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A thread to understand the #Hotel Industry - from the eyes of Patanjali Keswani of #LemonTreeHotel
Difference between this decade and last decade for hotel industry –
> Supply injections are going to be very very limited compared to previous decade.
> Growth of demand was at 12% and supply growth was at 15%
> Now the supply growth is under 5% and demand is northwards of 10%
> Supply injections are going to be very very limited compared to previous decade.
> Growth of demand was at 12% and supply growth was at 15%
> Now the supply growth is under 5% and demand is northwards of 10%
Returns in hotel industry -
> Ownership of assets – 8-9% ROCE
> Management of assets – 40% ROCE
> Franchise business – 100% ROCE
Over a period, all the branded business in India is focusing on asset light model other than Chalet hotels
> Ownership of assets – 8-9% ROCE
> Management of assets – 40% ROCE
> Franchise business – 100% ROCE
Over a period, all the branded business in India is focusing on asset light model other than Chalet hotels
Unorganized to Organized play
> India - 3mn rooms out of which branded is only 1.6lk (only 5% is branded)
> USA - 5mn+ rooms out of which more than 3mn rooms are branded (>70%)
> India - 3mn rooms out of which branded is only 1.6lk (only 5% is branded)
> USA - 5mn+ rooms out of which more than 3mn rooms are branded (>70%)
Distribution of hotels in India
20 years ago, over 50% of branded Supply in India was five star or above, today it is probably 30%
Supply side is becoming more evenly distributed from Economy to Mid to Upper to Luxury
20 years ago, over 50% of branded Supply in India was five star or above, today it is probably 30%
Supply side is becoming more evenly distributed from Economy to Mid to Upper to Luxury
Cost Controls
Earlier used to have 8000 rooms and 8000 staff, now it is well above 8000 rooms but only 6000 staff, staff to room ratio dropped dramatically by 1/3rd
Cost savings are of 2 types – Flab and Muscle, Muscle should come back but the flab has gone forever after covid
Earlier used to have 8000 rooms and 8000 staff, now it is well above 8000 rooms but only 6000 staff, staff to room ratio dropped dramatically by 1/3rd
Cost savings are of 2 types – Flab and Muscle, Muscle should come back but the flab has gone forever after covid
How Ebitda changes, depends on your changes in room revenue and non-room revenue
Room
> Increase in room revenue - 100% flow through to Ebitda
> Increase in occupancy – 90% flow through to Ebitda
Non – Room
> Increase in non-room revenue – 60-65% flow through to Ebitda
Room
> Increase in room revenue - 100% flow through to Ebitda
> Increase in occupancy – 90% flow through to Ebitda
Non – Room
> Increase in non-room revenue – 60-65% flow through to Ebitda
Fresh supply
Who will put a hotel today when your return of capital is 6%, it’s a self-regulatory control over supply
Who will put a hotel today when your return of capital is 6%, it’s a self-regulatory control over supply
Hotel industry – Next few years
> Next 4 years is a golden period for hotel industry
> Next 4 years in cumulative terms will see more profits than last 20 years
>In a cycle of 10 years, in 2 years you do most of your profits
> Next 4 years is a golden period for hotel industry
> Next 4 years in cumulative terms will see more profits than last 20 years
>In a cycle of 10 years, in 2 years you do most of your profits
Demand will be driven by
> Domestic consumers – Shift from unbranded to branded
> Foreign inbound travelers - Foreign travel is just at 60-70% of precovid numbers, that has to comeback
> Meetings, Incentives, Conferences, Weekend getaway will become a part of people’s behavior
> Domestic consumers – Shift from unbranded to branded
> Foreign inbound travelers - Foreign travel is just at 60-70% of precovid numbers, that has to comeback
> Meetings, Incentives, Conferences, Weekend getaway will become a part of people’s behavior
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