, we used all the tools available to us under asset management to upgrade a lot of our assets, totaling almost 24 to Taj. That includes the Holiday Village, the Fort Aguada, the Fisherman's Cove, Taj Mahal, Lucknow, they were brought back to their old glory. Excuse me. We opened 20 new hotels. Our portfolio in terms of number of rooms also doubled from 5,500 rooms to 11,000 rooms.
The percentage to enterprise level revenue system by developer management contract driven asset light growth, it went from 52% to almost 70%, to which I just alluded. Similar nice story we have with Ginger. Ginger has a revenue of INR 225 crore, but the nine-month margin has gone up to 40% and 50% of the Ginger, reimagined Ginger is in the Lean Luxe portfolio. Ginger is now also gone live in this month on Tata Neu, and we expect it to benefit from that. All other new brands, Trumark 25 stores. amã, I already spoke to you about it. The Trumanization of Ginger, almost 18 hotels, Ginger branded properties will have all-day dining called Trumark. Nine have already converted, nine others are getting converted before the end of March.
Taking our total then of Trumark restaurants as food service restaurants, 25 today to almost 35 before the end of this financial year. Other than that, I think, some of the key drivers of our revenue, I think, 70% of the growth is coming from existing hotels, some from new hotels, some from new and reimagined brands, and very, very marginal or small amount from a non-operating income, all as an exceptional item. With that, I think, I should now. Okay, Giri says I should continue, so I'll continue. Key markets for us, every market we are performing better than the pre-COVID level, which is leading also to margin expansion. Goa has been a star performer for us. That is definitely the case. Also Mumbai is doing very, very well.
Even January was very strong for Mumbai. Our occupancy in business hotels in Q3 went up to 77%, leisure to 60-65%. Palaces was at 57%, and Ginger hit 61%. More important is if you look in the presentation at the rates, the leisure portfolio commanded a rate of almost INR 17,000, and the Palaces at INR 46,500. The business getting close to INR 10,000. I think these are some very significant increases in rates, and we all know that the increase in rate leads to higher flow-through and conversion. On international portfolio also we have done quite well. U.S. was positive. U.K. has been positive. Maldives was good. Dubai was very good. Also Sri Lanka is beginning to come back to almost a 50% occupancy level.
There is no cash burn happening in Sri Lanka. In terms of domestic versus international operations, I think, the way we report, I think if we were to add a line on our reporting on income from international contracts in management business, or to add it back to the international portfolio, then you'll see that even the international portfolio is almost at 22% EBITDA margin. That is extremely positive. Very important is the control on the cost. If you see the fixed cost as a percentage of revenue in Q3 went down to 28%. Payroll costs went down to 24%. A lot of you asked this question last time in the Q2, what happened? Payroll, is the cost getting inflated? What kind of salary increases are there?
We said this is just a weaker quarter where you're seeing that increase and the salary raises that we give at a certain time of the year, which has had an impact, but you'll see the difference in Q3. Now I'm sure you're able to see that difference. We're very happy to see that our corporate overhead as a percentage of revenue has gone below 5%, which was always 7%, 8%, five, six, seven years ago. Our 9-month management fee growth surpasses highest ever full year management fees. Same story. Our Q3 management fee has grown by 86%. We remain confident that this income will keep growing and 2025 we will exceed the guidance that we have given.
Our The Chambers remains a very important source of our profitability because the flow through is larger than 80%. Very happy to report that The Chambers in Bengaluru at Taj West End is going to commence both. We're adding also new spa in West End, we're also adding the newly launched Indian restaurant called Loya. The concept also bringing it to West End and then to Lifestyle and finally to Taj Mahal Palace, Colaba over the next 12, 14 months. Drivers of margin expansion remain existing hotels. Why? Again, asset management. We have renovated a lot. We have done a lot of innovative concepts in existing hotels. We have added a lot of new hotels on management fee basis. We have the new businesses of Ginger, Trum and amã, which also add to the margin.
The Chambers, and that eventually is the reason why a 9-month comparison of a 24%+ EBITDA has grown to 32.1%. Most of you would remember that we had given a guidance of 33% under our One 2025. We see no reason why we should not achieve that given our growth momentum, given the strength of our pipeline, given our momentum in openings and also our continuous effort on asset management. With that, we would like to open for questions. The rest of the information is in the investor pack. For any questions offline, we'll make ourselves available, so please feel free to contact us. Thank you very much.
Thank you very much. We will now begin the Q&A session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking your question. Ladies and gentlemen, you will wait for a moment while the question queue assembles. The first question is from the line of Prateek Kumar from Jefferies. Please go ahead.
Hi. Hi. Good evening, Prateek. Yeah.
Hello. Yeah. Good evening, sir, and congrats for your results. My first question is on occupancies. Occupancies versus pricing. It seems occupancies have been, like, largely stable, versus, like, pre-COVID period, but pricing is, like, 25% range higher versus pre-COVID period. What, like, what really makes sort of explains this? Is this, like, a difference in transient demand mix, which I also saw is like 8% higher versus pre-COVID period? Or how are we looking at it?
No, no, I think, as we have always said, I think it's a combination of factors. Number one is that the demand continues to be very strong. Consumption patterns are strong here. Hence that is explaining why the occupancy is strong and the supply constraints that is clearly showing up in at least all Indian metros. And we have been able to sort of ensure that we kind of continue to maximize price realizations. We believe and, as Puneet said in the beginning, we see the continued momentum even in this quarter so far. I think we will continue to see strong occupancy and price growth.
If you see the price growth also, I think while the leisure price average, I think around INR 17,000, the business is still at around INR 9,000 or so, and we have always been maintaining that the potential for business to grow is still significantly there. There's no reason to believe that both occupancy and price growth will continue. You asked a question in terms of the transient growth. Clearly, the transient growth has been very strong actually. Our corporate dependency also, if you notice, has been around 11% or so. Which means we are not big on corporate.
There also we have explained, Prateek, in the past that we, as part of the rate renegotiation cycle, we have changed the principle wherein for many of the corporates, it is not a fixed rate that we negotiate for the year, but a rate of the BAR, which means that it's a variable rate which works both ways, both for customers as well as for us actually. Of course, all the other segments in terms of MICE and leisure groups, all that is kind of coming back. There's nothing which indicates that there will be a kind of flattening of the both occupancy and rate drivers for Prateek actually.
Thank you, sir. My second question is on management fees. Management fees have been now running very strong and with many more hotels coming on management fees. Would you look to revise INR 400 crore guidance for FY26 or 2025, which we have?
What we will do on this, Prateek, is that we normally do this around the capital market day. Lastly it was the capital market day after our first quarter results. Maybe around that time we will once the year has ended, we will take stock of all the guidance that we have given, and we'll come back in terms of the revised guidance wherever appropriate, actually. That's what I would say. You're right that the management fee for 9 months has been about INR 276 crores. It's a very strong growth and driven clearly by the portfolio growth as well as by the underlying performance. We'll come back on the guidance, but at this point in time, we're not changing the core guidance that has happened as part of our one twenty-five actually.
Sure. Thank you, sir. I have more questions, but I will get back to the queue. Thank you.
Yes.
Thank you. The next question is from the line of Achal Kumar from HSBC. Please go ahead.
Yeah, hi. Thanks for taking my question. Congratulations on such strong numbers. So I have couple of questions, please. First of all, of course, on the EBITDA margins, you already reported 32.5%, and Puneet said that there's no reason you should not be able to achieve 33%. Now, of course, the question is that if you are already at 32.1%, how do you see the EBIT margin bridge from here to FY26? I mean, don't you see significant potential upside to your long-term margin given that anyway next year you have G20 meetings, sorry, this year you have G20 meetings and then Cricket World Cup is there and then you are collaborating with Tata Group?
All that, how do you see the margin bridge going into FY 2026? My second question is on G20 meetings. You already mentioned that some of the meetings are already happening at multiple places. Again, from the last time I repeat my question. I guess it could be slightly easy for you to quantify the benefits now. Could you please share your thoughts in terms of how much this G20 meetings should accelerate the occupancy and ARRs for the industry and for you? How is that divided into sort of room revenue and MICE? I understand all the G20 meetings are sort of today to have a room revenue as well as a big event afterwards.
Finally, my last question is on your collaboration with the Tata Group. Of course, you know, not only in terms of Tata Neu, but also in terms of Tata Group's aviation business. How do you see the benefits, for IHCL? Thank you.
Taking one by one, Achal. Thank you for your question.
Yeah.
I think, on the margin guidance, as I said, we'll come back on the guidance on margins. I think 33% is a very decent margin for service industry. I think, more specifically, if you ask me what are the triggers, and that's exactly what your questions were. I think if I look at the triggers for margin, it's the diversification in top line that we have, in terms of some greenfields that we will build, the growth in management contracts, the growth in The Chambers, the growth in management teams, and the growth that we've been, I mean, getting on both the other businesses that we have. I think the diversification of top line, on high margin businesses is something which is there.
We are very clear that every new business that we do will have to be, what do you say, get us a margin above 35%. Otherwise, you know, you will not be able to get your, 33% margin. I think we are confident of our strategy and execution on all these drivers. And on the cost, you saw the productivity coming through. We will work on it and we see no reason why the margin should not go up. A little patience still at Capital Market Day in terms of the guidance, on, on these parameters. I think, let the year end is what I would say on the margin.
The second thing is that as far as the least revenue, I mean, the G20 is concerned, I think I was very happy to report that we have done a number of events in the run-up starting with Andamans to Lake Palace to Delhi to Bombay to Chennai now. I think in terms of the share that we have, share of voice that we have is clearly very strong, and we need that actually. The real business is yet to emerge because the main event is September, October, and we are yet to see the follow-ons in terms of the business delegations and all which happen, G20 follow-on business delegations. This will emerge. I think that is the second point.
We will talk about it separately as well on this, but this is. We see the strong momentum. The last point you had was on the aviation business. Absolutely. I think on the collaboration with both Tata Neu as well as the airline businesses, I think, it is developing well. We have a slide which talks about the growth of the loyalty membership base. The total loyalty revenues have gone up significantly, I think by INR 1,500 crores. Basically, what that means is that the incremental people have used our hotels at least once, of which the loyalty earning member will be in about INR 800 crores or so. I think this is something that will continue to develop and with new brands also joining, like Titan as an example.
That will continue to develop. On the airline partnership, that is clearly developing. You have seen the TajSATS numbers in terms of the leadership that we have demonstrated. In fact, the nine-month numbers for TajSATS are very strong. I think it is INR 440 crore has been the top line for TajSATS, and with a very strong EBITDA. You will see TajSATS continue to do well. I think, yeah, I mean, I think all good. I think you want to comment anything?
No, I think the outlook, as we said, is very strong. If the rates keep increasing, the margins will automatically increase.
Yes.
I think that is the key. We are very blessed with the Indian subcontinent because here the F&B part of the business is very strong also. We are seeing a lot of demand for lot more buoyancy in the wedding segment and events. A lot more events happening and lot more people participating, and that is really driving that non-rooms revenue. Those kind of businesses are also high margin. I think the restaurants is not as high as the event, and conference and wedding segment is. I think, as far as management is concerned, today what we know, what we see, what we have as business on the books, we feel the going is robust. It will stay strong.
With certain other events, one-off, like just now we had Hockey World Cup, we catered to the teams in Rourkela, in Bhubaneswar. We had, as Giri mentioned, we have already hosted seven events of G20. We also did the catering for the India Pavilion in Davos, in Switzerland for the World Economic Forum. There are a lot of activity going on and all that, eventually everything adds up. I think it's going to stay like that. There's nothing that suggests unless there is a, another COVID or something else that happens, which is beyond anybody's reasonable control or vision. Also we have to invest. We have the most iconic portfolio, and our strategy is in whichever segment we are present, we have to be the most premium brand in that segment.
It's not just the percentage only that 33 should become maybe 35 and 35 should become 36. It's finding the right balance of the top line, of the absolute amount of EBITDA and having a healthy margin. If there was a downturn, we are better hedged and we are less volatile despite being in the hotel sector.
Perfect. Thank you. I have a couple of, a couple more questions, but I'll come in the queue in case there is a time later on. Thank you.
Thanks, Sanjeevi .
Thank you. The next question is from the line of Binay Singh from Morgan Stanley. Please go ahead.
Hi, Binay.
Hi, hello and good evening. Congratulations on a very strong set of numbers. Two questions. In the past, you've often talked about inflationary pressures that the business is facing, which clearly you've managed quite well. Standing today, what are the key inflationary pressures that you are seeing now? Anything you would like to call out on? That is one. The second is you guys have extensive industry experience. This is cycle high margin that the industry is making. When do you think capacity growth starts to kick-start? There will be time periods by the time it comes in, but how do you see capacity growth incrementally? When does it start to kick-start so that we see some bit of, you know, equation of demand, supply matching?
If I was to quote Mr. Mandeep Lamba, he did a session recently. Is this the beginning of an from HVS ANAROCK? As one of the examples you said was, is this the beginning of a 5-year upcycling which is going to compensate for the last 15 years, right? I'm not sure. This is what he said, right? All I know is that no matter what capacity comes, we tend to forget. Listen what has happened in Mumbai. There is a very big conference center which has come up in BKC. What is happening in Pragati Maidan in Delhi? There's a huge convention hall that has been built for the G20. What is happening in Dwarka in Delhi? There's a big convention center coming up there. These facilities as infrastructure were not available. When now they are available, big events will also come. I think that is one.
I already gave in the introduction the post-COVID consumer behavior that is changing. The third is our focus on each of the brands with the comprehensive brand management strategy, which we have always communicated consistently. Finally, not starting any new businesses which do not provide less than 35% margins, and we rather focus on what we have existing. I think the culmination of this will help us drive top line, will help us drive absolute EBITDA, PBT, PAT, and still maintain a very healthy margin. We have to keep investing in our portfolio like we have done even in the last 3 years or 4 years despite COVID being there. We have to invest because we have these iconic assets. As communicated before, staying the most iconic but also most profitable company, we cannot ignore the iconic element.
No, no, that is definitely there. Anything on the inflation bit? Any cost items you've seen there, because the inflationary pressures are coming up.
I think the inflation has softened. It's not going up the same way as it had gone up like 3, 4, 5, 6 months ago. We are able to mitigate the inflation impact. I think actually inflation in some ways is good to drive the average rates. That also helps if the dollar has strengthened so much and the foreign travel wants to come back, and if they can stay in a Taj at 15,000 as $180, and when we go to New York, we have to pay $1,000, including in the PR. I think there is a positive and a negative to it. I personally believe, save for any geopolitical factors, save for any black swan event, I think the demand will keep growing.
The spend, as I mentioned earlier, on infrastructure will help the sector. We are very well positioned because we are addressing all consumer segments, and we are addressing all businesses. Only a black swan event can stop it. Otherwise something will always keep doing well.
In fact, Binay, if I remember right, it was the Morgan Stanley report which talked about real estate being a hedge against inflation actually. I think, if there's only one area where I think costs are going up is probably the project construction cost actually. I think that has certainly gone up. Otherwise ability to pass on price increases is not, at least so far, been a problem for this. That in mind, let's see what happens tomorrow on the budget because tomorrow's budget will, because it's a pre-election year, people are infrastructure spending push, whether it'll be anything like MSP increase that happened in 2019. I think some of those also should give a look.
Overall , if we look at our presentation, the microeconomic factors in terms of the growth of the country, the consumption trends, the budgets, the pre-election year, and then the hospitality demand supply, all of it I think is in the right place, Vinay, actually. And the growth is i t's also secular. It's not just the key cities. It's kind of growing, say, across the hinterland as well. I think it's, I think all are good signs at this point.
Yeah. No, it looks very impressive across all parameters. Thank you.
Thanks
Thank you. The next question is from the line of Sumant Kumar from Motilal Oswal. Please go ahead.
Hi, sir. My question is related to the key market like Goa, and we have seen a significant improvement in ARR. When we come to the occupancy levels compared to pre-pandemic, Q2 2019, we are still lower than pre-pandemic. Also the other observation is from the Palace Stay and resort destination, the occupancy is lower despite of a re we targeting higher ARR or what are the key reason whereby occupancy is lower in the Palace Stay, resort destination and the market like Goa? Even we have seen the Delhi NCR occupancy is lower compared to pre-pandemic.
See, there is no reason for us to target lower occupancy. We had 35 rooms which were renovated and were shut in Taj Holiday Village, which were not available for sale, especially on the sold-out days. They were not there, but they have now come back. you know, in this quarter they are back. That's one of the reasons. When you take out inventory temporarily, if it's less than 1 year, you don't reduce the room count, right? because that's how it works in the professional services where we share data. When it comes to the RevPAR is what you should look at and the average rate, if you know. The RevPAR is almost having an increase of 45%.
It's good to have the ability to charge higher rate, sometimes a change in channel mix makes that happen. 2019, 2020, Suman, the amount of international charters coming into Goa was very high. Now, it's getting back there in terms of international business. Slowly it's picking up. When your channel mix changes, when you rather have FIT, transient or leisure groups, which are not, you know, like, kind of charter business. Charter business is not, you cannot charge the same pricing. I think there is a little bit and there is a marginal adjustment of 83% versus 80% occupancy. That's not such a big difference. The big difference is INR 14,000 rate versus INR 21,000. There's a 50% increase in rate. That's what has driven the profitability in Goa.
Okay. Any. Can you throw some light on U.S. and U.K. occupancy? When we can expect the normal level of occupancy, what we had in Q3 519?
That's a very good question. Both these markets are not at the level that they should be. Occupancy in U.K. was around 84% in 2019. This time it was around 71%. There was an increase in the rate. The RevPAR again increases, but not good enough. U.S. still has to recover on the occupancy front. The rate we are doing fine. Why I said it's a good question is that upside from U.S., U.K., and Cape Town, which we now own 100%, is expected. What we are seeing is performing better than 2019, at least for the month of January. The outlook for February and March remains the same, that it is expected to perform better.
Can we expect, in FY 2024 we can reach at the pre-pandemic level or close to pre-pandemic levels?
I think it will be to pre-pandemic or even higher, marginally higher.
Yeah, because I think, if I take U.S. as an example, you know, we invested in Banquets, and we were able to open the Banquets only post-June, which means we did not have the benefit of a full Banquet revenue in the U.S. actually. There's no reason why we should not go back to the pre-pandemic level in the next financial year. I think U.K., while of course the challenges in Europe are there, the strong Indian business, the some of the domestic business and U.S. business. The U.S. business will certainly help actually. All of these will help in terms of driving U.K. up. These are our two important markets. As Suneet said, Cape Town is also coming out strongly. I think, they will be the last to recover, but I think this is a big season and they should also do well. I think, 2023, 2024, you'll see us go back closer to the pre-pandemic unless there are geopolitical economic factors which impact actually, is what I would say. Yeah.
Thank you so much, sir.
Thank you.
The next question is from the line of Nihal Jham from Nuvama. Please go ahead.
Yes. Thank you so much, and congratulations on the strong performance. My first question was on the contract change that you've done in the corporate business. Does that incrementally reduce the number of room nights that the segment ends up getting? Or does it get rate parity between the corporate and transient segment more or less? How would it end up changing the business mix or the ARR realization in the future?
I think what we have done in terms of some of the rate negotiations is a positive thing. Earlier on, when we had a fixed rate with corporates, we would have restrictions in terms of the number of room nights that we would give in busy season. When it changed the mix to a rate of the Best Available Rate, what happens is that you will be able to offer better flexibility to the corporates also. It's a much more dynamic rate now. Hence, I think it's good in terms of driving not just satisfaction to corporates, but also the profitability.
Secondly, what we've also been doing is that in many cases, we have allowed corporates to be more use the transient route and not necessarily through negotiations, especially the smaller corporates, actually. When you say transient business was 58%, I think it does include some of the smaller corporates as well. Overall, I think we continue to have focused strategies vis-a-vis the different segments, actually. I think all good is what I would say. In fact, we are the first to change this dynamic pricing for corporates, actually. They are also seeing value in that.
That is helpful. The second question was on the foreign guest part. For our India business, what will be the current share of foreign guests versus pre-COVID, if in case you will have that number available?
I think it will get to develop. I think as we have always clarified, I think it has been slow. I think it's not just because of visa difficulties, but because of other reasons as well. We expect it to come back now starting next year. I think generally what we have seen is that the foreign customer. When you say foreign, it's also Indians who are staying abroad. We have seen about 15%, 20% are the pure foreign foreigners. The Indians who come with OCI Card and all, it don't get measured because they have. I mean, who Indians generate, not OCI Card. Indians generate, I think that constitutes another 15%. Historically it's been about 35%. It's not come back to the full 35%.
You will see that as an opportunity, going forward in the current year.
Just one last question was that, in the current environment with the kind of demand supply situation that you see, ideally what is the long-term pricing that you believe this sector or you would want to take in the coming years?
Long-term pricing, I think as we said. See, there is tactical pricing and long-term pricing. Long-term pricing, you have to look at the long-term factors, the economic growth, the consumption trends, the pre-election years, the budgets tomorrow. I think a lot of these, the long-term prognosis in terms of consumption, demand, supply, overall demand. Demand is surprising actually. Continues to be very strong. Long-term price trends definitely are on the way up is what we believe. Relatively speaking also, I think, you know, we are still business pricing at INR 9,900 is what? $120 actually. As we said, you know, in the U.S. it's about $800-$900. Singapore, Thailand, all these places are much higher actually. I don't see any problem in long-term pricing trends being much stronger actually.
Understood. Thank you so much. I appreciate all the answers.
Thank you. The next question is from the line of Karan Khanna from Ambit Capital. Please go ahead.
Yeah. Thanks for the opportunity. Just a couple of questions from my side. Firstly, if you could talk about, you know, the homestays business where we are seeing a lot of competitive intensity that's increasing from international brands, wherein Marriott recently announced their plans to add around 500 premium homes under their brand Homes & Villas by Marriott Bonvoy. How does this affect your proposed 500 homestays and, you know, even the contracts or the negotiations with your partners in this business? If you could talk about that's number one.
Second, on the overall distressed asset acquisition opportunity, you know, being the largest and perhaps the oldest hotel chain in the country, if you could talk about how you're looking at this space given your balance sheet, any meaningful opportunities that you're seeing there, I think that would be great to hear your thoughts on that?
You see, we like to believe that the best competition is when you're competing with yourself. We are already at 108 homestays, and we see no reason why we should not get to 500, because in this 108 we have not even used any of our own capital. Once we start using some capital on our land banks and start building some of the amã villages, it goes very fast. It's not also always just number of homestays and it's the number of listing, what is your margin from those and what kind of revenues you're driving. It's number game on asset light. You need a very large scale to make it any kind of a meaningful business.
I think we remain very confident that with what we already have, the strength of Tata, the strength of the legacy of Taj, it provides a great platform for other brands like amã to thrive going forward. We are not in a rush. We keep the portfolio clean because as I mentioned earlier, we want to be perceived as the premium offering in any business that we are in. We should not be the cheap offering. That was the biggest change we also did with the Ginger, was taking it from a price-driven positioning to a more experiential-driven positioning. I think that is the answer on the homestay. The second question was on the
Marriott. It was on Marriott.
No, that is good. That is homestay. Sorry, what was your second question? You had another question.
Yeah. The second question was on the entire asset acquisition opportunity, perhaps, you know, being the largest and the oldest hotel chain, if you could talk about any meaningful opportunities that you're seeing in the domestic markets.
We think they will start coming as the ECLGS, as alluded to in Q1 and Q2. Once it expires, then you have a default or non-default, is some of that, I hope not a lot, but some of that inventory comes into market. We are very well positioned without having any debt, having free cash flows to take advantage of any opportunity that might come. We don't always have to buy an asset. We could use lever equity, we could use management, we could use leasing, we could use, you know, mezzanine debt. We could take a small stake. We could use our GIC platform. I mean, we have so many opportunities available, and we have the brands available, so we can benefit from such opportunities.
Your question is from a timing point of view good because now we are beginning to see some opportunities come onto the market in the last few weeks. I would say since 10th, 11th, 12th of January, some properties possible in Mumbai, some some in even destinations like Alibag or in South. It's, there is some discussions and also from, I would say from the state governments. I mean, there is a possibility to do some business there. Also from our own group related companies. One of our focus is on the Northeast, so if we can get some tea plantations out there for our amã brand or to expand our footprint in Northeast from currently 13 or 14 to 25 hotels, that's what we have guided the market to 25. Yes, we will use our capital to expand because you also have certain other incentives to go in these markets.
Sure. Okay, that's very helpful. Thank you.
Thank you. The next question is from the line of Nisarg Parikh from S&P Capital. Please go ahead.
Yeah, hi. Thank you for the opportunity. First question is if you could just, you know, help lay down if it is, you know, a hotel with the same number of rooms, RevPAR, if it is owned versus if it's under a management contract, you know, both quantum as well as percentage margin wise, what is the difference in EBITDA that we can get?
See, growth is coming at this point of time.
Not growth. I mean, is it EBITDA on company owned versus management amount?
Absolute amount, maybe we take that offline to sort of talk through that. I think it'll be easier. The only thing what I will point out is when you look at the margin, like what do you say, progression chart where we are showing an increase in margin, you will see that a significant margin is coming from existing assets. Our overall margin grew from 24% to 32%, which is an 8% growth in margin. On that, the existing hotels contributed 5.2% of the margins actually, which is really the growth in our existing properties. New hotels, Ginger, Sri Manama, Chambers, all of those add on actually. This is probably the nearest I have on a slide. If you want more specific numbers, we can chat separately. Not a problem at all.
Understood. Okay, my second question was on, you know, you just said that Taj, which is like 75% of EBITDA. I think what rooms we have, till 2026, we are adding maybe another 10% of more rooms. Around 1,200 rooms over the 11,000 base. Given where our occupancy and ARR levels are, how do we look at the growth in the Taj brand itself over the next 2 years? We have guided to 100 properties in the Taj brand. Actually, we are close to that. I think, I think that is.
The Taj brand today has around 11,700 rooms in operation. There are another almost 3,000 rooms in the pipeline. We think that this brand will continue to drive our performance, especially with our asset management efforts, which I have mentioned before. Let's say the Taj Mansingh. Another 6 months, the renovation will be complete there. We'll have some impact of that renovation and the efforts. You're already seeing that with only 50% of the hotel being operational. Soon it will be 100% operational and completely in the state of art, absolute flagship for us in Delhi. Other things, we are also investing in Lucknow. We'll be opening a second Taj in Lucknow in over the next 12-14 months in a place called Vibhuti Khand.
There is a lot of development that is happening on the Taj front, both on a company owned in terms of asset management and also driving growth by way of management contracts. It gets further interesting because as I said before, we like to maintain a certain balance also in terms of resorts. We want to defend the positioning of Taj in terms of palaces, in terms of number of resorts. That's why we bid for Lakshadweep because Taj created Goa when I was not even in the hotel industry, and Taj also created the destinations like Kerala. We have also created Havelock in Andamans, and the next one will be Lakshadweep.
I think not only finding just growth and just management fees, but a nice mix of portfolio which helps you drive rates, performance, keep the customer with you with the help of a strong loyalty program which we now have access to with Tata Neu. I think it should all help in the customer journey for the Taj brand. We are very pleased that it is doing up to 70% of the total contribution and which is also interesting. It used to do maybe 10, 20 years ago, it was maybe 99% or 95% of the revenue was off and carrying the burden. Today, almost a small number though, but more than a quarter of that is coming from our newly reimagined businesses, which are driving the margin expansion also.
Understood. If I can just ask a follow-up. I'm referring to slide 70, where in Taj you are adding around 1,200 rooms till 2025, which is around 10%-11% on the current base. My question is more so to say that where we are in terms of occupancy at pre-COVID and our ARR is, you know, is significantly high and has increased over the last 12 months. From a growth perspective, does that become limiting? Do we see just the 10-12% growth over the next two years for Taj? How should we think about it?
No, no. This is not how it works. If you look at the charts carefully, you will see pipeline rooms, which is 2,773. I told you it's almost 3,000, right? These do not include some where there is a condition precedent which could get resolved for some of the hotels which we have also signed up, but there are certain conditions to be fulfilled by the owners. That's one. This does not include any conversions. Everything does not come as a new construction. When we did this Taj Resort and Convention Center in Goa together with Siddharth in Goa, these 500 rooms were not a part of any pipeline. When we signed, within, like, a few weeks, Siddharth opened, and within a few months, we have Taj Resort and Convention Center open.
There is something called conversion of existing properties. There is something called a brownfield, which means the hotel is built 60%, 70%. It needs another 30%, 40% completion time. It will not take so much time. This what we are reporting is what we actually have today, which is signed, legally binding, and a press release has been issued communicating it to all the investors and also to the market.
Okay. All right. Got it. Thank you so much.
Thank you. The next question is from the line of Achal Kumar from HSBC Securities. Please go ahead.
Hi. Thanks for another opportunity. A couple of things. One, in terms of liquidity, you ended the quarter with a liquidity of INR 15 billion, with net cash of approximately INR 8 billion. Given that you don't have too much of debt commitment, what's your plan in terms of usage of cash? I mean, you already highlighted that you are open for organic growth, but what exactly are you committing to that? Do you still expect free cash generation of around 15%-20% pre-CapEx of your revenue? Are you open for return to shareholders? If you could share your thoughts on that. Secondly, any update on Sea Rock Hotel? Previously, of course, you said that you will have some update.
Just want to understand if you have any update on Sea Rock as well as usage of this INR 40 billion investment platform for GIC with GIC. Finally, last question is about. I saw you have put a slide talking about B2C channels. Do you see B2C sale is going up, which means the commission outgo could reduce. What is your thought on that? Thank you.
I think, answering each one of your questions, Achal Kumar, I think you're absolutely right that the cash of INR 1,500 crores, of course, includes INR 450 crores, which is earmarked towards the QIP from the QIP towards dividend payments. It's over INR 1,100 crores of cash. Cash generation will be strong. I think, this is kind of a developing area in terms of utilization. In my view, there are four broad buckets in terms of utilization. Number one is the regular renovations, which will broadly be in line with the depreciation of the company. That's how it's always been there. The second is the greenfield projects that we have signed up to will have a second bit of, utilization which will happen. The third one is your point on dividends.
I think very clearly we have been kind of, you know, the performance has been, not like the present, in the earlier years, and therefore, we have been cautious in terms of dividends. Very clearly we are open to relooking at that as we come to the end of the year. This is clearly not something that I can personally comment on, except to say that we will certainly relook, and it'll be debated with the board at the annual quarter. Are we open in terms of relooking at this and defining a dividend policy which is more closer to, you know, a fact-based dividend policy? I think those are things that we are thinking about. Fourth is, of course, is that we're also committed.
Given the difficulties that the industry has faced, we also want to make sure that we have a decent strategic reserve which will help us against any future pandemic or any other things like demonetization or GST. We will have a strategic reserve, but it will also prove that we are likely to have money beyond it, which will be used towards potential acquisitions. This is an area which is developing, Achalesh, and rest assured that we are working on it very openly with the full understanding that anything we do has to be accretive to the to the performance and the returns to shareholders. That's the approach we're taking. That is number one. The second question was on B2C.
B2C, the way at least we look at B2C is that anything which is not ADS or GDS, I think that's been about 30%-31% and our 69% is the B2C direct to consumer. I think we are quite comfortable with the way the GDS and ADS percentages are there. I think there is a role that the ADS plays, whether it is MakeMyTrip or Booking.com, they do have a role to play in terms of reaching the consumer. We continue to invest in our TRWs. The Tata Neu partnership, the loyalty programs also help us to get closer to the customers actually. Do we expect dramatic changes to the B2C percentages from the current 7%-70%?
I think we are happy where we are, and if it goes up, it is better. We don't necessarily treat ADS and GDS as bad actually. They are important as part of the contribution they do in driving sales up. They all have a role to play.
Okay. Any update on Sea Rock, please?
Yeah. On Sea Rock
Yeah, we made some progress with the MCZMA, and now we're going to apply for fresh permissions both to MOEF and to BMC. We'll be able to update you more in the next quarter. This quarter update is that we've got a letter, formal letter from MCZMA that please go ahead and apply.
Perfect. Thank you so much.
I think, if there are no other questions. Is there anybody else in the pipeline? I think maybe we take one more question and then before we close the call. In any case, as we advise, we are always available. We'll take one more question.
Yes. The next question is from the line of Prateek Kumar from Jefferies. Please go ahead.
Yeah, thanks for the opportunity again. I have two pending questions. My first question is on Ginger, Santa Cruz timeline. Would you be able to update on the timelines there? Second question is, right now YTD pricing for FY23 appears like around 25% higher versus pre-COVID pricing of, I mean, your standalone pricing at least. How does this pricing, like, let's say compared to peak pricing years like 2006-2008 for company or maybe for industry?
Yeah. I think, okay, let me.
Sure.
I think as far as the Ginger is concerned, we were already expecting it to open around June, July.
It's true. It's true.
It's probably a couple of months, there may be some plus, minus. I think that is something that will definitely open in the middle of the next financial year. As far as pricing is concerned, I think the market in 2007, 2008 was very different actually. With 60,000 rooms and today we have branded rooms at more than 160,000. I think the dynamics are completely different, Prateek, actually. Given the dynamics are completely different and, I think there's really no point in us comparing back to 2007, 2008 in terms of what was there. I think as we said in the beginning, the macroeconomic fundamentals are strong, the consumption theme is strong, the hospitality parameter is strong.
I think we can only look forward to sort of say that both occupancy and rates are likely to go higher. As we clarified, Prateek, the business ARR is still around INR 9,900 as we saw. There is still, we believe, potential in terms of growth in ARRs. There are no indicators that we have at this point of time that suggests there are any flattening or U-turn in any of these parameters actually. You see international tourist arrivals is still not fully come back. There are a number of factors which are only helping, Prateek, actually.
Thanks. That was very useful and all the best.
Thank you.
Thank you. Thank you. I think.
Yes. I now hand the conference over to Mr. Prateek Chadha for closing comments.
Thank you, everyone. Thank you for joining us and thank you for your support, and we look forward to continuous record quarters like the first three quarters of this financial year have been. Thank you for joining.
Thank you.
Thank you very much. On behalf of The Indian Hotels Company Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines.