“While you can say that in spite of heat it was decent performance, I am looking at trend lines and I expect the catch up will happen really from Q2 when there will be improvements vis-a-vis the previous year in occupancy,” says Patanjali G Keswani, CMD, Lemon Tree Hotels.

Summer is getting over. When I speak to some of your peers, they are of the view that irrespective of how hot the summer was, the Indian hospitality sector and the entire hotel sector enjoyed peak occupancies. Is that true?
Patanjali G Keswani: No, I do not think that is true from what I know, because I get that monthly report from Smith Travel Research. I think April was very good. But as I have said earlier, May and June were quite affected by the elections and also by the heatwave. Now, obviously, certain markets, which are a small segment of the overall market, which is hill stations and so on, did well. But I am looking at it from an all-India number and I would say it would be around the same as the previous year. While you can say that in spite of heat it was decent performance, I am looking at trend lines and I expect the catch up will happen really from Q2 when there will be improvements vis-a-vis the previous year in occupancy. The trend line is flat, when do you think the trend line to normalise and for the full year you think the trend line could be up only because demand may be low according to you for the current quarter, but it could pick up significantly in coming quarters?
Patanjali G Keswani: That is nearly certain. Because if I look at the trend lines on annualised basis, then I am pretty sure that this year will be better than the previous year. But this quarter was not better than the previous quarter, it was roughly the same in terms of demand.

There is also some news that the travel and tourism combined contribution stands at about $199 billion and NSE has actually launched a new thematic index, which is the Nifty India Tourism Index. I just wanted to get in your thoughts on what this would mean for the sector as a whole.
Patanjali G Keswani: Well, I think it is good for the sector. See, the point is that the sector was not significant in terms of market cap up to about two years ago or three years ago. So, post COVID, the sector, at least the companies I saw in the thematic index, on an aggregate basis their market capitalisation is well over $50 billion and I think it is a great idea because this enables you to participate on a distributed basis, on a de-risked basis across the future of the travel and tourism sector in India.

By the way, 200 billion is only six point some percent of GDP and the global average is over 10% average. So, I think there is a lot of growth and a big runway for the tourism and travel sector in India. And this, putting it in this index I think is a great way to participate.

And let us get specific because you have gone on record as well to talk about how FY25 is going to be a game changer for Aurika and analysts are talking about close to 270 to 300 odd crores revenue. Can that be seen? Can we see a 70% or a decent occupancy growth for FY25-26? What are the estimates that you are working with?
Patanjali G Keswani: So, I am not working with any estimates. All I said, it will take about a year to stabilise this hotel. And I am not changing that stance. So, it will be a game changer in terms of an EBITDA contribution. And I do not want to give guidance, but I do not think any estimates I have seen so far are really off the mark. I do understand that analysts are pegging in a growth of almost 15% on the top line for FY25. I understand that you do not want to give any guidance per se, but is this estimate off the mark at all or this is a bit more conservative?
Patanjali G Keswani: Well, I always like the word conservative. So, let us say I agree with this at the least.

But if I have it right, from an asset-heavy model, you have been focusing a lot more on management contracts now. Could you talk to us about what could be the split going forward and how will it impact your profitability and margins?
Patanjali G Keswani: So, management contracts currently, if you look at us, we have over 10,000 rooms, but we happen to own 60% of that or nearly 60, so we own a little under 6,000 rooms.

So, ownership of rooms means that you own the EBITDA. Management of rooms means you typically get one-sixth of that EBITDA. So, obviously, if I put it as an analogy, you need to manage 600 rooms in order to earn the same EBITDA as 100 rooms if you happen to own it.

But there is zero risk in management and obviously 100% risk in ownership. So, going forward, all we said was that we would focus on helping consolidate the very fragmented Indian market and we are continuing with that strategy.
I am not saying that we will not own hotels in the future, we may if it makes sense from a return and risk perspective, but right now we have about 40% managed and our target is very simple that by 2028, which is four years out, we should have over 20,000 rooms of which 70% or 14,000 would be managed.

But talk to us about the overall split in terms of the growth. Yes, last quarter was a bit muted. But we are hearing a lot about these MICE events coming up and the kind of occupancy and the footfalls that that garners. Could you talk to us about whether international tourism is back to the pre-COVID level or not? How much is coming in terms of the business travel? How much is coming from the domestic travellers?
Patanjali G Keswani: So, firstly, typically in the hotel segment, there are, I would say, four large segments. First is corporate, second is meetings, third is airlines, and fourth is retail. So, when I look back, I find that retail is the fastest growing, followed by the meetings and incentives. And then of course, airlines, because when airlines have placed orders for nearly 3x the number of aircraft that they are already today operating with, then clearly it is a segment that is going to grow significantly. So, these are basically the four segments, the fastest growing being retail. Yes, MICE has become a very important segment for the hotel sector. And going forward, I just see that increasing. As far as international travel goes, well, this was a really hot summer. I do not think I can really comment on how it will be in winter, but my broad guess is we should catch up with the pre-COVID levels finally this winter.