Notes from the Analyst Conference call (available on IndiaEarnings)

KHIL’s Mumbai properties, Orchid & Lotus Suites will continue to be the major drivers in the short term (6-8 months). The Occupancy rates in both the properties have come down but ARRs have gone up significantly. The OR for Orchid is 77%, down from 88% in the corresponding quarter but ARR is up by 25% to 8,600. Similarly, the OR for Lotus Suites is 70%, down from 77% but ARR has improved from 3,500 to 7,500. The company expects higher ARRs in Q3 & Q4(season) and the Orchid hotel is already tarriffs of Rs 12,000 in Oct.

The heritage property in Jadhav Gadhi Fort (Pune) will be launched on Nov 20th and will be the first of its kind in Maharashtra . It has a capacity of 44 rooms and the company expects starting ARRs to be around 15k and Occupancy of 60%.  Its proximity to Mumbai will help it in targeting the premium wedding market, which is currently catered by the palaces in Rajasthan.

Expansion plans

The company operates on 3 models. Own, Lease & Manage.

Apart from the Mumbai properties, the company is focussing only on Tier II/III cities because of less competition & capex requirements and higher returns.

KHIL plans to add 100 more rooms in a phased manner to the Orchid hotel in Mumbai by FY10. The per room capex requirement will be much less because it will not incur any overhead costs (lobby, kitchen etc).

It has a 33% stake + management fees in 2 properties (200 + 200) coming up in Pune by Aug 08. The other stakeholders are Unity Infra and Maharashtra govt.

It is also setting up an Orchid and VITS(4 star business hotel) close to the Nagpur airport. The first property is going to be operational in 18 months and the 2^nd one in 30 months.

Other VITS properties will be coming up in Raipur & Baddi over the next 3-4 years.

The company has acquired a 60% stake in a group company, Concept Hospitality. It currently manages 400 rooms in various hotels like Rados in Powai, Uppal’s Orchid in Delhi and Lagoona resort in Lonavala.

The management fees are typically about 4-8% of the revenues. KHIL currently manages 1000 rooms (including Concept) in various hotels and it will go up to 1500 rooms over the next 3-4 years. Some of the management properties that are going to become operational in the near future are Vaishnodevi (200 rooms by Nov end), Belgaum (60 rooms by Dec), Amboli (Jan/Feb), Aronda (Nov), Aurangabad (104 rooms by Mar ’08), Lotus Suites Baroda (100 rooms by Dec/Jan) and Nagpur (55 rooms by Q1FY09).

Restaurant business

Currently it is in a very nascent stage with about 20 odd VKSS restaurants operational. The company believes that the Food Retail story has a huge upside and expects it to be very lucrative in the long run. It plans to open 100 VKSS restaurants over the next 3 years. It is primarily concentrating on the highways in western India and the Nagpur-Raipur section. It has also tied up with ONGC & HPCL to open 200 odd fast food outlets.

Funding plans

KHIL had raised 80 cr in Feb through a FCCB issue. It has about  115 cr of debt on its books. The CAPEX requirements for the time being will be met through internal accruals, debt and the cash from the FCCB issue. The management stake in KHIL is about 75%.

Diwali vacation period is one of the peak tourism seasons hence the outlets were crowded. The food is reasonably priced considering acceptable cleanliness/hygiene standards.