PremiumHotels companies have been suffering since the covid-19 pandemic began and understandably so, considering that occupancies took a sharp beating. The second wave halted recovery and this shows in The Indian Hotels Co. Ltd’s June quarter results (Q1FY22). Consolidated revenues more than doubled, rising 140% year-on-year to Rs345 crore, but were 44% lower vis-à-vis March quarter.
It’s worth noting here that the impact of the second wave hasn’t been as severe as the first one last year, which has cushioned Indian Hotels’ performance this time around. Growth in Q1FY22 was driven by domestic leisure demand.
Analysts from Motilal Oswal Financial Services Ltd in a report on 10 August, said, “Despite the second covid wave, standalone RevPAR nearly doubled as compared to last year due to ARR growth and occupancy improvement, as the impact this time around was less severe and the recovery was faster as compared to the first wave." RevPAR stands for revenue per available room and ARR is average room rate. Standalone RevPAR increased to Rs1992 in Q1FY22 from Rs992 in Q1FY21.
Having said that, even so, the recovery seen in Q1 wasn’t enough to make profits. Indian Hotels made a loss of Rs149 crore at the Ebitda level. Ebitda is earnings before interest, tax, depreciation and amortization. For perspective, Ebitda loss stood at Rs266 crore in Q1FY21 and the company had reported an Ebitda profit of Rs71 crore in Q4FY21.
To be sure, for now, it appears like the worst for the hotel industry is likely over. According to Indian Hotels, “July was a good month and business on the books for August looks promising."
However, it’s not like the road ahead is smooth. “But, the resurgence of the second wave of covid has push back the revival process. Faster normalization would be key for rebound of historic 65-70% occupancies and around Rs11000 ARR, in our view. But this may be gradual over 15-18 months," said analysts from Dolat Capital Market Pvt. Ltd in a report on 9 August.
Meanwhile, despite the challenges, investors seem to be factoring in a good share of the optimism into the stock price. The Indian Hotels’ stock has underperformed the broader Nifty 500 index in the past one year.
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