Ladies and gentlemen, good day, and welcome to the Lemon Tree Hotels Limited Earnings Conference Call. 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 touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Anoop Poojari from CDR India. Thank you, and over to you, Mr. Poojari. Thank you. Good afternoon, everyone, and thank you for joining us on Lemon Tree Hotels Q1 FY 2024 Earnings Conference Call. We have with us Mr. Patanjali Keswani, Chairman and Managing Director, Mr. Kapil Sharma, Chief Financial Officer, and Mr. Vikramjit Singh, President of the company. We would like to begin the call with brief opening remarks from the Management, following which we'll have the forum open for an interactive question and answer session. Before we start, I would like to point out that some statements made in today's call may be forward-looking in nature, and a disclaimer to this effect has been included in the results presentation that was shared with you earlier. I will now request Mr. Keswani to make his opening remarks. Thank you. good afternoon, everyone, and thank you for joining us on the call. I will be covering the quarterly business highlights and the financial performance for Q1 2024, post which we'll open the forum for your questions and suggestions. Due to high seasonality in the hotel industry, I would urge everyone to consider year-on-year performance rather than quarter-on-quarter. In Q1 2024, Lemon Tree Hotels continued its growth from the previous year, and this quarter has been the best ever Q1 in terms of gross ARR, revenue, EBITDA, PBT and PAT for Lemon Tree Hotels. Q1 2024 recorded a gross ARR of INR 5,237, which increased 8.6% year-on-year and decreased 10.1% quarter-on-quarter. Occupancy followed a similar trend, which increased by 514 basis points year-on-year and decreased by 339 basis points quarter-on-quarter. This translated into a RevPAR of 3,678, which increased 17.2% year-on-year and decreased 14.2% quarter-on-quarter. Total revenue for the company was INR 224.6 crore, which increased 16.8% year-on-year and decreased 11.8% quarter-on-quarter. The net EBITDA margin for the company in Q1 stood at 47.6%, which decreased 60 basis points year-on-year and decreased by 815 basis points quarter-on-quarter, owing to the increase in variable and fixed costs, as well as planned increases in renovation expenses. The increase in costs is somewhat less compared to the guidance shared in our previous call, we will ensure we will keep our EBITDA margins intact. The PAT for Q1 FY this year grew by 103% year-on-year from INR 13.6 crore to INR 27.5 crore. Our cash profit stood at INR 50.3 crore, which increased 32% year-on-year. Fees from management slash franchise contracts for third-party owned hotels stood at INR 10.4 crore, up 19.3% versus Q1 2023. Total management fees for Lemon Tree Hotels were up 21% to INR 23.9 crore compared to INR 19.8 crore year-on-year, previous Q1. During the quarter, we signed 6 new management and franchise contracts, which adds another 548 new rooms to our pipeline. As of June 30th, our operational inventory comprised 90 hotels with 8,500 rooms, and our pipeline comprised 46 hotels with about 3,700 rooms. From this quarter onwards, we will also be sharing our network revenue for Lemon Tree Hotels. That is total system revenue of owned, managed and franchised hotels, which stood at INR 352 crore for Q1 2024, as compared to INR 300 crore in Q1 2023. Going forward, we are very confident in the company's ability to sustain this growth in the coming quarters by focusing on the following growth levers: the imminent opening of Aurika, Mumbai Skycity in October 2023, further acceleration in our managed and franchise portfolio with a proportionate increase in fee-based income, further improvement in gross ARRs and occupancy for the Lemon Tree Hotels portfolio, and a very significant increase in gross ARR and occupancy in the Keys portfolio post renovations. In fact, very early indications are already available in the Keys portfolio. Now, the opening of Aurika, Mumbai Skycity is on track. As you can see from the pictures in the investor presentation, many facilities in the hotel are completely ready, and most of the operating licenses pertaining to the operations of this hotel have already been obtained. With this, I come to the end of our, my opening remarks and would ask the moderator to open the forum for any questions that you may have. Thank you very much, sir. We will now begin the question and answer session. Anyone who wishes to ask questions may press star and one on their touchtone telephone. If you wish to withdraw 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 a moment while the question queue assembles. We'll take the first question from the line of Archana Gude from IDBI Capital. Please go ahead. Hi, sir. Thank you for the opportunity, and congrats on another good quarterly performance. I have three questions. When I, when I was looking at this slide number 23, we are given that on the RevPAR comparison between LTH and industry, we're fairly done, at industry level, but there is considerable gap between Bangalore and Delhi. How we should read these numbers, sir? You're talking slide- 13, 13. 23, sir. Okay. No, I think it's, slide 13 in the heading. Sure. Okay. Sir, how we should read the numbers for Bangalore and Delhi, like? See, the basic thing is that a very large portion of our inventory in Bangalore is the Keys portfolio. Mm-hmm. The Keys portfolio is really economy stroke, entry level, mid-scale. As I said, till we completely renovate this portfolio, it will continue to drag our relative performance. Let me give you an example of this. If you look at our entire performance. Mm-hmm. From Q1 2024 and look back to the Q1 2023, the Keys occupancy has only increased. In Q1 2023, it was, I think, 55.6%, and in Q1 2024, it was 57.2%. That means a very marginal 1.6% increase, whereas the Lemon Tree portfolio went from 67 to 73. What you have to look at is in the cities where the Keys portfolio is large, like in Bangalore, it is, I think, 380 rooms. On a weighted average basis, it will drag our performance down till the renovation is complete. Sure. Does that answer your question? Yeah, what is Delhi? Delhi is because, you are looking at industry, and in Delhi, 70% of the industry is five-star deluxe. occu-- see, our focus was very simple, Archana Gude. Mm-hmm. In the last financial year, our focus was reprice. Right. Okay? From the mid-market segment perspective, our repricing was actually, if you look at that RevPAR, it is much, much more significant than everybody else. We repriced in two slabs, so ultimately our new ARR were 50% over pre-COVID. As a result, the bottom 15%, 20% of our demand fell off. As I had mentioned in earlier conference calls, we were looking at building back the occupancy after the price increase. What you are seeing now is the rebuild of the occupancy in Q1 this year, which is historically the weakest quarter. This occupancy increase, you will find, will continue in Q2, and I can say categorically, we will do significantly better in Q2 than in Q1 as far as occupancy goes. However, ARR growth will not be the way it was in the previous year, so it will be, as you can see, about 8%, and that is what we will continue to target on a quarter-on-quarter till we hit H2. At H2, of course, we will reprice significantly, because by then we will have built the demand back to pre-COVID at those much higher prices. Right. That answers. Secondly, on this, corporate segment, though it has gone down on YoY basis, is that a conscious call by the management that let's increase the retail portion, so that, you know, that will overall aid the margin expansion, et cetera.? Absolutely, because if you look at corporate, corporates are-- because they are bulk buyers, they are the most price sensitive, and this is why I have said, you know, also in earlier conference calls and even in our five-year vision, that we want to increase the retail side of our business, you know, to in fact, 66% of our total demand in the next four years. Just to give you a number, Q4, Q1 this year versus Q1 previous year, our corporate RPD fell by 100 RPD, 100 rooms per day, but our others increased significantly. This is because it's a conscious decision that when you increase prices, there is a planned churn, which means you keep taking out the most price-sensitive segments and replace them with higher paying segments. You see that in the overall occupancy. What I would urge you to look at is not corporate as much as the overall room nights that we are doing. This is fundamentally a reflection of our shift in focus to driving our brand awareness, rather than simply going as vendors to large corporates. Right. Right. Sir, on new management contracts, how we should see the traction going ahead? Like, you know, overall, we're talking about demand, supply, mismatch and everything. Should we consider 6-7 hotels on quarterly basis should be added on management contract? Yeah. I've given some broad targets. As I said, by the end of this year, we hope we will have about 10,500 rooms operational in our inventory. You know, it is a little difficult while we are signing very aggressively. In fact, the latest JLL reports say that Taj, Marriott, and Lemon Tree were the three highest did the three highest acquisition of management contracts in this quarter. We are going to aggressively continue, but what I think, I would urge all of you who are listening in on this call to take into account is that openings are very often not in our hand. You know, it may be that the person doesn't get licenses on time, the owner of that hotel, or has a temporary funding problem, or there are some design issues or some, you know, issues relating to construction. That is a bit out of our control. What you are seeing, I think, is a trending, and you will find that there will be something like a hockey stick growth in our inventory after another six months. You know, once we hit 10,500, it will start accelerating because the hotels we are signing today will start getting operational, you know, from next year onwards. Sure, sir. Sir, thank you. All the best, sir. Thank you, Archana. Thank you. We'll take the next question from the line of Nihal Mahesh Jham from Nuvama. Please go ahead. Yes. Good afternoon, sir. Good afternoon, sir. The first question was, you mentioned about- I'm sorry, Mr. Jham, your audio is feeble. We are not- I'm so sorry. Am I, am I audible now? Yes, sir, this is better. Please proceed. My first question was just a clarification. You did mention that the Bangalore market was impacted because of Keys sources. The Lemon Tree in Bangalore's performance on a RevPAR basis, similar to the 18% growth that the Network X Keys has seen? Yes. That is helpful. You made a, a statement, you know, as a part of the earlier discussion also, that maybe, rooms which are in the five-star segment have a better pricing at this point in time. Is it a case, even now, that the premium hotels in the current environment have a better pricing power overall, or that is not the situation? That hotels, any branded hotel in general has Sorry, your voice faded again. I'm so sorry. Sir, may we request you to come to the network area and talk, please? Your voice is breaking. Hello. Yes, sir, this is better. Please continue. Yes, I was asking that is there a current case where the premium hotels are having a better pricing power, or the pricing across, any branded hotel in the industry would be similar at this point in time? This is entirely a function of mix. Suppose there is a market in which there are fewer luxury hotels and more mid-market hotels, then the luxury hotels, because of relatively lower supply, have a better, better pricing power among themselves. Remember, our pricing is with respect to the mid-market and upper mid-market segments. We do not price vis-a-vis a five-star, because the five-star deluxe user does not look at a mid-market hotel as an alternative. Do you get me? I get you. When you Five-star luxury users do not look at mid-market and up, upper mid-market hotels as an alternative to stay. Really, what you have to keep in mind is a multiple set of factors, which is: what is demand in a certain market? What is the luxury demand in a certain market? What is the supply in that market? When you see these numbers, which is the numbers by Smith Travel Research, they are an aggregate of economy, mid-scale, upper mid-scale, upscale, and luxury. Okay? Like, for example, Delhi got a lot of demand also because of G20 and so on, and G20 delegates were all put up in five-star hotels. That was the benefit for five-star hotels in Delhi, especially those in the, in New Delhi. This is just a comparison to show you how we performed on an all-India basis. When you look at cities where there is this demand-supply mismatch within price segments, then we may show a lower number compared to the aggregate, because maybe they were, you know, the five-stars drove the pricing in that market because of demand for five-stars. I would not generalize. I would rather say, look at micro-market conditions, and from that perspective, I would say, look at the all-India performance, because that is the annualization, the aggregation that you see, which is on the extreme left of that slide that we put forth. Got that. This is very clear. Just one final question was, I think there's a case of the CCPS being converted. What will be the stake for APG after the conversion happens? 41%, back to the original. See, our intent was APG gave us money at a certain point, at a certain valuation, that was at the start of COVID. Our intent was to equalize. Our shareholding, which was 59% then, dropped when the CCPS would have been converted. We had two choices. One is to put in some assets and, you know, value them, put it into the JV, because we still continue to own about 1,700 rooms. But we found that was not a sensible option because the effective tax was coming to about INR 60 crore. We opted for the plan B, which was going in to buy their proportionate share back from them at the new value, the new equity value. That is what we have endeavored to do, and which is why we have come back to 59%. Perfect. Thank you so much, Mr. Keswani. Best wishes. Thank you. Thank you. We'll take the next question from the line of Adhidev Chattopadhyay from ICICI Securities. Please go ahead. Yeah, good evening, everyone. Thank you for the opportunity. First question, could you elaborate on July because of the rains, is there any impact, especially in Mumbai and Delhi, on the occupancy and room rates? That is first question. Second question is on Mumbai Airport Hotel. The launch you're doing, how many rooms do you intend to launch initially, and how do you intend to then, scale this up? Yeah, those are the 2, 2 questions. As I have already said, we are doing better in July than in Q1, firstly, significantly better. Rains have not impacted us. I think rains have impacted. See, rains are an annual event. Where the rains have impacted are those hotel companies where they have assets in the hills and so on, where landslides and, you know, various other things have occurred, and flooding. Number two is, as far as Aurika, Mumbai Skycity goes, we will fundamentally be ready with the entire inventory in October. What I understand from our projects team just recently was that all 669 rooms will be ready, but they will be ready in various points in October. It is not that they will open all together, but what I can say is, by end October, all the rooms will be operational. Okay, we intend to go into the market with all the rooms, the availability, whatever is there, the entire, 700, Yeah, almost 700 rooms will be available. That is right, but let me just clarify one thing. Yeah, yeah. In the beginning, when we launched the hotel, it's not that we require, technically require all the rooms, because the buildup of demand is gradual when you open a hotel. The other point to note is that Dussehra and Diwali operate through October through to, I think, twelfth of November. Anyway, that's a low demand period. While we will operationalize the entire inventory, I do not expect that demand will be so high as we would like, as is normal, post-Diwali. In that sense, the timing is quite okay because we'll open the hotels in October, but the demand for that market, which is Bombay, really will pick up after twelfth November. That is after Diwali. Okay, fine, sir. That is clear. Yeah. Thank you, and all the best. Thank you. Thank you. We'll take the next question from the line of Jaivir Shekhawat from Ambit Capital. Please go ahead. Sure. Thanks a lot, and good afternoon, Mr. Keswani. Regarding your Mumbai property itself, the Aurika one, I want to understand about your strategy here in terms of the overall pricing, as well as the way you look to launch that property during this first full year of operation. Now, in the slide and earlier calls, you've mentioned that the conservative estimate is around the INR 12,000 for room rate and about 75% occupancy. Even today, if I see a comparable hotel, like a JW Marriott, I mean, the rates are far, far ahead of that. Could you just talk about how you would approach, how would your strategy be during the first year of operation? Would you want to keep the rates lower in order to penetrate that market faster and then possibly take the rate increase in second year? That is normally the situation, Jai, but let me explain. We opened our first hotel in Bombay, which is the Lemon Tree Premier, a little before COVID, so really, we had no time to stabilize it. The way to look at it is that hotel, which is a 300-room hotel, really became operational on a, you know, on a, on a normalized basis only after COVID, which was in April last year. Let me give you an interesting example. When we launched that hotel, we launched at, I think, INR 6,000, INR 6,250, and we were doing 50%-60% occupancy, and gradually, at that price point, we built up demand and then repriced. If you look at the Lemon Tree Premier Mumbai today, and I'm giving you July figures, we are doing 90% occupancy at INR 8,400. This is in off-season in Bombay with 300 rooms and a Lemon Tree Premier. Typical demand diff pricing difference between a LTP and a 5-star hotel is about, in Bombay, is about INR 4,000. If you look at the 2 five-star hotels, deluxe hotels we will be competing with, with Aurika, it will be fundamentally ITC Maratha and JW Marriott. They are currently priced, at least on the retail side, at anywhere from INR 12,000-INR 20,000 every day, depending on demand. This is, I'm talking July. While I have given a number in our last presentation, that this is what we expect Aurika to do, let me also say it is a conservative number. I think I have said we will do about INR 170 crore EBITDA, and we are very, very, very sure we will do better than that. This is a ramp-up. What you are asking me is how will we do in the next six, seven months? It will be a gradual ramp-up. Even the Lemon Tree Premier, as I said, last year was doing INR 6,000, and this year is doing INR 8,500, and the occupancy is now 90%. I expect Aurika, Mumbai Skycity will go through a similar progression, and next year will be, I am very sure, a game changer for us from the perspective of this hotel alone. Right. Right, in the presentation, I think you had put in FY 2026, because I believe you might be able to even achieve that in FY 2025 itself. Sir, could you also talk about how much would be the F&B share? You've also got big banqueting facilities here, the events space as well. Difficult to predict, but typically in a hotel, our normal multiple is whatever the room revenue is. The difference between us and, say, a five-star hotel is that in five stars, 55% of the revenue is room revenue and 45% is food and beverage and other revenue, which is why their average EBITDA margins are in the low 30s. In our case, our business model is that we are fundamentally selling rooms. In our case, 75% of our revenue typically is rooms, and 25 is food and beverage and others. That is why we are able to get to, you know, 50, north of 50% EBITDA margin. In Aurika, Mumbai, because of the large convention facilities, we expect that instead of 75, 20, it will-- 25, it will be closer to maybe 68, 32, roughly there. That's our broad expectation, but of course, it's a function of what, how the market needs convention facilities, how we compete there, and so on. Understood. Sir, regarding what the numbers that you've reported for your Aurika Hotels portfolio, we have seen about 11% year-on-year decline in ADRs. Is that an early sign of softness in leisure demand, given international and outbound travelers already started picking up? See, if you read commentaries by travel companies, they are saying clearly the revenge travel part of the pickup has gone. What you will now see is gradual increase in travel demand due to, I think, more in terms of general economic growth and mid-market aspirations, and so on. That, that jump up in leisure demand, which occurred last year, has significantly moderated. Now, coming to Aurika, what is it called? Udaipur. Let me give you an interesting number. According to STR in Udaipur, the occupancy of Udaipur in Q1 was about 40%, and we had a 10% premium on it. From a RevPAR perspective, actually, we do not see ourselves competing with an Udaipur Villas or a Lake Palace or a Leela. We compete with the next level, which is the lower level Tajes and Tridents and so on. We have outperformed all of them. It's a good sign for us. There is huge acceptance, and I think what will be quite a shocker for everybody will be the performance of Aurika in H1-- H2, because the preliminary, you know, bookings tell us that it will be, well, it will be enormously profitable in Q3 and Q4. It has already booked, I think, 15 weddings, which is buyouts of the hotel, and typically, each wedding gives us over INR 1 crore, INR 1 crore in EBITDA. Just from the wedding perspective, we learned INR 16 crore in EBITDA in H2, excluding normal demand, which is also very high in winter. Right. That's great to hear. Last question on your management and franchisee fees. How do you see their, their scale three years out and also contribution to your EBITDA, especially in light of the recent hirings that you've done from Choice Hotels, in order to scale up this business? Last year, I think we did about INR 36 crore in third party. I'm not talking from Fleur, but from third party. This year it will be, I think, north of INR 50 crore. Next year, it will be north of INR 75 crore, and then we are looking at about INR 130-150 crore the third year out. That will be a 100% flow through to EBITDA. The two big things you will... Actually, as I said, the four big things you will see, is a tripling of management fee income in the next 2.5 years, up to INR 200 crore of EBITDA from Aurika, a significant increase in EBITDA from Keys and our normal, you know, 20%-25% increase in EBITDA from the Lemon Tree portfolio every year. Well, I wish you all the best. Thanks a lot. Thank you. Thank you. We'll take the next question from the line of Murtuza Kharsiwala from Kotak. Please go ahead. Yeah. Hi, sir. Just an extension on the management fee, please. How should we think of the management fee from Fleur, both from an accounting perspective, does it get eliminated fully on consolidation? From an economic interest, should we think of it as the 40% that APG owns, as you know, our economic interest in the incremental management fee? That's part one. The second is just to understand, you know, you just talked about an 100% pass-through of management fee to the EBITDA. Typically, any cost associated with, you know, having this managed hotels sort of set up in place, any cost, or it's essentially just sort of setting out the brand that we have? Okay, Murtuza, to come back to the first point, our fees are netted off on a console. While they get to Lemon Tree standalone, you know, they are in the consolidated, they are netted off. Now, coming to the second point, which is fees of Fleur. Well, we own 59%, but we take 15% of the EBITDA as management fees. Effectively, we get 6% out of Fleur, out of APG's 40. Our economic interest is 66, 65.6%, if I remember right, and our shareholding is 59. As far as management fees goes, you see, beyond the office setup that we already have with the fixed costs, we are not adding more people. In fact, yesterday to our board, our business development head, Mahesh Aiyer, made a presentation. One year ago, he used to go out to try and pick up one, you know, one query every two or three days. Today, we are getting, and this is what he told the board, four queries a day. A part of the reason that our costs have increased, in fact, that's why I said, going forward, it'll be a zero-- it'll be a 100% flow through. A part of the reason our, our payroll costs have gone up in, as you will see in Q1 this year versus Q1 the previous year, is that we've not only hired the Choice top management team, we've also got some more people into our business development side and into our pre-opening side. We basically built the infrastructure to start adding hotels very aggressively. I think, Mahesh, what do you feel? How many hotels will you sign this year? We will sign about 40 hotels this year. We'll sign 40 hotels more this year. That is, I mean, his bonus depends on this statement, I think he's. You will see a massive, actually, a hockey stick from perspective. Just if you could give me an approximate ballpark as to, you know, what would be the, the, the infrastructure or basic cost set up, if you have a number in mind, you know, that drives this entire management fee revenue, the cost? I understand the operating leverage, that you can scale up significantly with the same cost, but what would that cost be, if you could put a number to this list? You mean all in per annum? Including the entire team- Yes. I would say about INR 8 crore-INR 9 crore. Okay, fair enough. Thank you so much, sir. Thank you. Thank you. We'll take the next question from the line of Kunal Lakhan from CLSA. Please go ahead. Yeah, hi, good afternoon. Sir, I mean, on, on your slide 12, when I see the comparison with the industry, you know, we see that, you know, you have outperformed in terms of occupancies, but, you know, kind of underperformed in terms of ARR. Is this like a conscious strategy where we are like, you know, now choosing, say, occupancies over, over ARRs, which was very different last year? Although we have done well in terms of overall RevPAR, but just trying to understand, like, you know, our, our strategy going ahead. To explain it, as I had said earlier, Kunal, we had focused on price hike without looking at inherent demand growth. We had said we need to reprice. That is what we did, which is why we did, in my opinion, a very low occupancy in Q1 last year, which was about 65%. Keep in mind, pre-COVID, when we were much more conservative in repricing every year, our average occupancies of our portfolio, excluding Keys, were 77%-78%. When we repriced, we, we accepted that there would be a churn and a loss of certain highly price-sensitive segments and customers. I had also said, I think a couple of earnings calls before, that we will now focus on building demand back at this new price level. What you are seeing is, is a, was a focus on building demand back. This is a seesaw. Ultimately, what we want to achieve is superior RevPAR performance. Sometimes it is a focus on ARR, on average rate, sometimes it is a focus on occupancy, and when times are good, it is, you know, it just both come together in a double whammy. Times are not yet good because international travel, which typically contributes 10% of our demand, has not really come back. It is still less than 40% of pre-COVID. But when that happens, like, like in Q4, Q2, I think we are already at, I think, about 74% occupancy, and we have still maintained the increase in rates. I am pretty confident that in H2, all of this will weave together. We will start hitting occupancies of, you know, close to 80% at much higher ARRs, and that was the ultimate objective. It's a step-by-step process. Sure, sure. Just to follow up on that, in, in, you know, in, in the earlier, interactions, you, you had highlighted that, you know, you expect ARR growth of about 10%-15% over the next, three years. Would you still hold, hold that guidance, with the current strategy that we are adopting? I would say 15%, north of 15%. Okay, great. My second question was on the, on the margin side. We had seen some increase in, in fixed, fixed costs and some renovation costs also. How much of this would keep recurring? Again, like, you know, on, on the margin guidance also, you, you had highlighted about 50% plus EBITDA margin. Would you... Would, would that continue? Yes, of course, it will. We have said that. I've said that in my remarks also. Think of it this way: typically in our business, that is in Lemon Tree, our wear, our fixed costs are fixed unless we decide to change them, but variable costs at the current mix of rooms and food is about 23%. If you look at Q1 as the example, revenue went up 32%, INR 32 crore quarter on year-on-year. You can safely say that the variable cost increase was INR 7 crore. Mm. That is 7. The total expense increase was INR 18 crore, and I'm going year-on-year. I'm excluding, of course, stamp duty, which we paid last year in Q1. The variable cost increase, as I said, was INR 7 crore. increase in renovation was another, sorry, increase in fixed cost was about INR 8 crore. Renovation, last year also, we had started doing fairly aggressively in our Lemon Tree portfolio, but this year we have started doing it also in Keys. That was another INR 3 or INR 4 crore. We reduced some expenses elsewhere, and that was adjusted in the pre-operative expenses for Aurika, which was written off in the P&L. Although others were capitalized, a certain portion was pre-operative expenses for Aurika. When you add this, the increase in variable costs, the increase in renovation costs, the increase in fixed costs, and the increase due to operative, pre-operative expenses, and reduce the savings in costs elsewhere because of our renewable focus and so on. Overall, you will find that the increase in expenses was INR 18 crore. This really means that now you are seeing the new level of fixed costs for Lemon Tree, which includes the increase in our business development team, which is the question Murtuza asked me. Now, going forward, one would expect that going into Q2 and onwards, most of the increase in revenue will flow through, or at least 65%-70% will flow through to EBITDA, unlike Q1, where INR 14 crore only went through from revenue to EBITDA. Does that answer the question? Yeah, yeah, it does. Thanks so much. My last question was on slide 13. Our Mumbai and Gurgaon portfolio are, are doing really well compared to the industry. What are we doing differently in these markets that, that is benefiting us? These are, these are segments, yeah. Mumbai hotel has really taken off. We have a huge retail demand, high recognition of the brand. I'm happy to see that. Gurgaon, corporates have... You know, we were less dependent in Gurgaon on IT and more dependent on MNCs and pharma companies and financial institutions and so on, and those have all come back to normal. It's the IT markets, which are still somewhat dealer, which is why Pune has not really taken off. Bangalore has definitely, especially, the Keys portfolio, which was very largely dependent on IT, has not yet taken off. Part of the reason is also the fact that these are very old hotels and in desperate need of upgrade, and similarly with Hyderabad. while in Hyderabad, we have done much better than the India average, we have not done as well as some of the five-star hotels there. Sure. Thank you so much, and all the best to all. Thank you. Thank you. The next question is from the line of Sumanth Kumar from Motilal Oswal. Please go ahead. Yeah, hi. My question is for employee experience, it is increased even QoQ from Q4 2023 to Q1, and Q4 and Q3 is a peak season. Can you talk about the reason about that or churning in the industry, the employee cost inflation for the Lemon Tree as well as industry? I cannot tell about the industry, Sumanth, but what I can tell you is that if you look at Q1 this year and Q4 the previous year, which is actually the closest comparison, the increase is only 3% or 4%. The real increase is between Q1 last year to Q1 this year, when we beefed up our business development team. Obviously, this is like an investment, although it is coming in the P&L. In my mind, I see it as an investment in our growth, and that increase is about INR 8 crore. As I explained, you know, about, maybe about 30% of that is the business development team, and the balance is an increase in, the salaries of our staff, those who were with us through COVID, many of who, you know, took a salary cut and so on. We've kind of normalized it, and this is broadly what you will see going forward. Okay. Okay. By the way, attrition is back to normal Pre-COVID. It's not very high in Lemon Tree. Okay. Any other cost increase in power? Because we have seen the power cost is also increased, QoQ. No, the power units have come down. You see, every year, the government typically increases unit costs by anywhere from 10%-15%. That is because of the peculiar nature of the power industry, where there is a lot of subsidy/free power, and that is passed on to commercial users like us. Second is that one reason, power and fuel has also gone up is because there have been a lot of power cuts in some cities where we have a large inventory, like Gurgaon, for example, where the power cut is like 6 hours a day. That means you have to operate DG sets, and DG sets, typically, the power cost is INR 25 a unit. It is, you know, 1.5 times what the normal is. These are the things that unfortunately add to our cost structure, because not only do we have to pay much higher rates and power, we also get very erratic power in some states. We are not focusing on solar power? We have a very large percentage, but our hotels are built very efficiently on small plots, so we don't have spare land or spare rooftops. Our equipment is loaded there. There is a limit to how much solar power we can put. This is all part of that overall plan, which we had shown in our 5-year plan, that we will go to 50% renewables in the next four years. The last question is. 16, 18% renewable already. Okay. Last question is for employee cost, what INR 42.6 crore in this quarter. In the, we, we, we have some variable variable employee also. When the business is, is going to be an at the peak level in Q3 of FY 2024, can we expect some% increase also in Q3, or will be where bare minimum increase will be required? It will be kind of. You see, what you are talking variable employee costs, when I say 23% is our variable cost, it includes any, let's put it this way, temp staff we add in peak season. It will not come under this employee cost? No, it does come here, because this is the way we are showing it in the accounts. When I talk variable costs, this is not breaking down your fixed and variable costs. This is just giving the expenses in, in total. What I'm trying to say is, your permanent employees are your fixed costs, your variable, your temp employees typically are variable costs. Okay. Thank you. Thank you so much, sir. Thank you. Thank you. We'll take the next question from the line of Aishwarya Agarwal from Nippon India Mutual Fund. Please go ahead. Yeah, thank you very much- I'm sorry to interrupt, Mr. Agarwal. May we request you to use your handset? There is a static on the line, sir. Is it clear now? Yes, sir. Please proceed. Yep. Sir, just want to know, I, I understand in the call that you said July month, we are doing far better than the first quarter. Can you explain that, please? I told you, and we are doing 74% occupancy. Sir, what has happened, which has led to improvement in ARR in the month of July versus the previous quarter? No, July-- I am talking July occupancy is an absolute number. ARR is a function of year-on-year, we are doing better than the previous year. I don't have offhand the numbers, how it is doing in the first 11 days versus the last month. Overall, what I... You know, it is interesting that for the hotel industry, typically, Q2 is the worst quarter. For Lemon Tree, Q2 is better than Q1, and that's encouraging for us. I think what changed is that we have started operationalizing a lot of our digital transformation efforts. We have generated an entirely new way of doing sales, which is completely tablet-based. If I remember right, about 100 salespeople across 9 cities have, have been retrained. It's a very interesting new way of doing sales because, at least our salespeople tell us that it's revolutionary, and I think you will start seeing that the results of that come through in our occupancy. As I said, you know, this digital transformation effort is focused on revenue, on rate, on retail rates, on sales, and on processes, and I think in the next six months, we will have a significant impact on our cost structure also. This is that BCG assignment we have been doing. The other interesting thing is that, in our case, we are finding that our ability to demand, to drive demand from new hotels that we are opening, has significantly picked up after this, this new tech, this new digitalization of our sales process. That is what we are seeing happen quite rapidly, actually, going forward. I mean, it's already quite visible. Sure, sir. When we talk about our competitors, whether those people also follow the same process, or we are better than them? I can say with absolute confidence that we are in the top 5 percentile in this, and I mean globally, because what we have brought out are global best practices in B2B sales. One day when you are here, Aishwarya, I'll show it to you. It'll, it'll quite blow you away. Well, sir, then the question will come that how long the peers will... When the peers will also try to take the advantage of the technology, and eventually they will also go for the adoption. I mean, this competitive advantage will remain with us for how long? I'll try and monetize it and sell it to peers, in fact, on an annuity. It's not so easy. It requires enormous amounts of data, third-party data, not only your internal data. It requires a machine learning blender. It requires an AI brain sitting on top, and it took us nine months to do it, by the way, and we piloted it only two months ago, and now it is rolled out nationally. You will start seeing the results actually from Q2. Sure. That's, that's very good. The second, sir, when you talk about the Mumbai Aurika hotel, 669 rooms, you seems to be confident about opening it in the month of October. What are the things which has already been done, and what are the two, three key things which we should look forward to, to be completed before the opening? See, Aishwarya, there are hundreds of approvals which finally and some of them are sequential, some of them are parallel. It's all kinds of stuff from multiple departments and agencies. We have a rough idea what happened in Bombay with our first hotel, and obviously, we have multiple consultants assisting us. What I'm given to understand is we are at the penultimate stage, which means we have, I think, only two licenses to get this month, and then it will flow into the occupancy certificate next month. Alongside that, there are operational licenses. Many operational licenses are unfortunately only given after the occupancy certificate, but I am told those are also, we have put in preliminary requests, and those two will be given to us by first October. If that happens, now you know how government works, so somewhere in early October, we will open the entire hotel. Mm-hmm. Great. Great, sir. This is very good to hear from you. Thank you very much and best of luck. Thank you. Thank you. We'll take the next question from the line of Shivam Mittal from Punartha Investment Advisers Private Limited. Please go ahead. Hello? Hello, I am here. Yeah, I can hear you. Yes, sir. Yes. Okay, thank you so much for the opportunity. I just want to know, in terms of owned hotels, what will be the opening in terms of rooms like FY 2024, 2025? Right now, the only hotel we are opening this year is the Aurika, Mumbai Skycity, then there is a small 70-room hotel in Shimla, which we will open, probably 24 months from now. There is no other owned hotel, there is no other CapEx. In fact, our entire capital deployment cycle of about INR 4,500 crore will be over, mostly with, Aurika. Then it's a question. Of course, a lot of that capital in book value is a few, many years old, and some of it is new. It will be a question then of juicing those assets, and, fortunately, at a time when we are moving towards peak cycle. Thank you. In terms of debt, so are we planning something like we are, we will also go for net debt, net cash, actually, like Indian Hotels and Oberoi? See, we are not raising, we are not doing a rights issue or a preferential issue. We don't need to. We are pretty confident. I think you'll start seeing it from next year. As I said, our peak debt is about where we are now. There may be a slight increase when Aurika Mumbai opens, but that will be paid back in Q4. End of the year, we should be similar to the beginning of the year, and then from next year onwards, we will use our spare cash primarily to write the debt down. I think we've already said that in... I think Lemon Tree itself on a standalone will be debt-free in 1.5 years, or 2 years, and Fleur, based on our projection, should be debt-free in 1 year, 1.5 years after that. All right. Thank you so much. That's all from my side. Thank you. Thank you. Thank you, sir. We'll take the next question from the line of Jinesh Joshi from Prabhudas Lilladher Private Limited. Please go ahead. Thanks for the opportunity. My question is on Aurika. I mean, the hotel is quite near to the airport. What kind of crew business contribution are we expecting over here? Have we negotiated any contract with any of the airlines so far? Would you like to share anything regarding that? Well, my team tells me that we will get 100 rooms a day from airlines, at about INR 8,000. It's a low rate, but it's a base rate. That will presumably start in 1 or 2 or 3 months after Aurika opens. You know, we don't want to go over-dependent on airlines because while it is guaranteed business for a year, and it is even better than corporate business because, it does not fluctuate, we would be more focused on retail and some corporates who are currently using what we have identified as our competitive set. There have been some discussions, and from 1st of September, the site visits of, I think, about 30, 40 corporates, who together can account for another 100 rooms a day, will start. But I am saying we are pretty sanguine that this hotel will, will, will do occupancies on par with that micro market, which is over 80%. I know I've shown 75 as our conservative, but the hotel will be a very, very significant contributor to our EBITDA from Q4 this year onwards. Sure, sir. My, my second question is with respect to your opening remarks, whereby you mentioned that this time around, the increase in cost is somewhat less compared to what the guidance was given earlier. If I recollect properly, in the last call, you had stated that our renovation guidance for three years is approximately INR 150 crore, which means INR 50 crore per year. Would you like to revisit that and quantify a bit? I mean, by how much will we be lower? No, no, we will spend INR 150, and it is very much part of the P&L that you are seeing. Let me explain, Jinesh. About 75%, I think, if I'm right, roughly, of our renovation is OpEx, and about 25% is CapEx. In the INR 150 crore that we spent, about INR 120 crore will be OpExed out and will come pre our EBITDA. The EBITDA number you see is actually after we have, we spend this INR 40 odd crore this year, too. That's very much part of our normal, well, in this case, it is extraordinary renovation because we are upgrading the entire Keys portfolio. From a, from a cost perspective, what I had said earlier was that, you know, about, if you take a, a revenue of INR 200-250 crore, about INR 5-6 crore is the incremental cost, in our, renovation per quarter this year. That is broadly what I had said. That, I think some analysts assume to mean that our EBITDA would be 2.5% less, because naturally, there is a 5%, INR 5 crore increase in costs. What I mentioned in my opening statements was that there were certain other costs that we were able to, A, control, B, we managed to increase our revenue enough that the EBITDA margin, was not significantly impacted. In fact, it was only 60 bps less than, Q1 last year. I know that we showed 45.7, but that included stamp duty last year. If I remove stamp duty, last year, we did 48.2%, and this quarter, we did 47.6. It means things are, you know, going along the way we expected, and we did a little better than we thought, or at least better than what the analyst said. They said we'd be 2.5% less than 48.2. Sure, sir. One, one last question from my side. I think our share of corporate mix has gone down from about 43% to 38% while the ARR is up by about 9% to 5,200. Now, I believe that the corporate business comes at a discount. Is the jump in ARR basically a function of change in business mix, or is it also a function of price hike? You know, I'll, I'll tell you broadly. I don't want to get into specifics. If I look at segment-level gross ARR trends from Q1 '23 to Q1 '24, the ARR increase is 9%, the corporate ARR increase is 14%. Corporate ARR is still 6% below the company ARR. That is the trade-off, which is why you will see that while corporate room night share has gone from, you know, 43 to 38%, the revenue share has dropped from 39 to 36. That tells you that from a revenue perspective, it doesn't pull its full weight. This is a very planned strategy for us. We want to replace it with retail customers. The retail customers, you know, it's very simple. If I replace a corporate with a retail customer, even at a lower rate than the retail customer is paying today, I still cream because it is above the rate the corporate is paying. Are you getting me? Yes, sir. Yes. That, that pretty much explains it. And, thank you so much, and all the best for your Aurika opening. Thank you. Thank you. We'll take the next question from the line of Riya Mehta from Aequitas Investments. Please go ahead. Thank you so much for giving me the opportunity. My first question is in regards with Aurika, Mumbai Skycity. Are we looking at demand from things like weddings? Like, because our Aurika brand in Udaipur is much more for all leisure activities. Would we see the contribution from these segments increasing for Mumbai? Yes, because we have large banquet facilities, we expect we will get a significant portion of our revenues from, both for rooms and for food from the wedding segment. Okay. Could you repeat what kind of contribution would we receive from Aurika, Mumbai Skycity this year and next year? This year, very difficult to estimate, Riya, because it's a question of how quickly we ramp up. Right. Next year, it should be north of INR 170 crore EBITDA. Right. In terms of Fleur, I would want to know what kind of debt levels are there currently? I think it's about INR 1,400 crores. INR 1,450. Yeah. INR 1,400, INR 1,450. We were just talking about, trying to do some IPO or something like that. Could you brief more on if that happens, what would, how and how do we go about it? See, the options for us for Fleur are very simple. We have three options. Option one is we continue as is. Option two is we list Fleur once Aurika, Mumbai Skycity opens and is stable, so it becomes like an asset company. Option three is that a third party comes in and invests significantly in Fleur. Part of that could be primary because we own 59%, so technically, we could raise up to, you know, 18% fresh money. And another way to raise capital is we still own 1,700 rooms. We have roughly valued it at about INR 2,000 crore. If we transfer those into Fleur, then we could raise another INR 2,000 crore potentially in Fleur. Our broad, you know, we are open-minded. We have not taken a decision yet. The board has discussed it extensively. We are evaluating options. As I, as we speak right now, there are some options on the table for third-party investment and significant third-party investment. All options are on the table. Let's put it this way, if Fleur lists or raises third-party money, we will become debt-free by next year as a group, because we will raise such significant capital. You know- That will lead to dilution of share and of Lemon Tree in Fleur, right? Not at all. Not at all. We own 59%. Well, according to some investment bankers, 18% fresh shares will write off the entire debt of Fleur. No, the equity stake of Lemon Tree in Fleur will be diluted because of the- It will come to 51. 51, we'll still be majority. Okay, thank you, that's it from my side. Thank you so much. Thank you. Thank you. We'll take the next question from the line of Pratik Kumar from Jefferies. Please go ahead. Yeah, good afternoon, sir. My first question is on industry or maybe company as well. Last year, we saw industry taking up 3-4 price hikes during the year. This year, when do you expect pricing trajectory to turn positive on sequential basis, given low base of pricing is partly adjusted and there is selective normalization in various categories of hotels and demand? From Q3. Okay, so, so, so October onwards, there should be a reversal. Unlike last year, we should have like maybe two hikes this year, that's what we expect, and which should translate into 15% hike on an annual basis, which you mentioned? See, Pratik, if you look at Q1, I think our price hike was what? About 8%-9%. Q2 will be roughly similar. Q3 on a year-on-year basis will be, you know, something like... The price hike is 2. One is the hike that you give to your contracted customers, and one is the price hike that you achieve due to retail sales. My expectation is that, and typically, retail sale repricing is very high because whenever you get full, you know, Like some people asked me recently that, "Is it true that your hotel in Ahmedabad is priced at INR 35,000?" I said, yes, because that's what happens when events happen or high demand periods occur. It's something like airline pricing. You're quite right. The prices, in my opinion, will go up more than 15% in Q3 and a further 5%-6% in Q4, leading to an overall increase of maybe 15 odd%. But this will be led primarily by retail pricing. Right. Okay. When you mentioned, in the various growth drivers we have for the, for the year, and you said 25% increase, not, not for the year, but, maybe for a couple of years. You said 25% increase in EBITDA from Lemon Tree portfolio. This means is on the back of higher occupancy and pricing, that's what you meant? That's right. Okay, just last question. Let me explain that to you. Let me explain that to you. If we take our group revenues up by, let's assume our EBITDA is. Our revenue is INR 100 and our EBITDA is INR 50 as the owned portfolio, Lemon Tree Hotels. A 25% hike in EBITDA is translates in rupee terms to an INR 12.5 increase on the current INR 50. For an INR 12.5 increase, I need to increase my revenue only by 17, because 75% will flow through, because our fixed costs are now stable. Really, what I'm saying is, if Lemon Tree's own portfolio only increases its revenue by 17%, our EBITDA will grow 25%-28%. Right. That's it. That's very clear. Last question on your, I mean, when you say that over the next few years, we will have, like, significant room inventory added, at the peak of the cycle, you mean peak of the cycle, like, in like two, three years, or like, it's like four, five year out, what do you mean? What, we believe. See, peak cycle is normally when occupancies on an all-India basis cross 70%. That's when everybody kind of reprices, because 70% means that really in winter, for 4 or 5 days every week, you have no rooms available. Think of it this way. I'll give you an interesting example. On peak days at Lemon Tree, Bombay, we price our rooms at INR 20,000, and the last 20 rooms are sold at that price. That is what takes your average rate up. Similarly, with a hotel like Aurika, Bombay or Aurika, Udaipur or Delhi or equivalent markets. When you talk pricing, pricing is not static. It's not that I have taken the pricing up. The pricing is driven dynamically, in our case, by a machine learning AI brain, and we change pricing every 1 hour for hotels. Going forward, my view is that supply growth in India is significantly less than demand growth. Demand growth in India, simple number is 1.5 times or 1.4 times GDP growth. If GDP is growing at 6, demand is going to grow north of 8, and supply growth is sub 5%. That 3% difference flows into occupancy. If India is at 68 today, next year it will be at 71, and following year, it will be at 74, assuming everything else is, you know, normal. At that point, pricing goes through the roof. It's not rational pricing hikes, then it becomes absurd pricing hikes. Just like at the bottom of the cycle, it becomes absurd price declines. My view is it takes four years, five years for supply to operationalize. The next four, five years, and I'm not talking Lemon Tree, I'm talking for the industry, is going to be a golden period, and, you know, you'll find every hotel company doing very well. Sure. Thank you, sir. These are our questions, always very useful. Thank you. Thank you. Thank you very much, sir. Ladies and gentlemen, as there are no further questions, I would now like to hand the conference over to the Management for closing comments. Over to you, sir. Okay, oops. Thank you once again for your interest and support. We continue to stay engaged. Please be in touch with our investor relations team for any further details or discussions. I look forward to interacting with you in the next quarter. Thank you. Thank you, Members of the Management. Ladies and gentlemen, on behalf of Lemon Tree Hotels Limited, that concludes this conference. We thank you for joining us. You may now disconnect your lines. Thank you.