Sector Outlook 2022: 10-years pricing records were broken in Q3FY22, says Amit Jaiswal, CFO, Royal Orchid Hotels

Amit Jaiswal, CFO, Royal Orchid Hotels, talks about Omicron and its impact on the business of the company, cancellations, prices movement, deal with the Vascon Engineering to Budget expectation among others during a candid chat with Swati Khandelwal, Zee Business. Edited Excerpts:

Q: How much the rising number of cases due to the Omicron has impacted your booking, if yes, how long the effect will be there?

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A: Corona is increasing right now and there is no doubt in it and if you have a look at the figures, it is increasing very fast. But the good thing is that there is no need for hospitalization. It has affected the business – the kind of business we saw in October, November and December (we had quite robust business) – and corporate booking among others have gone down. I believe that this is going to be a month or one-and-a-half months phenomenon after which revenge tourism will start again and people will step out and start travelling. I would like to say that the Omicron version of CORONA is actually an exit and CORONA will come to an end after this. I feel that this year is going to be a very good year for the travel and tourism industry. If we take out this one month then the year will be quite good for the travel and tourism industry.

Q: Have you seen any cancellations due to rising cases?

A: The trend was quite good and even in January all of our hotels located at leisure destinations were completely sold out. Even the business hotels were picking up. But the current situation is such that cancellations are happening at the leisure destinations where people were moving with their children but the cancellations have not occurred for the grown-ups. However, slight cancellations have been seen in the case of family bookings. As far as the business hotels and marriages are concerned, the restrictions have reduced the number of people as the number of invitees has been restricted to 150-200 people against 400-500 people, which used to be in the past. In the MICE (Meetings, Incentives, Conference/ Conventions and Exhibitions/ Events) segment, which generally used to be quite good in January and February, people are deferring their plans as they are alert. So, the corporate business and MICE segments are being deferred. We expect that business will return as soon as the situation normalises, it is expected that things will normalise by mid-February or its end.

Q: How much the prices have moved up amid demand rise and what kind of trends are visible in terms of pricing? 

A: As far as pricing is concerned, if it is segregated into two parts of which one is leisure price and the second is the business hotel pricing. The leisure pricing has moved up to a level in the previous quarter (Q3FY22) that it has broken all the records of the last 10 years. Ever had pricing like this and the records of the last 10 years have been broken. It has gone so high in fact the prices have been hiked even 300% in some hotels. The business hotels pricing had improved a bit in the last quarter but still, it was 10-15% lower than the pre-COVID levels. We were expecting that the pricing will touch the pre-COVID levels in this quarter but because of Omicron, it seems that we will have to wait for some more time. In fact, the occupancy of the business hotels stood at 75% in the previous quarter and I feel that it may see a 10-15% hit in this quarter. But it will improve after this. In terms of profitability, we were one of the few hotel companies that have posted a profit in the September quarter. We have great expectations from the December quarter, which will be declared once the account is finalised but the December quarter results will be very good. However, the March quarter will be hit a bit.

Q: Going forward, what is going to be the company’s philosophy and strategy and will you focus more on Leisure hotels? What is the split between leisure and corporate setup at present? Also, last time you told us that the company will increase its number of hotels from 70 to 100. Where will you focus geography-wise and segment-wise?

A: Leisure hotels are going to do very well for the next 2-3 years, there is no doubt in it because earlier people used to go out of India, but now they are roaming in India. Domestic tourism has increased a lot and is likely to increase further. The next two years will be very good for leisure destinations. So, we have a focus on leisure destinations but yes, following the asset-lite model we will look forward to hotel management or revenue sharing mechanism. We have 12-13 hotels in the pipeline and I believe that we will be able to cross the number of 100 hotels by March 2023.

Q: In around August the company has done a deal with Vascon Engineering to acquire the remaining 50% stake in Cosmos Premises Pvt Ltd. in lieu of 100% stake in Rivershore Developers Pvt Ltd ("RSDPL") and settling of liabilities in the books of RSDPL. The deal was supposed to get completed within 60 days. Has that been completed? Also, what kind of tie-ups will we get to see at the global and domestic levels?

A: The deal has been completed, just, the shares are yet to be transferred. The financial transaction closure has happened. With this, now, we are 100% owner of the hotel that we have in South Goa. We have handed over our land in Pawai, which will be developed by them. So, one way it is good for us is because Goa is a good location and we can develop things there a lot. The debt asset of ours have moved out and it will increase our profit margin a lot, in the coming quarters.

Q: The company during Q2 results has issued a termination letter in respect to one of your leased hotels and the matter was pending arbitration. What is the update on it now?

A: The arbitration process is going on, the arbitrator has directed it to the conciliator, we are in touch with them. Even we want to continue with the hotel if we get better terms.

Q: The Budget is around the corner. So, what is your expectation from the central government and the budget this time?

A: The government must think that 9% of the country’s GDP comes from the tourism sector, so, it should provide a tax benefit to it, which will increase productivity further. The business, which went out to destinations like Sri Lanka and Thailand among others will stay in India, which means the government will get more tax. So, it is an appeal from the government that to help the tourism sector it should reduce the tax regime a bit, so, that the business moves up. That will be my appeal to the government.