Ladies and gentlemen, good day, and welcome to The Indian Hotels Company Limited Earnings Call. Q2 FY 2022-2023. Being hosted by Mr. Puneet Chhatwal, Managing Director and CEO, IHCL, and Mr. Giridhar Sanjeevi, EVP and CFO, IHCL. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. At this time, I would like to hand over the conference to Mr. Puneet Chhatwal. Thank you, and over to you, sir. Good morning, everyone. Thank you for joining so early. It is our pleasure to walk you through our responsible profitable growth, continuation and the journey, presenting the 2nd quarter results. Firstly, this is the best ever 2nd quarter that we have had when we went and checked, more than a decade of the results that have been presented. Our revenue came in at INR 1,258 crores, which is a 22% increase over the same quarter last year, or I would say pre-COVID level. With an EBITDA of INR 319 crores, another 76% increase, and an EBITDA margin of 25.4%. Profit after tax of INR 122 crores, strong free cash flows, and we were net cash positive of approximately INR 388 crores. Our journey on margin expansion and flow-through continues. As you can see, when we embarked on giving this kind of guidance way back in 2018 on the journey of Aspiration 2022, our guidance and our aim was to get to 25% margin. Q2 being the weakest of the four quarters, we have been able to deliver that 25% already in this following a very strong Q1 at 31%. The same thing is on our PBT. Our PBT is positive for the first time in last 11 years. The PAT is also at a healthy level of INR 122 crores. Further, what is making all this happen? Of course, we have an upswing which is happening. Business is coming back to normal, especially on the domestic front. There is still a lot of expectation in terms of international arrivals going back to pre-COVID level as of early 2023. If you see the tourism breaking news this morning, that's what was stated, that the expectation is as of January, the international incoming will go back to the pre-pandemic level. Also there are other activities. At the international front, we are expecting more conference meetings, incentives to follow. The second reason that we have witnessed is a very strong revenue growth index. Our RGI in most of our key markets is already above, you know, 30%. That means we're performing 30% better than the comp set. In certain markets like Rajasthan, Goa, Kerala, it's almost double. Our non like-for-like growth is also assisting us with the change in the business model. Our signings have seen a very strong momentum. Even this year, we are year- to- date at 16 new signed contracts added to the pipeline. Nine openings have happened. We expect nine more hotels to open. Our pipeline today is more than 8,000 rooms. The pipeline with the total portfolio corresponds to 30%. If you were to look at as a percentage of the number of rooms in operation, we are getting close to 40%. It's a very strong pipeline. Even if there was some washout, which there always is, we are still looking at a very healthy growth momentum going forward, based on a fee-based driven model, so that we are in line with the guidance that we have given on Ahvaan 2025 of having a balanced portfolio of 50% coming through owned and leased and 50% through fee-based business. Some of our recent openings include the Sawai Man Mahal on the grounds of Rambagh, another palace which is open, the Vivanta by Taj in Kerala, Vivanta in Shillong, and also a Vivanta in Ahmedabad. We also have two state-of-the-art Ginger properties that opened in two very strategic locations. One is Ginger in Ahmedabad, and the other one is in Mumbai, Ginger in Goregaon. In order to strengthen our brands further, we have been continuously innovating with new concepts, you know, and also polishing and upgrading our legacy brands like The Chambers, which we have mentioned. Of the new launches, we recently launched a new Indian concept called Loya. It is launched at Taj Palace, New Delhi. It will be followed by Taj West End, Bengaluru, The Taj Mahal Palace in Colaba, and Taj Lands End, Mumbai over the next nine to 12 months. Another partnership we had entered into just pre-pandemic with Paper Moon from Italy has also opened up at the Fort Aguada. We are very excited to bring this Italian concept, which complements our very well-established Trattoria in Mumbai, which we are also planning to expand in the next quarters. All our new businesses, this is how we have assisted our traditional businesses, and you will keep hearing more and more about our new F&B concepts, new launches as we move into the third quarter related to our backbone, which is our Taj brand or our traditional portfolio under SeleQtions and Vivanta. Under the new businesses, our Qmin is beginning to be a nicely established and positioned brand, which has moved from not just home delivery, not just trucks, but the Qminization of Ginger, which we said eight of those restaurants have been completed. We expect now that the portfolio has reached 25 QSR outlets, 11 which we took over from Tata Cha, eight in the Ginger, the others in the Connaught Place in Delhi, the Ambassador, the President, the Taj Wellington Mews, the one in Guwahati, taking the total to 25. The Qmin business has already crossed a GMV of INR 125 crore since we started. So we are very pleased with the contribution of Qmin and the way it has evolved. In these new businesses, we would also like to mention amã. amã, our homestay has now crossed the portfolio of 100 homestays with 57 in operation, the others in various stages of development and in the phases of getting the licenses. Some very beautiful homestays have got added to the portfolio, especially one in the Lonavala area and another one, a new one in Goa, in Bastora called Hacienda de Bastora. Also very pleased with the new businesses. Ginger had a very good quarter, and a very good H1. If we looked at Ginger from a H1 perspective, we have had a revenue of INR 143 crores and an EBITDA of INR 56 crores and a margin of 39%. Ginger has been PBT positive for each of the six months of the 1st half of the year. We are expecting a lot of hotels to open under Ginger before the end of the financial year. As I mentioned earlier, we are expecting to open nine more. Of these nine, we expect five properties to be branded as Ginger branded properties. Why we also call responsible profitable growth because a responsible business is at the core of anything that we do as a Tata Group company. Our 2030 goals, just for the sake of reminder to all of us, is 100% wastewater recycling, 100,000 youth to be skilled for livelihood. Now, these 100,000 youths will have at least 25% women. This is the target we have set for us. 50% energy from renewable sources, 100% hotels EarthCheck certified, 100% hotels go beyond single-use plastic, and 100% adoption of UNESCO's Intangible Cultural Heritage project in geographies that we operate in, and 100% business meetings and conferences to go green, and we are calling these energized green meetings. Some of the projects that are underway, you must have read about it, is our collaboration with Tata Power to have EV charging stations, which is now +225, and the count keeps increasing every day. Renewable energy, sustainable cooling projects with IFC from Washington. Preserving cultural heritage strong, 10 projects underway, the latest one being in Orissa, our traditional one being in Madhya Pradesh in Chhindwara. Also our focus remains on what, the campaign which we did, which we called She Remains the Taj in diversification on women referral program, on skills for women. We have also collaborated recently with the Orissa government in Bhubaneswar and in Assam, to build a skilling center, and we are currently having 13 skilling centers and 1,200 students being trained. We started a new newsletter internally, to just integrate, deeply embed, the whole thinking and the whole way of doing business under our Paathya. That's what we call the program, and we are calling it Paathya. Moving on to some of the key trends that are emerging. I think, let me just give you a brief on that before we open up for questions. HVS ANAROCK came up recently with a Q3 outlook of demand outpacing the supply. They said the demand on a RevPAR level should have a double-digit increase. From whatever we have seen over the last six weeks in this quarter, we can confirm that we are witnessing similar trend. This is very critical because Q3 is the strongest quarter, and if we have that growth, and if it's mainly driven through average room rates, then the flow-through would be higher. That's one. You know, if we turn the clock back to almost 10 years ago, the number of branded hotel supply in operation almost equaled the number of branded hotel supply under development, under construction, or in pipeline. That number has come down significantly, and it's currently at 40% of the number of branded rooms in operation. So that should help. The second key trend on the demand generators is air passenger traffic is expected to reach pre-pandemic level with very strong growth. Which is also coupled. You know, it's aided, getting help from both recovery in corporate travel as well as domestic leisure, which continues to be strong. International travel has also picked up strongly. We can all see on the cost of tickets that the demand there is also very strong. Further, as of the middle of this month, we expect a very strong wedding season this time to kick in, which will also be further assisted by India's taking over the presidency of G20, and we expect more and more delegations, more and more events happening, which should help the sector, not just Indian Hotels, rather, the entire sector, should benefit from it. Yes, we still maintain our guidance of our 2025 based on all these trends to achieve, what we have guided on a +300 hotel portfolio, a balanced portfolio, 50% owned and leased, and 50% driven through fee-based business. A 33% margin, at the end of the cycle, and no corporate debt, zero debt at corporate level, in terms of running business. All in all, I would say yes, the journey is exciting because it seems we are at the beginning of an upswing in the cyclicality of our business. The way we are positioned with the operating leverage of the owned and leased portfolio coupled with now the ever-increasing size of our asset light growth, together with the new businesses which are high margin driven businesses, we feel confident in achieving the guidance that we have provided, unless anything like a COVID-19 or any other event comes in the way. Even there, the management will continue to navigate as we have done in the past. With that, I would like to open up for questions, unless, Giri, you want to add something? No, no, sir. I think, let's do the questions because of the time there. That's fine. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for the moment while the question queue assembles. The first question is from the line of Sumant Kumar from Motilal Oswal. Please go ahead. Yeah. Hi, sir. Good morning. My question is regarding the occupancy for U.S., U.K., Delhi and NCR and Rajasthan is still lower than pre-pandemic level. Any thoughts on that? U.K. and U.S., the RevPAR in U.K. and U.S. is at 92% and 96% respectively compared to pre-COVID. We expect that as of this quarter it will get to almost 100%. In terms of Delhi NCR, as I said before, with the government delegations and the G20 picking up, that should recover fully. The challenge in Delhi is also every year with the weather situation. I think that does not mean that the demand goes away, it only gets displaced to a later month or later weeks. I do expect demand to pick up in Delhi. The occupancies must rise. For us a Taj Mansingh renovation is also having an impact. If anybody who's Delhi-based will go and see that half of the façade has become very beautiful, but that means half of the façade is without windows, and we are not able to sell those rooms. This renovation is expected to be completed at the end of this quarter, and it will be repositioned. It is almost already repositioned as the flagship property like we always had, and the rates almost have doubled there, but on a very lower base. We are expecting another +100 rooms to come into operation in the next four to six weeks. Rajasthan is very strong. You know, we are not going for any and every kind of business, especially in our palaces. Yes, you can get a lot of wedding business that's short-term. Our strategy is to be most iconic, and with most iconic thing we are trying to manage it in a very good way. The rates are very robust. The performance is very good. Jaipur is at its best ever. Udaipur has also shown a lot of resilience, and the rest will follow Sumant. It's not something to be worried about in the short term. Both Rajasthan and Delhi will be very strong for us. Can we say U.S. and U.K., we are focusing more on pricing and not on occupancy? Yes. I think that is not just us. If you look at the global trend, the rates in the U.S. have gone up significantly. U.K. has its own challenges. You know, some months become very strong, like when we had the sad news about the Queen. Those three, four weeks were very strong, and then the recent political turbulences make it a little weak. All in all, London is very strong, especially for us. We are investing in London further and, you know, we are taking our iconic House of Ming from Taj Mansingh to London, and it will open there also by April. We opened Chambers there. We opened a new All Day Dining there. Now we are also opening the Chinese. It's already under construction. Can you talk about the cost trajectory, particularly for the employee cost and other expenses, for the coming quarters? You know, if you look at our results in detail, you will see on the employee and employee benefits, we are very much at the same level as we were before. That is mainly because of the efficiency that we have drawn in through our change in business model. I think the fixed costs pre-pandemic, in quarter two, were at INR 276 and a variable on the employee side at INR 89, totaling INR 365. Q2 2023, it's at INR 372, with fixed going down to INR 243 and an increase in variable to INR 129. I think if you look at the total is INR 376 versus INR 365 pre-pandemic, and that is very much in line with the increase in business because our revenue levels are much higher than before and the size of the portfolio also. No, we are maintaining almost similar level of sales, but our cost has increased. Is it related to the employee or other expenses? Some expense is for the upcoming business also for the Q3? No, Sumant, every year in the 2nd quarter, we have increments and bonuses that are paid. There is a change in Q2 which you don't see in Q3, Q4. It stabilizes. The next change that you will see, a little uptick, you will see in the Q2 of next year. That's how it is done post the AGM and the board meetings that we have, at that time of the year. Okay. Thank you so much, sir. If I may just add, Sumant, I think the point, the focus is on productivity. You have seen a total revenue growth of 22%, and the overall cost growth has been much lesser at 11% for the quarter and 8% for the year. I think, and that is giving us the leverage. Productivity continues to be strong if you look at the cost per top line percentages as you have seen. That's the way to look at these cost actually. Okay. Thank you so much, sir. Thank you. The next question is from the line of Achal Kumar from HSBC. Please go ahead. Hi. Good morning, gentlemen. Thank you for taking my question. A great set of numbers and, by the way, well done about the presentation about the pack. I see there is a lot of new wonderful information in the pack, so that's fabulous. Coming back on the questions, first of all, on this HVS ANAROCK forecast, which you talk about 8%-10% increase in ADRs, well, we don't know what assumptions have gone into that, but what are your thoughts on that? I mean, how much international inbound recovery they are incorporating in that? But do you think this number is probably underrated or undervalued or underplayed? Do you think it would be higher in case there is strong recovery in inbound international tourism? Where are we on that? Second, about the collaboration with the Tata Group. Have you started deepening your collaboration with the group? What kind of benefits do you see there? You have given INR 1,000 crores plus number from loyalty program. How much of it you will dedicate to Tata Neu? Finally, the G20 Summit. I think it's a big event. Then I guess preparation must have been started. I'm not sure if you can convert some of your thoughts from qualitative to become more quantitative. Do you have something in mind, some calculation, some numbers on that? That'd be great. Thank you so much. Achal, thank you. Very good questions. One, I would not like to speak on behalf of HVS analog. It just was given as a reference, what they have put into guidance. We said what they have said is what we are witnessing, and the growth is mainly driven through rate. I can only repeat that that is absolutely the case on the domestic front, which is almost more than 85% of our portfolio. Number two, we have a lot of new openings coming in. Despite the openings, when we put the consolidated, you see that the rate is still showing an upward tick. Number three, the demand in both leisure and corporate remains strong. The sector has shown its resilience. It shows that we are in the beginning of a kind of a very strong Q3 from whatever we have seen in the last six weeks. This is what I said, and I've repeated that. What HVS factored in, I think you can check with them directly. The second question you had was on Tata Neu and loyalty-led revenue. Our loyalty-led revenue is around INR 1,000 crores. Of which what qualifies under that program where you earn and burn earning of points is around INR 675 crores. Of which another 5% of that number is directly attributable to the app which is the Tata Neu app. So really the loyalty program has got a significant boost. We have had a 50% increase in our loyalty members. This is only the seven months because it was launched on the 7th of April. We are very excited because this whole quest for technology, innovation, bringing so many groups together, getting to such a large loyalty potential has been made possible for us through the group synergies and we are very well positioned to take advantage of it. We will see more in this quarter because at the end of November, Ginger will also. We needed to do some technology upgrades, and Ginger was not linked to the app. When Ginger gets linked together with BigBasket, 1mg, you know, all these kind of businesses, the Trent is coming online, then it will be in that kind of segment to benefit further. Finally, on the G20, I like the way you question how we can turn the qualitative into quantitative. We can give also more guidance offline or a little later because as we speak, a lot is being finalized. This is not in the hands of the hotel sector. It has a lot to do with all the different collaborations happening at different bureaucratic levels. Through other positions that we have in CII or Hotel Association of India, we do get to know a lot, but all I can say is Taj and other hotel groups are strongly collaborating with the government, and we've done a lot on the rates and the rooms and certain bookings, whether it is with the Sherpa's office or the G20 Sherpa's office or it's Ministry of Commerce or it is our Invest India CEO. A lot of these things are happening as we speak, and there'll be more and more clarity latest by the end of this month. Thank you, Mr... We can turn it into quantitative. We will give you what approximate... Actually, we will not need to do it. The government itself will be publishing how many events will happen in how many destinations, what are those destinations. It will not all be Delhi or Mumbai-centric. From whatever I know and I've heard is there'll be more than 50 destinations which will be covered across India. With our 100-plus presence in 100-plus destinations that IHCL is present, I think we are well positioned to get our fair share of that business. Thank you, Mr. Puneet. Sorry if I may take liberty to ask one more question, that's last, I promise. Do you have any update on Sea Rock Hotel and the use of that INR 4,000 crore investment platform with GIC lying unused at the moment? Giri, would you like to take that? Yeah. No, I think the Sea Rock, the discussions continue, Achal. I think from what we understand, the government is trying to prioritize the building of iconic kind of projects in Bombay. We have clearly been working with designers to get some preliminary thinking in terms of what we want to do. I think from an MCZMA perspective, I think hopefully things are getting clearer. There is progress, but we need, of course, the files to move and kind of get all the other clearances. Overall, I would say that given the discussions with the government, things look much more positive at this point in time. It's probably a few months more where we'll get better clarity on this resolution. That is number one. As far as the GIC platform is concerned, yes, I think we keep looking out for what do you say, acquisition opportunities for sure. I think with the running out or what do you say, the ending of the moratoriums and all that, and we continuously keep evaluating, but we don't have any deal to report at this point of time, Achal. No deal to report. Perfect. Thank you, and I wish you wonderful, great luck. Thank you. The next question is from the line of Deepika Mundra from J.P. Morgan. Please go ahead. Hi, sir. Good morning. Sir, if you can just, you know, talk a little bit on the occupancy front. You're already seeing, you know, peak level type of occupancies as compared to we have in the past. So from here on, would RevPAR be a more, you know, is there scope for occupancies to go up further or it's all gonna be rates? It's Deepika, that's a trade-off. We have to look at it. Depends what is the source of occupancy. If it's a wedding business, then you also are doing food and beverage. Same thing on events and meetings. On FITs or transient customers, you always try to get a higher rate and try to get them directly to you instead of coming via, right? I personally see that what we have witnessed in the last six months that the rates will continue to increase. They've increased globally and I see no reason why they will not increase in India with the constraints in supply. Independent of peaking of the occupancy. Is there a cap to occupancy levels given weekday versus weekend demand, and the type of demand profile that we have in India which is slightly more on the corporate side? Is this the best occupancy that you think is doable? No, the best is always 100%, even more than 100%. If you are in an airport location, you could even sometimes sell the room twice. We are far away from that as a sector. We're only seeing 70%. The best is when it's 100% on 100%, right, with the best possible rate. But we are still away from it. Very strong markets with very strong demands have demonstrated the ability to go 85%, 90% occupancies at the peak level. You know, London, Paris, New York, the three largest lodging markets of the world. For us, let's say Mumbai in the month when we had IPL, April and May was very strong occupancy. Goa, Rajasthan in December. There is you cannot cap that we will not go beyond 75%, 80%, 85%. You have to sell every room because when you go to a hotel school you are taught a room not sold today cannot be sold tomorrow. Right. Sir, on the manpower numbers, we've seen a steady slight climb up in terms of number of employees per room. Obviously that is probably to do with the demand pickup as well. Over here again, would you continue to see a rising trend in line with how the occupancy is improving, or do you think you're at fairly steady state right now? We are at a fairly steady state, but if the demand continues to grow, we will have to have more people that we need. You know our strategy has always been to be the most iconic. We don't want to cut corners, especially on our palaces business, on our, you know, very iconic assets. There is a certain level of service that has to be maintained, and that's how business has been done, especially with Taj is what Taj is because of that consistency for almost 120 years in business. With Ginger, of course, it's always been a very lean model. That's why we call it lean luxe. With Vivanta also it is very much, you know, a given. We know how many employees exactly it will have. With the Safaris, with the Palaces, with the business hotels, that Taj brand has and the locations it has, that number will keep evolving. Understood, sir. Thank you so much. Thank you. The next question is from the line of Shalin Lakhani from UBS. Please go ahead. Yeah. Hi, Puneet. Hi, Giri. Congratulations on the good second number and great operating metrics. Bunch of questions from my side. If I recollect, I think this is the time when you get into negotiations with your corporates on the rate. Any color on what kind of ARI increase we can see on the corporate side? No, I think the corporate negotiations have gone well. In fact, I think what we have tried to do on the corporate side this time is to sort of make sure that the rate increases are there. I think the rate increases are more than 10% in terms of corporate rate increases. Number two is that we're also very careful in terms of differential rates which are given through the season. I think that has changed in terms of making sure that there are a certain number of rooms which come at the negotiated rate but above it is all linked to par actually. That is the way we have been doing it. Many of the smaller corporates actually. I mean they are now many of them are actually more coming through the transient route as opposed to the negotiated route actually. I think I would say given the overall momentum and the level of business with all corporate negotiations the rates have gone much higher actually. Absolutely. Mm-hmm. Overall remember Shalin that for us the corporate business in general across the network is not more than 15% historically as well. It is not the biggest part of our revenue line actually. Yeah. Absolutely agree. Generally that tend to be the lowest on ARI increase, so if that is more than 10% I assume that every other segment is higher than that. Yes, that is true. That is true. Okay. Secondly on- Shalin, what is driving or has driven our rates on corporate and others is the upgradation of our assets. You would recall that unfortunately the pandemic came, but pre-pandemic already we had upgraded 17 of our assets back to Taj, whether it was Lucknow or it was the two hotels in Goa or Fisherman's Cove in Chennai. A lot of our properties were upgraded, and thankfully so in time, so because the resort business benefited during the pandemic. We continue to do so. As I said in the presentation, we are opening, we have just opened the Italian in Aguada. We are opening a new pool in Aguada in Holiday Village. We are opening 30 new rooms in Holiday Village after refurbishment. We are coming up with two new food and beverage concepts in Holiday Village, which was underutilized space or not utilized at all, let me put it this way. It's not replacing something. That should open by the end of this month. A collaboration with Diageo called House of Nomad, and another one with AB InBev called Seven Rivers, like we opened in Taj Lands End. All in all these. That's been that part, the A of the SMART strategy. When we said asset management, this is how you're managing your assets that you own and continuously taking them to the higher level, so that you get a larger share of the market and also you're able to retain the business and don't lose it to the competition. Right, sir. Sir, Giri, you mentioned that there is bonuses being paid out in 2Q. I assume that's largely a 2Q phenomena, right? That will not be in 3Q and 4Q, right? No, I think what was stated earlier was that the increments kick in from Q2, and therefore there is a little bump up because of the annual increments which get kicked in. That's the only thing. As far as bonuses are concerned, for the year these typically provided till the end of the year. So that's more cash payout as opposed to P&L even. Whereas the increments are where the current P&L will go up a little. Yeah. There is nothing like a one-time bump up in Q2 in employee cost? No, nothing. No other thing. It is just the normal increments which come in which kind of increase the Q2 numbers. The employee cost would be at this level unless you obviously increase employee headcount or maybe some bit of variable pay. No, I think one thing I need to add is some of the wage settlements have happened across the hotels. What then happens is that because there is a pandemic, we can speak offline in terms of some of the details there. I think some of the wage settlements which had been postponed due to the pandemic last three years, that has now come in. There is a certain element of one-time increase which has come because of the catch-up which has happened. I don't have the details as I speak, Shalini. Then we can speak separately on this. No problem. Giri, in principle, Shalin is right. What I've also said earlier was you get this increase uptick every year at the same time because we do increments. Unless you increase the headcount, that's what Shalin said. Unless the headcount is increasing, so salaries and employee benefits stay the same unless there is a new directive from the government to increase contribution on X or Y or something. From what we know today, it will stay at a similar level. Right. Great. Thank you so much, Giri. Thank you so much, Puneet. That's it from my side. Great show. Congratulations once again. Thank you. Thank you. The next question is from the line of Prateek Kumar from Jefferies. Please go ahead. Yeah, good morning. On wedding season, how do you see this time is expected to be like big fat wedding season for the industry. How do you see that benefiting the business in 3rd quarter? We see the outlook very good, but I would like to correct you, it's not for that, but it's for magical moments at the living legacies of Taj with everlasting memories. Sure. Generally, in 2nd half of the year, we typically do a run rate of 20%-25% growth in revenues versus 1st half. From that perspective, are we in line with the trend like that for FY 2023 as well? Or because 1st half of FY 2023 was much stronger, that 2nd half versus first half growth may be slightly tapered? Well, as I mentioned, the first six weeks gave us reasons to believe that the trend continues. Especially in Q3, it's very important because this being the strongest quarter, your starting base is very high from a pre-COVID level, right? In the pre-COVID, the November was an outstanding month in 2019. Despite that, we said that we can confirm that we are seeing an uptick, a strong double-digit uptick. Sure. Lastly, on other expense, that has also like sort of increased by 5%. What has gone really on higher other expense during this quarter like last quarter? How should we look at it going forward? I think, Prateek, these costs are fundamentally increases in sales and marketing expenditure because with the resumption of activity, clearly we have kind of spent on that. But of course, in a very productive way. I think, and you should look at it as increasing in line with the activities which are happening. Also, Giri, the increase in license fees because of the revenue share in Delhi as more and more renovations complete in Taj Mansingh as well as in Connaught, there is a linkage to that higher revenue shares. That will be one of the consequences of the increase in revenue in these hotels. Is there one-off pent-up costs which were like sort of not accounted earlier, for the reason like renovation for maintenance, which has like sort of come this quarter? Like some of the peers have also reported similar trends, is this something which we have also witnessed? I think, I mean, nothing I can think of in terms of any significant, one-offs actually. No. Really there was something I you might remember is some VAT amnesty we did in Mumbai properties. A very small. Very small. INR 1.5 crores it was, I think, but not such a big number to. Yeah. Yeah. Sure. Thank you. Good luck, sir. These were my questions. Thank you. The next question is from the line of Nihal Jham from Nuvama. Please go ahead. Yes, thank you so much, and congratulations on the strong performance. A couple of questions from my side. First one is you highlighted about the foreign tourists expectation of a full revival in Jan. This from our perspective is the business on books from the foreign arrivals similar to what it was pre-COVID, and is that giving us an additional lever to price higher? International business on the books, is that your question? Yes, that's my question. If that can give us a better lever to price higher in this peak season? I think the demand in the last rolling twelve months domestic has been so strong. That is where the price rise has been coming from. If international picks up the way this morning tourism breaking news said as of Q4 goes back to the pre-pandemic level, then the price hike could be higher. Otherwise when it comes to international business in our international properties, we are almost in line as of this month to the pre-COVID level. As I said before, like 92%-96%. Cape Town should see an uptick. Dubai was performing very strong, +30% higher than pre-pandemic. Maldives has been strong. Of course, Sri Lanka has been weak. It is at 50% of pre-pandemic. For our domestic properties, how would that look like? For the domestic properties, I think because of the constraints in supply, whether it comes through international or domestic, the rates should remain robust and should keep increasing. Sure. That is helpful. The second question. The other thing you should note, Nihal, is that if you see our slide which is on margin expansion, I think one of the things which is just beyond rates and occupancies is the way we look at asset management. If you look at the graph which shows the waterfall between 17.7% pre-pandemic to 25.4%, we have a block which says key hotels at 3.8%. These essentially represent significantly the asset management activities which we do in terms of driving greater revenues, optimal costs, and therefore driving margins. 3.8% of the increase of 8% is coming through such strong asset management activities actually. We have spoken about Mansingh in the past. We are doing some stuff in Nanjing. Hotel by hotel we are kind of working in terms of driving through. Therefore our whole profitability profile of hotels is driven not just with between occupancy and rates, but also a whole bunch of asset management activities. That is helpful, Mr. Giri. The second question was on our MICE business. In the rates part we've obviously seen a strong resurgence which is visible, you know, in the room revenues that we're getting. Now, with this being a peak quarter for both MICE and specifically for marriages, is it that we are expecting that the business comes back to pre-COVID in terms of, say, the number of weddings or conferences, or is there a significant repricing in these events also which can drive a strong improvement in this line item? I think. Do you wanna answer that, Puneet, in terms of weddings? No, go ahead, Giri. No, I think the wedding business has come back quite very strongly actually, and the rates have gone up significantly. Therefore, I think not just in terms of number of events, but also in terms of the rates, there is a significant increase, and that is helping. Even in corporate MICE, you see, corporates coming back in terms of number of events, plus the government business as well. Now, I think, as we spoke, not just G20, there's a lot of government business in terms of ministerial travels. All of that is helping in terms of driving the overall MICE business. Yeah. It is helping us in the overall shape of business, plus of course the key cities, Delhi, for instance, government business, Bombay, and some of the newer places like Goa, where we have some very strong convention center facilities. All of that the level of business, plus our market share as well actually. Understood. I think those answers are visual as well. Thank you Thank you so much. Thank you. The next question is from the line of Vikas Ahuja from Antique Stock Broking. Please go ahead. Hi, sir. Good morning. Sir, can we, you know, talk about the attrition position? Is it also at record high levels in line with what we are seeing on a positive side on the operating drivers? In terms of the wage hike, is it possible to give an impact on margins? Do you think this year we may have to give one more wage hike, maybe selectively to retain talent considering the overall wage inflation? Thank you. No, Attrition is a challenge for the sector, but I think, with the ethos of the group and of Taj, we have treated our people very well, so we are not in that kind of a vulnerable position. Not sure where the second wage hike comes from, you know, this. I've not heard that from any one of my colleagues in the sector, so that is not relevant. Of course, there is pressure. If you are the world's strongest hotel brand with Taj and you are doing well, your employees are sought after by, and your associates and key managerial positions are sought after by other groups. However, because we are a company with very strong growth, I think the opportunities for our people to grow with us are far higher than growing elsewhere, and that has already helped us in employee retention. On the contrary, we are spending a lot of money in building our people for the future. We're not only skilling 100,000 people and we've taken initiatives with CII, but whether it is our top management people going for advanced management programs or middle management or senior management or, you know, we have doubled almost our expense on learning and development, to actually service the need of a growing portfolio where we need people. If we are opening two hotels a month, we need people, right? We are working on a very different set of assumptions versus the question you asked. Sure, sir. That clarifies. There won't be any more bump ups in the wage faster. I understand. Thank you. Thank you. The next question is from the line of Kaustubh Pawaskar from Sharekhan by BNP Paribas. Please go ahead. Yeah. Good morning, sir. Thanks for giving me the opportunity and congrats for good set of numbers. So my question is on the room demand. As you said, that supply constraint will continue to, you know, have a positive impact on the ARR, and even the demand is strong in the domestic market. Do you think inflation, sustained inflation, might act as a risk going ahead, you know, to the room demand? Or do you expect, despite the inflation, the sentiments would be strong and it will continue to have, you know, positive impact on the demand? I personally feel that the inflation, you know, especially on the domestic front, people are used to a certain level of inflation. This morning I saw that the U.S. number has come in a very restrained way in inflation, which should help the rest of the world also. There was a certain pent-up need for certain prices to go up, and they've gone up. It is all a function which is beyond our control. It's a function of oil prices. It's a function of dollar exchange rate. Now this morning the dollar also looks not as strong as it looked two days ago. There is a lot of things happening. Our job is to somehow manage and navigate through this, which we will do. We don't see up till now any disturbances in business, in variable costs, fixed costs. You have all the data with you in terms of, you know, our, as an example, our fixed cost as a percentage of revenue versus pre-COVID is down from 48% - 37%. Our corporate overhead as a percentage of revenue is down from 8.1% - 6.7% in 2nd quarter. All in all, I do not see that kind of an impact. As my colleague, Giri, mentioned, we are looking more at efficiency without compromising quality and doing the right things and keep improving and innovating so that we can manage at the same time optimize our revenues and also manage the costs, both fixed and variable in a healthy fashion. Yeah. Thanks. Thanks for the detailed explanation. My second question is on the room renovation. How many rooms are you planning to renovate over the next 12 to 18 months? Because of this inflation, whether there is any increase in the cost of renovation per room, which we need to factor in? Typically, we have budgeted and given the guidance, not the rooms renovation only, as Giri mentioned, all the other activities that we have. We are looking at a CapEx of 4%-5% of our annual revenue. That is the way this business works globally. We think we will be in line with that this year and next year also, and the coming years also. Okay, sir. Thanks. Thanks for the opportunity and all the best for the future plans. Thank you. Thank you. Participants who wishes to ask a question may press star and one. The next question is from the line of Jayesh Shah from OHM Portfolio Equity Research. Please go ahead. Hi, this is Jayesh Shah. Congratulations on great set of numbers and a big compliment to Indian Hotels. Puneet, I have a broader question that given that we are at the beginning of the hotel cycle, but we have seen a huge bump up in the first year itself because of COVID, you know, pent-up demand. How do next two years really pan out? Is it occupancy growth? Can it really go up and the rate hike both can be 10% extra to give something like a 20% revenue? I'm not asking for guidance, but you know more qualitatively as to which is the bigger trigger here. Or is it the new initiative that you guys have which will be a meaningful delta for next year or next two years? That's my question. Right. Jayesh, there are a few factors which need to be considered. One is the change in consumer behavior because of the pandemic. As an example, not many people were driving themselves pre-pandemic as they are driving now and taking off. Let's say, this week, Tuesday was a holiday of Guru Nanak's birthday. You may take a Monday off and take Friday, Saturday, Sunday, Monday and Tuesday, and actually drive yourself also given that the airfares are at a peak level. This was not as obvious before. With the government spend on infrastructure improving, you know, let's say the Delhi-Agra-Lucknow corridor, the Karnataka connect Goa or the Mumbai building on all these coastal road and all these structures coming in. I think that has a direct correlation with hotel demand going forward. Something which was there, it was a latent demand but was not satisfied because of whatever reason nobody ventured out the way they ventured out because of the COVID. That is not going away because people now get used to that. That has led to the evolution, strong evolution of the leisure segment. When we say all leisure destinations are doing very well, it's because a lot of business is being done from leisure destinations. Like this call today, I can take it from London, I can take it from New York, I can take it from Goa. I'm taking it from Mumbai from Express Tower, our office. I could have been anywhere and still combine, you know, a few days, you know, tomorrow and day after being the weekend, and combine that with the weekend. I think that is one significant change which has been driving incremental demand, which was not there to that extent in a pre-COVID level. Second factor you have to consider is it varies from companies to companies. Being a strong, growth company that we have become, we have a lot of not like for like growth. That should also help us driving in terms of quality also, as we are not adding assets that create losses in the first few quarters or first few years because till they reach to stabilization. Most of that is driven through, management fee contracts or operating leases for the Ginger level. I think, that's the second, thing that one has to consider going forward. Third is how much our new businesses will be successful and which stand the test of time. This is the Qmin and the amã. If they become large and successful businesses, of course, the figures that you were mentioning are achievable, from a top-line perspective because they're all incremental. They have not displaced any previous revenue, and then you have rebranded it as something else. It's all adding to the base that we used to have. Thanks. That's very useful. As an associated question, will cost also now rise faster than usual? Because earlier there was COVID, maybe you have postponed some expenditure. In one way, you know, while you are saying that the growth is not front-ended, is costing also not front-ended and moves in tandem? I think the costs or the cost of employment will rise, but the efficiencies will also improve because another thing happened because of COVID is the acceleration of digitization. I think digitization helps you to reduce certain costs or become more efficient. That we'll continue to see. We're seeing that already on our corporate overhead. We have added 100 hotels to our pipeline, and as an absolute amount and as a percentage both, the corporate overhead has gone down. We are advertising more. We are more present in social media. We have more brands and more this thing. The absolute amount of cost is lower despite inflation, despite increments, despite you know, wage settlements, whatever you want to call it. Very, very impressive. Lastly, is there a challenge in getting new properties acquisition? Acquisitions is a different one. That is when you want to buy. I think there is an ECLGS scheme, which is Emergency Credit Line Guarantee Scheme, which is still valid and may or may not get extended. We don't know that, but I think that is good or healthy for the sector so that they got some breathing space. Some who are, you know, where the capital structure is not right, will not be able to manage whether it's 2% or 3% of the total supply or 5%. Of that, whatever is relevant for us, we will have a look at it. Sorry. I also meant in the form of greenfield. In terms of, you know, getting properties in the right location that you would want. Not really, Jayesh, because there is so much to do. India is also, you know, going to witness a lot of growth in tier two, tier three, tier four cities, which has not yet happened. There is a life beyond Delhi, Mumbai, Bangalore, you know, on the key metros. You'll see a lot of emergence. Look at just Northeast, I mean, beyond Guwahati now, the Dimapur and the Itanagar and all, they will also need more supply. Similarly, newer states like Jharkhand, et cetera, they will also need more hotel supply than has been the case before. I think there is a lot of our spiritual circuit. You know, if you want to host today an event in the first university of the world in Nalanda, where do you make people stay? I think there will be a lot of growth happening. Look at the UDAN scheme of the government with the 50 new airports that are coming or several new airports. We are in destinations which will also need hotel supply to be added. There will be a lot of activity which will happen on the supply side. On one hand, you'll see, okay, there is a supply increase, but that significant increase is not going to come only in the metros as used to happen in the past. Thank you. Thank you very much. Thanks, Jayesh. Thanks. Thank you. We will take the last question, which is from the line of Vikas Ahuja from Antique Stock Broking. Please go ahead. Yeah. Hi, thank you. Just one small clarification. I understand on the attrition question, obviously we being Tata, our attrition is going to be half of the industry or even lower. But compared to our own history, maybe 10 years, is attrition level also at a decade high level? Is it a fair assumption? That's about it, sir. Thanks a lot. Giri, would you take that? Yes, I can do that. No, no, I think while attrition has gone up because of the, you know, poaching which has happened, the reality what happens with us, Vikas, is that the attrition is typically in the early years of the career of people actually. After about seven or eight years or nine years, there is not too much of attrition for companies like IHCL, because by then I think they are completely loyal to the company. While attrition has gone up, I don't think it has created a problem for us in terms of key manpower being lost actually. I think we are fine. We are absolutely fine. It's not a factor which should be of any major concern for us. The other thing, you know, what Puneet was talking about training, that we do. We have upskilling on training. Some very innovative stuff we have done in the U.K. In the U.K., as you know, all hotel companies are struggling with attrition actually. One of the things we have done is to send about 10 odd people, 10 or 15 odd people from India to the U.K., younger people with potential, which is part of their own career development in terms of working at an international location and also cracking the problem of low manpower, shortage of manpower in U.K. Some of these methods we are using, which really are quite innovative and help us to deal with problems in very different ways actually. Okay. All right. Sir, in terms of replacing those people, are we relying more on the lateral hiring or we are hiring freshers and just training them? If we are hiring fresher, what is the training time or, you know, you put them at work maybe as soon as you hire them? That's it. We have a very comprehensive recruitment and training program which we recruit from the hotel management institute. There is always an annual influx of people which happens through these programs. Lateral hiring is kind of minimum, but of course, with the growth in hotels, what we have seen is that we have taken lateral hires, for instance, a general manager in Taj Dubai is an example is a lateral hire. We have taken some of those steps in some of the key hotels actually, but they are not significant at this point of time. Where we need, we have certainly recruited is what I would say. That also reflects, for instance, you know, when we hire international people in some of these international hotels, it is also to get a different kind of experience actually. Okay, thanks. Thank you. Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to Mr. Giridhar Sanjeevi for closing comments. Thank you. Thank you all for joining us early morning. Excuse me. I think, as we described during the conference, I think, the momentum of the business continues to be strong. While Q1 and Q2 are historically the smaller quarters, and it is heartening to see that the first Q1 and Q2 have been strong. As we are in the middle of the strongest quarter and well into the 4th quarter, we expect the momentum to continue. Thank you for your time, and we will anyway be in touch with the analysts and other fund managers, over different meetings as we go forward. Thank you so much. Thank you. On behalf of The Indian Hotels Company Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.