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Lemon Tree Hotels Concall – Feb 2025
Financial Performance
Lemon Tree Hotels Concall Updates: Lemon Tree Hotels reported its highest-ever third-quarter revenue, reaching ₹355.8 crore. This marks a strong 22% growth compared to the same quarter last year.
The net EBITDA saw a significant jump of 30% YoY to ₹184.8 crore, with an improved EBITDA margin of 51.9%, up by 316 basis points.
The company’s Average Room Rate (ARR) for Q3 FY25 stood at ₹6,763, reflecting a 7% YoY increase.
Occupancy rates rose to 74.2%, showing a healthy improvement of 826 basis points.
The Revenue Per Available Room (RevPAR) grew 21% YoY to ₹5,018.
Profit after tax came in at ₹79.9 crore, marking an impressive 82% rise, while the cash profit climbed to ₹114.9 crore, up by 49% YoY.
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Management Fees
Lemon Tree Hotels saw notable growth in management fees.
The income from third-party owned hotels under management and franchise contracts reached ₹18.4 crore, reflecting a 24% YoY growth.
Fees from Fleur Hotels contributed ₹25.3 crore, a substantial 45% YoY increase.
Overall, the company’s management fees rose 35% YoY to ₹43.7 crore.
New Developments
A key highlight was the awarding of a letter of award for the redevelopment of the Orchid Hotel in Shillong.
This property will be transformed into Aurika, Shillong, with 120 rooms and modern amenities.
The project is expected to be operational within 2.5 to 3 years and benefits from capital subsidies, including full GST reimbursement and a 5% interest subvention under the Meghalaya Industrial and Investment Promotion Policy.
Asset-Light Strategy
In line with its asset-light model, Lemon Tree Hotels signed 13 new management and franchise contracts, adding 766 rooms to its development pipeline.
During the quarter, the company operationalized 1 hotel, adding 38 rooms to its portfolio.
As of December 31, 2024, Lemon Tree Hotels’ total inventory stood at 200 hotels with 16,385 rooms.
This includes 112 operational hotels (10,317 rooms) and a pipeline of 88 hotels (6,068 rooms).
Growth Outlook
The company remains optimistic about its growth trajectory, focusing on expanding its management and franchise portfolio.
Renovation projects are expected to drive higher ARR and occupancy rates, with continued investments planned through FY26 and FY27.
Management anticipates that demand for branded mid-market hotels in India will outpace supply, driven by rising discretionary spending.
Challenges and Risks
Despite its positive outlook, the company acknowledges potential challenges.
Delays in converting signed contracts into operational hotels due to funding issues from property owners could impact timelines.
However, management is confident in achieving its goal of 20,000 rooms by 2028, driven by the strong demand for asset-light management contracts.
Renovation Impact
Renovation efforts have already shown positive results.
For instance, the Keys hotel in Pune experienced a 24% increase in ARR after its renovation.
The company is targeting an EBITDA of ₹60 crore from the Keys portfolio, a significant improvement from current levels.
Market Dynamics
Lemon Tree Hotels believes that supply absorption in major metro markets will continue, supported by historical performance trends in airport hotels.
The focus remains on capturing the lifetime value of customers through strategic brand positioning and network expansion across India.
Lemon Tree Hotels Concall Future Guidance
Looking ahead, Lemon Tree Hotels expects mid-teen growth in revenue per room (RevPAR), with cost increases estimated to remain in the mid-single digits.
Long-term guidance suggests EBITDA margins could reach 60% as renovations are completed and operational efficiencies kick in.
FAQs
What was Lemon Tree Hotels’ revenue for Q3 FY25?
The company reported its highest-ever third-quarter revenue of ₹355.8 crore, reflecting 22% YoY growth.
How did Lemon Tree Hotels’ management fees perform?
Management fees increased by 35% YoY, reaching ₹43.7 crore, with strong contributions from both third-party hotels and Fleur Hotels.
What is the outlook for Lemon Tree Hotels’ expansion?
The company remains confident in achieving its target of 20,000 rooms by 2028, focusing on asset-light management contracts and ongoing renovations.
How is the company addressing potential operational challenges?
While funding issues from property owners could pose challenges, management’s optimism is grounded in strong demand and strategic growth initiatives.
Lemon Tree Hotels continues to build momentum with a smart asset-light strategy, renovation-driven value enhancement, and a keen eye on India’s growing hospitality market. The future looks promising for this leading mid-market hotel chain.
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