Hotels Will Be A Direct Beneficiary As Aviation Capacity Increases: Samhi Hotels | CNBC TV18

Summary

In an insightful discussion, Ashish Janala, CMD and CEO of Sami Hotels, highlights the company's strong performance in key markets like Bangalore, Hyderabad, and Pune, with mid-double digit ARR growth. Despite market fluctuations, demand remains robust, driven by the corporate sector and increasing air travel. Sami Hotels continues its strategy of asset recycling, reducing debt and reinvesting in high-potential properties. Looking ahead, the company projects solid growth, with a target of 16-17% revenue growth over the next 2-3 years, and a significant boost in margins, driven by both operational efficiency and strategic expansion.

Takeaways

• 😀 The luxury travel and tourism sector is performing strongly, with notable growth in cities like Bangalore, Pune, NCR, and Hyderabad, especially in terms of Average Room Rates (ARR) and total revenue.
• 😀 Sami Hotels has seen excellent performance in markets like Bangalore and Hyderabad, with growth driven by major events like conferences and exhibitions.
• 😀 Both ARR and food and beverage revenues have shown strong growth, contributing to double-digit growth in overall revenue for Sami Hotels.
• 😀 Despite stock market fluctuations, there has been no significant negative impact on Sami Hotels' occupancies or business, with corporate urban India proving resilient.
• 😀 The aviation sector’s growth is correlated with hotel demand, with Sami Hotels expecting increased business as air capacities grow in key markets.
• 😀 Sami Hotels is focusing on asset recycling, having sold properties like the Duet Hotel and Four Points by Sheraton Chennai, and intends to redeploy the capital in high-return markets.
• 😀 The company aims to monetize an additional 150 crores worth of assets in FY26, reducing debt and improving financial performance.
• 😀 Free cash flow generated from operations, estimated at 80-100 crores, will help reduce net debt, bringing it down by approximately 250 crores over the next 12-15 months.
• 😀 85% of Sami Hotels' customers are business travelers, with the remaining 15% being recreational or leisure travelers.
• 😀 Business bookings remain strong for March and April, and the proportion of Indian travelers has increased significantly since the pandemic, providing stability in performance.
• 😀 Sami Hotels expects 10-11% total revenue growth for same-store hotels over the long term, with a projected 16-17% growth over the next 2-3 years, fueled by additional room inventory and renovations.

Q & A

What has been the performance of the hotel markets in cities like Bangalore, Pune, NCR, and Hyderabad?

The hotel markets in cities like Bangalore, Pune, NCR, and Hyderabad have experienced mid-double-digit growth in Average Room Rates (ARR), driven by strong market recovery and recurring events like large conferences.

What percentage of Sami Hotels' business comes from corporate clients?

Approximately 85% of Sami Hotels' business comes from corporate clients, including direct corporate bookings and events.

How has the focus on Indian travelers affected Sami Hotels' business post-pandemic?

There has been a significant shift towards catering to Indian travelers, with approximately 80-85% of their business now coming from domestic guests. This has led to greater stability compared to the past when foreign travelers contributed a larger proportion of the business.

How does the hotel sector correlate with other industries like aviation, according to Ashish Janala?

Ashish Janala pointed out that there is a strong correlation between the growth in the aviation sector and the hotel industry. As air capacities increase, demand for hotels also rises, benefiting the hospitality sector.

What is the company's strategy for asset recycling and how does it impact its financials?

Sami Hotels follows an asset recycling strategy where they sell non-core assets to free up capital. This capital is redeployed into higher-return markets. As a result, the company expects to reduce its debt by about 250 crores over the next 12-15 months.

What are the expected financial benefits of the asset monetization strategy?

The asset monetization strategy is expected to reduce Sami Hotels' debt by approximately 250 crores over the next year, leading to a reduction in finance costs and improved financial stability.

What are Sami Hotels' revenue growth projections for the next few years?

Sami Hotels projects a 10-11% total revenue growth for same-store hotels over the long term. With new room additions and renovations, they expect overall revenue growth to reach around 16-17% over the next 2-3 years.

How does the company plan to increase its room inventory, and what is the target for the next fiscal year?

Sami Hotels plans to increase its room inventory from 4,800 operating rooms to 5,600 rooms, mainly through the execution of existing projects on their balance sheet, without the need to acquire new properties.

What is the company's margin outlook for the next 18 months?

Sami Hotels' margins, currently around 38-39%, are expected to increase to approximately 42-43% over the next 12-18 months as the company focuses on improving operational efficiency and increasing its revenue base.

What is the company’s debt reduction target, and how does it plan to achieve it?

Sami Hotels aims to reduce its net debt by 250 crores over the next 12-15 months through asset monetization and free cash flow generated from its business operations.