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Hotels
ƒ To report average revenue growth of ~11% YoY in Q3FY11E
Average revenue growth for the I-direct universe is expected to be
in the range of 10-11% in Q3FY11E. The growth in revenues would
be mainly driven by improvement in occupancy levels, which we
expect to improve by 400 bps YoY to 74% in Q3FY11. Average
room rates (ARRs) are expected to improve marginally by 4-5%
during the same period. QoQ, companies are expected to report
average revenue growth of 34.2% on account of the peak season.
ƒ Operating margins to remain under pressure compared to last year
Due to moderate growth in sales and rise in operating costs,
especially F&B and other operating costs, we expect operating
margins to decline by 602 bps YoY to 28%. As per our observations,
the companies during the quarter have not entirely passed on the
rising cost burden to consumers. However, on a sequential basis,
we expect its OPM to improve by 820 bps due to a sequential jump
in revenues with the onset of the peak season.
ƒ Moderate revenue growth, lower margins to impact profitability
Net profit for the I-direct universe is expected to decline by 18-19%
YoY to | 113 crore on subdued margins and higher interest costs.
However, the same is expected to improve compared to the last
quarter due to sequential growth in revenues along with an
improvement in operating margins. EIH and Hotel Leela are
expected to report net profit of | 21.4 crore and | 14.0 crore,
respectively, as against losses reported in the previous quarter.
ƒ Leisure destinations to see strong traction during the quarter
Due to the ongoing peak season, we expect leisure destinations to
outperform compared to business destinations in Q3FY11. Leisure
destinations such as Goa, Kovalam, Jaipur and Kerala showed sharp
improvements in occupancy levels to 78% from 73% on account of
the holiday season. Among business destinations, Hyderabad has
witnessed a marginal rise in occupancy levels on account of
ongoing political issues over Telangana.
EIH Revenues for the quarter are expected to grow 14.6% YoY due to growth in foreign
tourist arrivals (FTAs) and incremental revenue flow from its new five star hotel in
Mumbai BKC. We expect average occupancy levels to improve by 450 bps YoY to
71% whereas ARRs are likely to improve marginally by 5% YoY
Hotel Leela On the revenue front, Leela is expected to benefit from both a rebound in corporate
travel and strong pick-up in demand from tourist destinations Goa and Kovalam.
However, PAT is likely to decline compared to last year on lower operating margins (
-400bps YoY) and higher interest outgo
Indian Hotels Revenues for the quarter are expected to improve due to re-opening of its Taj
Heritage wing, Mumbai and improvement in foreign tourists data. We expect
average occupancy levels to improve by 700 bps to 67% whereas ARRs are likely to
improve by 4-5% YoY to | 9550
Kamat Hotel OPM is expected to improve marginally by 150 bps QoQ to 34.9% on improved
business and better cost controls. However, we expect its net profit to decline by
54.7% YoY as last year's profit included other income of | 5.9 crore on write-back of
excess provisioning related to property tax
Royal Orchid
Hotel
Revenues would grow 33% YoY on a strong rebound in the IT/BFSI segment and
additional revenue flow of ~| 4.3 crore from its new hotels in Ahmedabad and
Hospet. Margins will improve marginally by 150 bps YoY to 26.2% due to efficient
cost control management and growth in revenues
Taj GVK Hotel The growth in revenues will remain muted at 6.3% YoY as Hyderabad has witnessed
lower pick-up in the business due to ongoing political issues over Telangana.
Operating margins are also expected to decline by 400 bps YoY to 34.4% while the
same is expected to improve marginally by 210 bps QoQ
Viceroy
Hotels
Revenues would grow 7.6% YoY backed by a 200 bps improvement in average
occupancy. However, QoQ we expect revenues to grow marginally due to ongoing
political issues over Telangana. Operating margins are expected to improve YoY.
However, PAT is likely to reduce on higher interest costs
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