Lemon Tree Hotels Limited — Q3 FY26 earnings call

Basically, Karan, one is we do not have peers who are currently operating in the Indian listed space. They are all mostly luxury heavy. The ability to reprice in winter is normally higher than ours, as I am sure you have observed in the last 3 years. Now if you look at what has happened to our portfolio, we have been affected by Gurgaon. Gurgaon has gone through a very weak quarter and in fact, our RevPAR growth has been negative.

Analyst questioned lower RevPAR growth despite renovation benefits, prompting management to explain market-specific weaknesses (Gurgaon) and strategic focus on occupancy before repricing.

Asked by Karan Khanna

You saw we did a small deal closure - the one we just closed, which was Aurika in Varanasi. It is equivalent of 150-room Aurika because its ARR will be 3x of what the other Aurikas will be. Hopefully, in the next 2-3 months, we will start construction of the Aurika, Delhi, which we hope we will complete in 3-3.5 years. Going forward, I hope you will hear a bunch of announcements from us on acquisition/greenfield opportunities. I do not want to give guidance as to how many and where they are, but as I mentioned last time, there are roughly 2,500 rooms we are looking at, and we are pretty sure we will be able to add that level of inventory to our company in the next 1 year.

Management provided specific updates on Aurika expansion plans, including new projects and pipeline targets, indicating future growth drivers post-demerger.

Asked by Karan Khanna

If I take those 1,400-1,500 rooms out, the portfolio that really needs renovation is about 4,100 rooms of the owned portfolio. We have completed over 65% of them. This year, I think we renovated about 1,200 rooms. At any given time, there were about 700-800 rooms shut.

Clarified the progress of renovation, the scale of inventory affected, and the expected timeline for completion, which is crucial for understanding future RevPAR potential.

Asked by Vaibhav Muley

First was getting all our data sources together, a single data lake, migrating it to AWS with a private cloud, so on and so forth. Then we asked ourselves, how do we use this data for better and more informed decision-making. The areas we looked at was revenue management, then we tied up with Salesforce for a better way of doing sales. It is called next-gen sales. We also looked at personalization and loyalty they were all in phases. You see this requires a cultural transformation in a company. The technology side is only 1/3rd. 2/3rd is the cultural change, and it is a journey we are going through. It is encouraging. We are also asking ourselves now that we have started creating products what I would call minimum viable products is how do we monetize it now with third-party users of this?

Management detailed their comprehensive tech strategy, from data infrastructure to revenue management and loyalty, and highlighted a significant financial impact of ₹50 crores from technology alone, indicating a strategic shift.

Asked by Achal Kumar

Now really, fee income becomes meaningful with new hotels only after they stabilize because a large portion of it is the kind of business you are pushing in there, the revenue that you generate and the incentive fees that you earn. ... As far as Fleur goes, there was an impact of GST changes and accelerated renovation.

Addressed a key financial question regarding the slower growth in management fees despite room additions, explaining the stabilization period for new hotels and specific impacts on Fleur.

Asked by Abhay Khaitan

We can look at the impact of GST and say it will be about 2% next year based on just what we expect to do in revenue terms and how much of that revenue will be above Rs. 7,500. It is an approximate figure, but we think it is pretty accurate that was the first point.

Management provided an updated, lower estimate for GST impact on revenue for FY27 and FY28, clarifying its influence on pricing strategy.

Asked by Sameet Sinha

Our intention is very simple, that once we build all the various segments that are supposed to fire to provide room nights, then we will reprice all segments because our ability to churn the portfolio and churn the mix improves significantly. Really, in Bombay, our strategy because of the very large inventory was fill the hotel, first get base so that you cover your costs, then start getting additional customers and then over time, keep increasing the prices as you can replace the customers with newer, higher-paying guests. That is the process.

Management articulated a clear, multi-stage strategy for the Mumbai market, explaining how they plan to shift from maximizing occupancy to driving higher ARR, which is critical for future profitability.

Asked by Rahul Jain

I do not think it is a cycle anymore. I really feel we are seeing early signs of a structural change in demand and a whole bunch of new customers, especially post-COVID, and these are younger customers, want to stay in branded hotels. It is quite clear to me. The upcycle is still actually on a pure cyclicality basis, we are nowhere near at the top of the cycle. Top of the cycle is defined when your India occupancy crosses 70%-75%. In fact, you have to hit closer to 75%-80% when you can significantly reprice. We are not there as far as I know, the reports I read say India's occupancy is still about 66%, but this is an aggregate.

Management offered a nuanced view on the industry's cyclicality, suggesting a structural shift in demand rather than a pure cycle, and provided context on India's current occupancy levels relative to peak repricing potential.

Asked by Achal Kumar