Indian Hotels Company, which saw a good performance in FY23, is aiming for an operating profit margin of 33 per cent by FY25 while it plans to jack up its pace by opening over 20 hotels this year.

Talking to analysts to discuss the hotel company’s Q4 and FY23 results, MD & CEO Puneet Chhatwal said demand in the hospitality sector was outstripping supply, and it meant to take advantage of this opportunity to boost and broaden its portfolio. In FY23, while hotels demand has risen 11.1 per cent over FY20, room supply has grown only 4.5 per cent in the same period.

The Tata group-owned company ended last fiscal year with an EBITDA margin of 32.7 per cent, close to double of what it reported in the year-earlier period. Last year, it opened 16 hotels and ended the year with over 260 hotels. It also signed contracts for about 36 hotels. It expects to have a hotels portfolio of over 300 by FY25.

Chhatwal said that even if the company stopped signing any new hotel contracts, it still had about 73 hotels in the pipeline that are good enough for the next three years.

The current year was already off to a good start and coming ahead was the G20 meetings, the World Cup Cricket, and the wedding season toward the end of the year, all of which would be drivers to increase hotel occupancies.

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While the luxury brand, Taj, continues to be the backbone of the company, one of its newer brands and budget hotel chain, Ginger Hotels, is rapidly expanding and ended FY23 with revenue of over ₹300 crore and EBITDA margin of 39 per cent. The brand has the potential to deliver a margin of 50 per cent.

Chhatwal said that in the case of Ginger Hotels, it operated through leases as it gave them operating leverage, was more economical and allowed them to scale up rapidly..

The Taj, which is about 54 per cent of the company’s total portfolio, has about 100 operating hotels under the brand and during the year, it opened four and signed on for eight more. The company also expanded to new geographies, such as Riyadh and Dhaka during the year.

The Indian hospitality sector is expected to end the calendar year 2023 with an occupancy rate of 60 per cent, an average room rate of ₹7,106 and revenue per available room of ₹4,690. By 2025, the occupancy is expected to rise to 70 per cent, the room rate at ₹7,983, and revenue at Rs 5,588.

Domestically, the company’s hotel portfolio ended the year with an occupancy of 69 per cent, an average room rate of ₹9,753, and revenue per available room at ₹6,765.

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