Lemon Tree Hotel

Lemon Tree Hotels reported its highest-ever Q1 revenue at ₹317.4 crores, marking an 18% year-over-year growth. Net EBITDA increased by 23% YoY to ₹142 crores, resulting in a robust net EBITDA margin of 44.8%, an expansion of 178 basis points. Profit after tax (PAT) saw a significant surge of 139% YoY to ₹48.1 crores, while cash profit grew 51% YoY to ₹82.3 crores. This strong performance was driven by a 19% YoY increase in RevPAR to ₹4,523, with Gross ARR growing 10% YoY to ₹6,236 and occupancy rising by 591 basis points to 72.5%.

The company is making significant investments in renovations, business development, technology, and renewable energy, with approximately 350 rooms shut for renovation in Q1 FY26. These efforts are expected to continue into FY27 until the entire owned portfolio is refreshed. Management anticipates renovation and tech costs to drop significantly from the current 6% of total revenue to 2-2.25% within the next 15 months, leading to a 'huge expansion' in EBITDA margins. Investments in renewable energy have already reduced power and fuel costs from 8.7% to 6.9% of revenue, with a target of 50% renewable energy in the owned portfolio within 12-18 months.

In Q1 FY26, Lemon Tree signed 14 new management and franchise contracts, adding 1,273 new rooms to its pipeline, and operationalized 5 hotels, contributing about 400 rooms to its operational portfolio. As of June 30, 2025, the group's total inventory stands at 226 hotels and 18,430 rooms, with 10,660 rooms operational and the rest in the pipeline. Management expressed confidence in accelerating asset-light growth, despite some delays in scheduled openings, and aims to achieve 20,000 rooms (including pipeline) for Lemon Tree Version 2.0 within the next 6 months, ahead of the 2028 target.

A committee of directors has been established to evaluate the transfer of assets from Lemon Tree to Fleur through a demerger scheme, with the intent for Fleur to become an independent, listed asset company (PropCo) by the end of next calendar year. Lemon Tree will remain a significant shareholder in Fleur, focusing on asset-light management, brand, and technology. Saurabh Shatdal will lead Fleur's asset-heavy growth, with an ambitious target to expand its room count from the current 4,000 to 10,000-15,000. Management projects that Lemon Tree's management fees from Fleur could 'explode' to ₹300-400 crores in the next three years.

For Aurika, Mumbai, the primary strategy in Q1 FY26 was to build occupancy to a sustainable level, reaching 76% from 46% last year. This involved a 50% increase in corporate business and a 30% increase in non-negotiated/retail business. Management expects Aurika, Mumbai, and its micro-market to maintain occupancies 'north of 80%' despite the upcoming T1 shutdown, anticipating continued demand growth and potential shifts to Navi Mumbai. The company aims to focus on increasing rates now that occupancy has stabilized.

The company successfully reduced its gross debt by 11% YoY to ₹1,658 crores in Q1 FY26, down from ₹1,864 crores in Q1 FY25. The cost of borrowing also decreased significantly to 8.01% from 8.80% in the previous year. Management targets a debt reduction of ₹50 crores per quarter and aims for Lemon Tree to be 'more or less debt-free' as a group within the next 18 months. Total renovation expenditure for FY26 is estimated at close to ₹130 crores, with a significant portion allocated to Opex, and this is expected to reduce substantially in subsequent years.

Lemon Tree is actively enhancing its loyalty program and digital capabilities. The company has grown its loyalty program members to 2.1 million, with a target to reach 3 million members within the next year. Repeat usage stands at 43-44%, indicating strong customer stickiness. Investments in technology, including data scientists and user experience engineers, are aimed at improving revenue management, personalization, and overall guest satisfaction, with the full benefits expected to roll out from October this year into next year.