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Hotels
Subdued growth in ARR to result moderate growth in Topline
We expect average revenue growth of companies under our coverage
would be ~6-7% YoY for the Quarter ended Dec’11. Revenue growth
will be mainly driven by ~200bps YoY growth in occupancy and ~4-5%
YoY rise in ARR for the same period. However, moderate growth in
topline is expected to partially offset by ~9% YoY rise in operating
expenses, led by F&B and other operating costs. As a result, operating
margins is expected to decline by ~170 bps YoY at 31% YoY in
Q3FY12E. Subdued growth in revenue is mainly attributed by concern
of room supply which restricted the growth in ARR. Under our
coverage, we expect margins of major players like Indian hotels and EIH
to remain under pressure (down by 150bps YoY and 240 bps YoY
respectively). On a QoQ basis, companies under our coverage are
expected to report revenue growth of 37% on the back of ~1000 bps
rise in occupancy and ~43% rise in ARR on account of the peak season.
Bottomline to remain under pressure on suppressed margins
The companies under the I-direct universe are expected to report net
profit of ~| 130 crore in Q3FY12E, a growth of ~32% YoY. The growth
in bottomline is mainly driven by EIH’s net profit which is expected to
grow at 79% YoY to | 51 core due to lower interest outgo. However, net
profit growth of other players is expected to be in the range of 4-16%
YoY on subdued margins. On the other hand, Indian hotels is expected
to report net profit of ~| 58 crore against | 50 crore in Q3FY11
respectively mainly due to growth in room inventories (addition of ~900
rooms under management contract in the past one year).
Leisure destinations to cater more travelers than corporate
Considering cyclical nature of the business and long holidays, leisure
destinations attracts maximum tourists against business destinations in
Q3FY12. This can be evident from occupancy rate across leisure
destinations such as Goa, Kovalam, Jaipur and Kerala where occupancy
improved by ~200 bps YoY to 73% from 71% on account of the holiday
season. Among business destinations, occupancy across NCR, Mumbai,
Hyderabad and Chennai have witnessed a marginal rise due to lower
discretionary spends by corporate and political unrest in southern
region.
Company specific view
Company Remarks
EIH We expected a moderate revenue growth of 5% YoY, supported by ~200 bps YoY and
~4% YoY rise in occupancy and ARR. Operating margin is expected to decline by
~243 bps YoY due to 9% YoY rise in operating expenses. Profitablity to improve
sharply due to reduction in interest cost.
Indian Hotels Revenues for the quarter are likely to see moderate growth of 7% YoY due to
incremental revenue from its new hotels (addition of ~900 rooms under management
contract). We expect average occupancy levels to improve by ~200 bps YoY while
blended ARRs to improve by ~4% YoY at | 8750, in Q3FY12
Kamat Hotel Revenues are expected to grow ~8% YoY supported by ~3% YoY rise in ARR and
~400 bps YoY rise in Occupancy across Orchid and VITS Mumbai. Margins are
expected to remain flat at 35% due to 8% YoY rise in operating cost. We expect net
profit growth of 5% YoY in Q3FY12
Royal Orchid
Hotel
Revenues are expected to grow by 7% YoY led by new room addition and marginal
growth in occupancy and ARR by ~100 bps YoY and 3% YoY respectively. However,
9% YoY rise in operating cost hit the margin by~150 bps YoY. We expect net profit
growth of ~4% YoY in Q3FY12.
Taj GVK Hotel The growth in revenues will remain muted at ~5% YoY due to flat occupancy as
Hyderabad has witnessed lower pick-up in the business due to political unrest in the
region. Operating profit is expected to grow at moderate rate of ~3% YoY due to
~5%YoY increase in operating expenses.
Source: ICICIdirect.com Research
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Hotels
Subdued growth in ARR to result moderate growth in Topline
We expect average revenue growth of companies under our coverage
would be ~6-7% YoY for the Quarter ended Dec’11. Revenue growth
will be mainly driven by ~200bps YoY growth in occupancy and ~4-5%
YoY rise in ARR for the same period. However, moderate growth in
topline is expected to partially offset by ~9% YoY rise in operating
expenses, led by F&B and other operating costs. As a result, operating
margins is expected to decline by ~170 bps YoY at 31% YoY in
Q3FY12E. Subdued growth in revenue is mainly attributed by concern
of room supply which restricted the growth in ARR. Under our
coverage, we expect margins of major players like Indian hotels and EIH
to remain under pressure (down by 150bps YoY and 240 bps YoY
respectively). On a QoQ basis, companies under our coverage are
expected to report revenue growth of 37% on the back of ~1000 bps
rise in occupancy and ~43% rise in ARR on account of the peak season.
Bottomline to remain under pressure on suppressed margins
The companies under the I-direct universe are expected to report net
profit of ~| 130 crore in Q3FY12E, a growth of ~32% YoY. The growth
in bottomline is mainly driven by EIH’s net profit which is expected to
grow at 79% YoY to | 51 core due to lower interest outgo. However, net
profit growth of other players is expected to be in the range of 4-16%
YoY on subdued margins. On the other hand, Indian hotels is expected
to report net profit of ~| 58 crore against | 50 crore in Q3FY11
respectively mainly due to growth in room inventories (addition of ~900
rooms under management contract in the past one year).
Leisure destinations to cater more travelers than corporate
Considering cyclical nature of the business and long holidays, leisure
destinations attracts maximum tourists against business destinations in
Q3FY12. This can be evident from occupancy rate across leisure
destinations such as Goa, Kovalam, Jaipur and Kerala where occupancy
improved by ~200 bps YoY to 73% from 71% on account of the holiday
season. Among business destinations, occupancy across NCR, Mumbai,
Hyderabad and Chennai have witnessed a marginal rise due to lower
discretionary spends by corporate and political unrest in southern
region.
Company specific view
Company Remarks
EIH We expected a moderate revenue growth of 5% YoY, supported by ~200 bps YoY and
~4% YoY rise in occupancy and ARR. Operating margin is expected to decline by
~243 bps YoY due to 9% YoY rise in operating expenses. Profitablity to improve
sharply due to reduction in interest cost.
Indian Hotels Revenues for the quarter are likely to see moderate growth of 7% YoY due to
incremental revenue from its new hotels (addition of ~900 rooms under management
contract). We expect average occupancy levels to improve by ~200 bps YoY while
blended ARRs to improve by ~4% YoY at | 8750, in Q3FY12
Kamat Hotel Revenues are expected to grow ~8% YoY supported by ~3% YoY rise in ARR and
~400 bps YoY rise in Occupancy across Orchid and VITS Mumbai. Margins are
expected to remain flat at 35% due to 8% YoY rise in operating cost. We expect net
profit growth of 5% YoY in Q3FY12
Royal Orchid
Hotel
Revenues are expected to grow by 7% YoY led by new room addition and marginal
growth in occupancy and ARR by ~100 bps YoY and 3% YoY respectively. However,
9% YoY rise in operating cost hit the margin by~150 bps YoY. We expect net profit
growth of ~4% YoY in Q3FY12.
Taj GVK Hotel The growth in revenues will remain muted at ~5% YoY due to flat occupancy as
Hyderabad has witnessed lower pick-up in the business due to political unrest in the
region. Operating profit is expected to grow at moderate rate of ~3% YoY due to
~5%YoY increase in operating expenses.
Source: ICICIdirect.com Research
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