GST rate cut has led to an increase in revenues, says Royal Orchid Hotels

The winter holiday season is upon us and that means a busy third quarter for the hotel industry. To know more about what the demand scenario and the outlook for the industry looks like, CNBC-TV18 spoke with  Amit Jaiswal, CFO of Royal Orchid Hotels and Vishal Kamat, director of Kamat Group.

Jaiswal said the first half was not been very great, there was only marginal increase in the revenues but the overall costs had gone up. "However, from October onwards that is the third quarter there has been a surge in the occupancy. and the occupancy has moved from 69 percent to 75 percent. As well as the average room rates (ARR) have gone up by almost 8 percent. December too looks very good in most of the hotels. So, hopefully we will be closing this quarter with very good numbers,” he added.

“The goods and services tax (GST) cut which the government declared at the end of September has contributed to a lot of increase in the revenues because earlier the foods and beverages (F&B) GST rate was very high at 18 percent, which is now at 5 percent and that has led to a lot of growth in F&B," he said, adding that GST rates for rooms also are down from 18 percent to 12 percent, which they have been able to pass on to the guests. So there has been a surge in the occupancy rate in this current quarter, said Jaiswal.

Speaking about the target room additions, Jaiswal said, “In FY21, we will be adding roughly around 15 hotels, a total of around 750-800 rooms. Out of which for almost 50 percent we have already signed.”

Talking about loss making properties, Jaiswal said, “Out of all my properties there were two properties, which were loss-making, one was the Jaipur and the Central. Good point is that post August, Central has started doing very well and hopefully in the present financial year – by the end of March, it will breakeven. So that depreciation loss also will be covered. As far as Jaipur is concerned, although it has shown improvement in last couple of months but still it will continue to incur loss as far as the depreciation loss is concerned."

Meanwhile, Kamat said, “Overall the month of October for our business hotels has not been as comparable to last year. There has been a dip because of Dussehra and Diwali coming in the same month but November has been very good and December also looks very positive in terms of both occupancies and ARR ."

“Christmas holidays are coming, so the focus moves towards our resorts, which are also having a very good buoyancy," he further added.

In terms of rooms Kamat said, "We have approximately 1,250 rooms across our various hotels and out of that approximately 850 are old and the rest are leased."

“Looking at how the things are now, January onwards also we will see a good movement in general. I look at January, February and March being quite positive,” Kamat said adding that most of their hotels at optimal performance in terms of occupancy and there is a incremental increase in ARRs.

Talking about debt, Kamat also assured that one should not be concerned because while their overall debt stood at Rs 300 crore, their EBITDA was around Rs 65-68 crore.

Jaiswal said their standalone debt was at around Rs 35 crore and consolidated was at Rs 85 crore. From the Powai land sale they expect to get around Rs 50 crore and hope to pare debt of around Rs 20-25 crore.