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MOSL: HOTELS-Retail-driven ARR growth – a common theme; Lemon Tree outperforms the pack

HOTELS: Retail-driven ARR growth – a common theme

We delved deep into the December-quarter results and the management commentary of key hospitality players such as Indian Hotels (IHIN), Lemon Tree Hotels (LEMONTRE), Chalet Hotels (CHALET) and EIH to identify ongoing trends in India’s hospitality sector. Key insights:

Aggregate revenue up 5% YoY; LEMONTRE’s EBITDA performance shines even on same-hotel basis
** Aggregate revenue for the hospitality set increased 5% YoY in 3QFY20, led by LEMONTRE (+39% YoY) and CHALET (+12% YoY). However, EIH's performance (-4% YoY) was dragged by loss of flight catering business from Jet Airways.

** Adjusted EBITDA (for Ind-AS 116) was up 12% YoY, driven by LEMONTRE (+48%), CHALET (+25%) and IHIN (+13%). EIH disappointed on this front too with a decline of 8% YoY.

** IHIN's consol. revenue grew 4% YoY to INR13.7b, while adj. EBITDA was up 13% YoY at INR3.8b, mainly driven by its standalone business (revenue/adj. EBITDA up 7%/13% YoY). Subsidiary revenue was down 1% YoY, but EBITDA increased 13% YoY led by cost-rationalization measures.

** LEMONTRE delivered robust 39% YoY growth to INR2b, mainly due to inventory addition (absent in the base quarter) and 7.5% RevPAR growth on a same-hotel basis. Adj. EBITDA was up 48% YoY at INR725m. However, on a same-hotel basis, revenue/EBITDA grew 6%/19% YoY.

** CHALET's revenue grew 12% YoY to INR2.8b, while EBITDA was up 25% YoY at INR1,123m. The company's hospitality segment EBITDA (adjusted for exchange gain of INR228m) increased 9% YoY to INR1,084m.

** EIH's revenue declined 4% YoY to INR5.1b, primarily due to the loss of the flight catering business from Jet Airways. EBITDA declined 8% YoY to INR1,534m.