Hospitality sector -Room for hope:: Business Line

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‘Good reason to believe an up-cycle is in the offing’:: Business Line

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Hotels ƒ Higher room inventory to keep occupancy under check despite improvement in foreign tourists arrivals (FTA) ƒ :Q3FY15 Result Preview : ICICI Securities, report

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Hotels: More rooms, less revenue :: Business Line

Hotels: More rooms, less revenue :: Business Line

Hotels ƒ : Q4FY12 Result Preview: ICICI Securities, PDF Link

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http://www.icicidirect.com/mailimages/ICICIdirect_ConsolidatedResultPreview_Q4FY12E.pdf

Hotels
ƒ Revenue growth to remain moderate at ~6% YoY in Q4FY12E
Despite this being a peak season for the hotel industry, major hotel
players under our coverage are expected to report a moderate growth
of ~5-6% YoY in topline during Q4FY12E. Addition of new room supply
over the years with moderate room demand during the quarter
suppressed average room rate (ARR) growth to the tune of ~3-4% YoY
while occupancy is expected to  be ~75% YoY (up ~200 bps YoY)
mainly backed by growth in leisure destinations.
ƒ EBITDA margin to remain flat YoY
EBITDA is expected to grow by a mere 4% YoY on account of a
moderate rise in operating cost. We expect the I-direct hotel universe
operating cost to increase ~5% YoY (marginally lower than sales
growth). Major hoteliers like Indian Hotels are expected to report
EBITDA margins of 34% (down ~ 139 bps YoY) while EIH is expected to
report EBITDA margin of 31% (up ~190 bps YoY), respectively,
benefiting mainly from their geographical mix.
ƒ Net profit to decline 8% YoY led by sharp fall in EIH’s profitability
Companies under the I-direct coverage are expected to report net profit
of ~| 163 crore in Q4FY12E, (down ~8% YoY) due to higher interest
and depreciation cost. Under our coverage, we expect net profit of
Indian Hotels to remain flat YoY while EIH’s net profit is expected to
decline 26% YoY to | 50 core mainly due to a sharp decline in other
income during Q4FY12E. Small hotel players like Royal Orchid are
expected to report net profit growth of ~2% YoY while Kamat Hotels is
expected to report a net profit of about | 0.2 crore against a loss of | 1.4
crore reported in during Q4FY11.
ƒ Leisure and select business destinations to drive growth in Q4
Leisure destinations such as Agra,  Goa,  Jaipur  and  Kerala  witnessed
occupancy growth of ~300 bps YoY to 80% from 77% during Q4FY12,
mainly on account of the holiday season. Among business destinations,
South Mumbai, NCR and Kolkata also witnessed occupancy growth up
to ~300 bps YoY to 78% from 75% during Q4FY12 driven by an
increase in MICE (meeting, incentives, conferencing, and exhibitions)
activities

‘We've been the most aggressive of all players' : Managing Director and CEO, Indian Hotels :Business Line

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Hotel industry in India is set to grow rapidly to meet the rising demand. Indian Hotels is well-positioned to take advantage of this surge with its properties spread across geographies and spanning various price points. In this recent interview to Business Line at the company's newest property, Vivanta by Taj at Bekal, Kerala, Mr Raymond Bickson, Managing Director and CEO, Indian Hotels Company Limited, pointed out that Indian Hotels has been growing at rates much faster than its competitors.

Excerpts from the interview:

How are occupancy levels in the hotel industry today? How does Indian Hotels plan to take on the competition?

In 2003, India had 62,000 rooms, while in the beginning of 2011 there were 1,67,000. India has, at present, occupancy levels of 65-68 per cent. In the last 10 years, the levels have doubled. We are now sold out five days a week in a year.

India's hotel market has to grow to meet the increasing demand. We will need 400,000-500,000 rooms to meet this demand. To cite a few examples, China, which has 2.8 million rooms, plans to build 600,000 more; the US with 5 million rooms, plans to increase it by another 400,000.

Hotels 􀂃 ICICI Securities 3QFY12 preview

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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.

Hotels :: Q2FY12 Result Preview::ICICI Securities

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Hotels
ƒ Low discretionary spends by clients to impact topline growth
The average revenue growth for the I-direct universe is expected to be
5-6% YoY in Q2FY12E. This can mainly be attributed to lower growth in
occupancy levels and muted average room rates (ARR) during the
quarter on account of the lean season. In our coverage universe, we
expect average occupancy levels to decline by ~100 bps QoQ in both
business and leisure destinations,  respectively, on account of low
discretionary spends by corporate clients and the lean season impact.
However,  ARR  is  expected  to  increase  by  mere  1-2%  YoY  to  offset
rising cost pressure. Hence, the incremental room supply in the last one
year would mainly be the driving factor for the revenue growth over
normalised growth for the quarter.
ƒ High fixed overhead charge, muted revenue growth to dent margin
The I-direct hotel universe is expected to witness margin contraction of
~200 QoQ to 22% mainly due to high fixed overhead charge and lower
topline growth. Under our coverage, we expect margins of TajGVK and
Kamat Hotels to dip by 500 bps and 200 bps QoQ, respectively. Margins
of EIH and Indian Hotels are expected to decline by 100 bps each. On
the other hand, we expect Royal Orchid Hotel to report flat margins
similar to that of last quarter.
ƒ Bottomline to remain under pressure on lower revenue
The companies under the I-direct universe are expected to report net
profit of ~| 28 crore in Q2FY12E, a drop of ~41% QoQ mainly due to
poor room demand across business and leisure destinations. The
cyclical nature of the business coupled with higher interest charges is
expected to weigh on the bottomline. Among major players, Indian
Hotels and EIH are expected to report net profit of ~| 4.6 crore and ~|
15.2 crore, respectively, against a loss of | 15 crore and | 6.3 crore in
Q2FY11, respectively, mainly due to growth in room inventories (i.e.
addition of Taj Falaknuma and EIH’s BKC, respectively).
ƒ Business destination to remain relatively better than leisure
Business destinations are expected to remain relatively better than
leisure destinations due to the lean season impact. However, both these
destinations are expected to see an average decline in average
occupancy. Business destinations such as Mumbai, Delhi, Chennai and
Bengaluru are expected to report a dip of 100 bps  QoQ in average
occupancy in Q2FY12E due to lower discretionary spending by
corporate clients. On the other hand, occupancy levels across Goa,
Jaipur and Agra (among leisure destinations) are likely to drop 100 bps
at around 53% due to lean season.


: Company specific view
Company Remarks
EIH Revenues are expected to grow 10% YoY with incremental revenue flow from
stabilisation of BKC, Mumbai. Hence, the operating margin is expected to increase
significantly coupled with cost control measures. EIH is expected to report net profit
of | 4.6 crore against a loss in Q2FY11 due to a drop in interest cost
Indian Hotels Revenues for the quarter are likely to see a moderate growth of 8% YoY due to
incremental revenue from its Taj Heritage wing, Mumbai and Taj Falknuma in
Hyderabad. We expect average occupancy levels and average blended ARRs to
remain flat at 63% and |  7217, respectively, in Q2FY11
Kamat Hotel Revenue is expected to grow by ~10% YoY (~2% QoQ) led by incremental revenue
from newly launched hotels. However, ARR growth is expected to be mere 1-2% in
most of the business destinations. Operating margin is expected to remain under
pressure by ~500 bps due to higher other expenses and employee cost
Royal Orchid
Hotel
Revenues are expected to grow by 3% YoY led by new room addition in Hospet.
However, corresponding growth in cost is likely to hit the EBITDA margin by650
bps in Q2FY12. Considering the seasonality impact, topline is expected to remain flat
sequentially
Taj GVK Hotel Revenues are expected to decline ~4% YoY due to drop in occupancy rate by 200 bps
& flat ARR mainly due to political disturbance in the region. Operating margins are
expected to decline 200 bps YoY to 30% due to a rise in operating cost. Sequentially,
topline is expected to decline 3% due to seasonality impact
Source: ICICIdirect.com Research

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Q2FY12 Result Preview:: ICICI Securities,

http://indiaer.blogspot.com/2011/10/q2fy12-result-preview-icici-securities.html

Hotels 􀂃 Addition of rooms and rise in occupancy to drive topline::Q1FY12 Result Preview -ICICI Securities

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Hotels
􀂃 Addition of rooms and rise in occupancy to drive topline
The average revenue growth for the I-direct universe is expected to
be in the range of 24-25% YoY in Q1FY12E. The growth would
mainly be driven by incremental revenue from the addition of hotel
rooms and improvement in occupancy levels. In our coverage
universe, we expect average occupancy and average room rate
(ARR) to increase by ~220 bps and 3-4%, respectively, compared to
last year. However, on a QoQ basis, companies are expected to
report average revenue de-growth of ~19% (except Taj GVK Hotels)
due to seasonality of the hotel business.
􀂃 Re-opening of major hotels, cost control management to help
expand margins
Due to a sharp rise in topline driven by incremental revenue and
moderate growth in operating costs, we expect operating margins
to expand by ~1010 bps YoY to ~28%. Under our coverage, we
expect the margin of Indian Hotels to improve by 60 bps compared
to last year due to re-opening of Taj Heritage while the margin of
EIH is expected to be better compared to last year due to addition of
new rooms in BKC Mumbai and Hyderabad. However, on a
sequential basis, we expect margins to decline by 520 bps due to
seasonality of the business.
􀂃 Improved demand and better margins to stimulate profit
Companies under the I-direct universe are expected to report net
profit of | ~88.5 crore in Q1FY12E against loss of | 1.3 crore in
Q1FY11 due to a revival in demand from business destinations.
Indian Hotels is expected to report a sharp growth in net profit due
to re-opening of Taj Heritage Mumbai and improved occupancy
while EIH is expected to report net profit of | 20.5 crore vs. a loss of
| 15.9 crore during the corresponding period last year taking into
account new room additions in BKC and new hotel in Hyderabad.
􀂃 Business destination to outperform compared to leisure
destination
Due to seasonality of the business, we expect business destinations
to attract more tourists than leisure destinations in Q1FY12E.
Business destinations such as South Mumbai, Chennai, Bengaluru
and Hyderabad showed a 300 bps YoY improvement in average
occupancy levels from 61% to 64% in Q1FY12E, with an increase in
business related travel expenditure. On the other hand, Goa, Jaipur
and Agra (among leisure destinations) are likely to see marginal
improvement of 100 bps YoY in occupancy to around 56%.


Company specific view
Company Remarks
EIH Revenues are expected to grow 26% YoY due to growth in FTAs and incremental
revenue flow from its hotel in Hyderabad and BKC Mumbai. On a QoQ basis, topline
is expected to decline due to the seasonality factor. The company is expected to
report profit compared to loss last year due to better topline growth
Indian Hotels Revenues for the quarter are likely to see healthy revenue growth compared to last
year due to re-opening of its Taj Heritage wing, Mumbai and improvement in foreign
tourists data. We expect average occupancy levels to improve by 380 bps to 68%
whereas ARRs are likely to improve by 2% YoY to | 9600
Kamat Hotel Revenue is expected to grow by 10.5% YoY led by better occupancy & ARR across
Mumbai region compared to last year. However, operating margin is expected to
take a hit of ~600 bps due to higher other expenses and raw material cost. It is
expected to report a profit against loss on a sequential basis
Royal Orchid
Hotel
Revenues are expected to grow 25% YoY due to a rebound in the IT/BFSI segment
and addition of new rooms in the Jaipur and Hyderabad region. The PAT margin is
likely to improve by 200 bps on a sharp rise in topline due to additional inflow from
the launch of two new hotels
Taj GVK Hotel Revenues are expected to grow ~15% YoY due to an improvement in occupancy
level by ~250 bps and ARR by ~5%. Pick-up in occupancy and ARR is in line with a
steady pick-up in the business in Hyderabad region. Operating margins are expected
to increase 60 bps YoY to 38% due to better cost control management
Source: ICICIdirect.com Research

Hotels �� : Q4FY11 Result Preview: High occupancies to drive growth: Centrum

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We believe Q4FY11 would be a strong quarter for the
luxury hospitality industry. A robust tourist season,
coupled with the recently-concluded Cricket World Cup,
is expected to drive revenues and hence profitability.
We expect hotel players to report healthy numbers and
end the year on a strong note. We retain our Buy rating
on Indian Hotels Company (IHCL) and Hold on EIH and
Hotel Leela. Improving operating metrics along with a
favourable environment make IHCL our top pick.
�� Robust demand to drive revenue growth: We expect
IHCL to report 27% YoY sales growth to Rs5,121mn,
buoyed by robust demand. EIH is expected to notch
growth of 21.6% YoY to Rs4,006mn, while Hotel Leela
should report growth of 5.3% YoY to Rs 1,427mn.
�� Margins to be stable: We expect IHCL’s EBITDA margin
to expand 240bp QoQ to 32.1%. However, margins for
EIH and Hotel Leela are expected to contract 250bp
QoQ and 40bp QoQ to 34.6% and 38.7%, respectively.

Hotels 􀂃 : Q4FY11 Result Preview: ICICI Securities

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Hotels
􀂃 To report average revenue growth of ~15% YoY in Q4FY11E
Average revenue growth for the I-direct universe is expected to be
in the range of 14-15% in Q4FY11E. The growth in revenues would
be mainly driven by improvement in occupancy levels, which we
expect will improve by 320 bps YoY to 75% in Q4FY11. Average
room rates (ARRs) are expected to improve by ~4% during the
same period. On a QoQ basis, companies are expected to report
average revenue growth of ~5%.

Kotak Sec, HOTELS - BUDGET HIGHLIGHTS & IMPACT

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HOTELS
BUDGET HIGHLIGHTS & IMPACT
n New services brought under service tax net
Impact: Following new services have been included in the service tax net -
l Hotel accommodation in excess of declared tariff of Rs1000 per day will
be levied an effective service tax rate of 5%
l Service provided by air-conditioned restaurants that have license to serve
liquor will be levied an effective service tax of 3%.
We view the above mentioned measures as a minor negative for the hotel
sector

Kotak Sec, HOTELS : Budget Expectations

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HOTELS
Current view
q Indian hotel industry has huge growth potential given that India is one among
the top growing economies globally. However, we stand poorly in terms of hotel
infrastructure when compared to developed and developing countries.
q In order to improve our hotel infrastructure at a rapid pace, the industry is seeking
accreditation of infrastructure status under section 80-IA to the hotel industry.
Accordingly the industry expects various benefits that are available under
the said act for the development of hotel infrastructure.
q Hotel projects have long gestation periods as they require huge investments of
which the bulk is accounted for land and building. Currently hotel industry
comes under the real estate sector and is subject to rules that apply to the real
estate sector. Banks consider real estate lending as risky assets and since hotel
projects are classified under real estate, lending to hotel projects attract higher
interest rates. The industry is also looking to get some tax rationalization and
single window clearance for various licenses.

Hotels Sector Preview: Union Budget 2011-12 : Angel Broking

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Hotels
The hotel sector has been witnessing a gradual recovery in the key operating parameters, backed by an
improvement in the economy and increased foreign tourist arrivals. In the last budget, the industry was given a
boost with investment-linked tax incentives for capital expansion in hotels under the two-star and above categories.
Following are the key demands of the industry from the Union Budget 2011-12, which would enable it to continue
on its growth trajectory:
The hotel industry has long been demanding the grant of infrastructure status under Section 80 IA (applicable to
airports and ports). This will enable hotel players to get the benefit of total deductions on profits and gains for 10
years. The granting of infrastructure status would provide more scope for reinvestment into new capacity, thereby
paving way for more guest rooms. In turn, it will help lower tariffs and will make India a more affordable tourism
destination, on the lines of Malaysia, Indonesia and Sri Lanka, further attracting foreign tourists.
The industry also wants the government to restore the depreciation rate to 20%. The depreciation rate was at 20%
till March 2007; however, it was lowered to 10% later. The reason behind this demand is that hotel buildings (like
factory plants) are used around-the-clock and require heavy investments for constant renovation and upgradation.
Overall, we are positive on the sector.


Budget Expectations
Head Current Status Wish List Potential Impact
Infrastructure status Not granted
Infrastructure status under
Section 80IA of the Income
Tax Act
Will enable hotel players to get the benefit of total
deductions on profits and gains for 10 years. Positive for
all hotel players.
D iti Depreciation Rate 10% 20% Will positively impact cash flows and tax outgo of all
hotel players

Top Pick: TAJ GVK

Hotels- 3QFY2011 ICICI Securities: Result Preview

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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.

HOSPITALITY Good times to continue: Q3FY11 Result Preview: Edelweiss

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HOSPITALITY
Good times to continue: Q3FY11 Result Preview: Edelweiss


􀂄 Key highlights of the sector during the quarter
Hotels across cities are witnessing better occupancies Y-o-Y due to strong revival in
business sentiments. As per DGCA, air traffic jumped 23.5% during April-November
2010 against the corresponding period in 2009, signaling strong revival in the
overall business environment. Occupancies are up 10-15% across major cities Y-o-
Y, with cities like Delhi, Kolkata, and Chennai witnessing more than 70% occupancy
in October 2010. In the current tourist season, hotels are looking forward to ORs of
75-80% after a long lull. ARRs are expected to show strong growth and are
expected to remain buoyant in Q4 as well. FTA growth in January-November 2010
was 10.4% (4.93 mn arrivals) against 14.8% during November 2010 Y-o-Y.

2011 Outlook: Hotels (In a recovery stage, occupancy to drive growth): ICICI Securities

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Hotels (In a recovery stage, occupancy to drive growth)
Neutral
After witnessing a severe contraction in the past two years, the hotel sector
is set to witness an improvement in its revenues (FY10-12E CAGR of 21%)
on an improved GDP outlook and lower-than-expected growth in room
supplies. The growth in revenues would mainly come from a rise in
occupancy by 16% to 74% from 64% in CY10 while ARRs are expected to
rise by 6% to | 8,400 during the same period. We believe moderate hotel
room supply and compelling valuations of the hotel sector would draw
attention of investors into this sector in 2011.