Kamat Hotels (India) Ltd Management Discussions.
INDUSTRY STRUCTURE AND OUTLOOK
Kamat Hotels (India) Limited (KHIL) was incorporated on 21st March, 1986 with the main object of setting up and running of hotels and related business. KHIL is into many hospitality ventures other then hotels and restaurant such as clubs resorts, Heritage hotels and much more across India. KHIL is also into Hotel Consultancy, setups and other such related activities. KHILs most globally recognized brand is "THE ORCHID", An Ecotel Hotel, Asias First chain of 5 star environmentally sensitive hotel which has won over 97 International & National awards. The Orchid is in Mumbai and Pune. The Companys properties provide all the modern amenities to the travelers which make it one pack deal for them. All the hotels of the company are distinctly designed to resemble the nomenclature of the hotel.
Indias economy will most likely be powered by private consumption, investments and exports in future. Softer interest rates, improving farm realizations and higher disposable incomes will enable this metric.
Overall investments rebounded in FY 2018-19 with fixed investments growing 12.2%, up from 7.6% in FY 2017-18. (investment/GDP) is estimated to have surged to 32.9% after being range bound at 30-31% in the past four to five years.
Indias exports grew at a healthy pace in FY 2018-19, albeit on a low base. The primary factors propelling Indias exports during the year under review were the easing constraints posed by Goods and Services Tax (GST) implementation, improved manufacturing and tailwinds of 2017 global trade revival.
INDUSTRY STRUCTURE AND DEVELOPMENTS
The hospitality industry has been undergoing tremendous changes and disruptions over the last two decades. The key trends that are reshaping the industry are listed here:
Virtual communities across social networks like Trip Advisor and Google, among others influence tourists and lead to more transparency.
Online Travel Agents (OTAs) have altered distribution channels, facilitated a shift towards large brands and have built enduring relations with travelers.
Digitalized guest experiences through apps are increasingly helping hoteliers manage many aspects of the guest cycle and experience.
Booming global tourism, owing to enablers like low-cost carriers and healthy GDP growth in emerging markets Rising trend of experience economy wherein customers request extreme personalization, unique experiences, and so on.
Generations Y and Z have different requirements and needs compared to older generations.
Sustainability approach of hotels is growing as patrons become increasingly sensitive towards environmental and social issues.
INDIAN HOSPITALITY AND TOURISM INDUSTRY
Travel and tourism industry contributed 9.2% to Indias GDP and registered a growth of 6.7% in 2018 (Source: WTTC). The industry supported 43 million jobs in the country (8.1% of total employment). India offers a diverse portfolio of niche tourism products, including cruises; adventure; medical; wellness; sports; meetings, incentives, conventions and exhibitions (MICE) eco-tourism; films; rural and religious tourism.
The country has been recognized as a destination for spiritual tourism for domestic and international tourists. Besides, the introduction of a new category of visathe medical visa or M visais expected to encourage medical tourism in India. Several other factors promoting tourism, in general and hospitality, in particular are:
Focus on improving infrastructure, including airports, roads and rail connectivity across the country.
Positive amendments to Coastal Regulation Zones Rules are expected to facilitate development of beach resorts across the coastline.
Digi tisation of services, including payment mechanisms.
E-visas offered to nationals of 166 countries is expected to increase foreign travelers.
New avenues of funding Real Estate and Hospitality assets through institutional equity by way of listing Real Estate Investment Trusts (REIT) and Initial Public Offers (IPOs) of certain hospitality companies. Introduction of the Insolvency and Bankruptcy Code (IBC) to resolve insolvencies efficiently, which The industrys concern however, are high GST rates, which at 28% for room tariffs above 7,500 are amongst the highest in South East Asia positioning the country as an expensive destination in comparison with regional peers. Further, the recent turmoil within the airline industry in India leading to a decline in flights has impacted travel, notwithstanding the high demand for air travel.
OPPORTUNITIES, THREATS, RISKS AND CONCERNS
Industry has taken upward turn after profitability should be better as compared to previous year. The long period and the Annual Room Rent and main factor for this upward turn includes the rising purchasing power of domestic travelers, an increase in commercial development and foreign tourist arrivals, a growing airline industry and government-led initiatives aiming to stimulate the sector. The promotion and aggressive marketing measures undertaken by the government is expected to aid influx of tourists. The industry would also benefit from introduction of new forms of tourism and development of niche segments.
Opportunities exist in ecotourism, adventure tourism, and cruise tourism. With increasing environment awareness and consciousness among tourists and given efforts undertaken by the government and private players, the ecotourism segment is the coming years. However, this is subject to unforeseen events which may reduce tourist traffic and thus the business of Hotels. Infrastructure development has taken place with which the travel and tourism industry is receiving a major boost. Your Companys property with world class services and strong brand identity is ideally poised to take advantage of these opportunities.
The Indian government has realised the countrys potential in the tourism industry and has taken several steps to make India a global tourism hub. Some of the major initiatives planned by the Government of India to give a boost to the tourism and hospitality sector of India are as follows:
Statue of Sardar Vallabhbhai Patel, also known as State of Unity, was inaugurated in October 2018. It is the highest standing statue in the world at a height of 182 meter. It is expected to boost the tourism sector in the country and put India on the world tourism map.
The Government of India is working to achieve 1 per cent share in worlds international tourist arrivals by 2020 and 2 per cent share by 2025.
Under Budget 2019-20, the government allotted Rs 1,160 crore (US$ 160.78 million) for development of tourist circuits under Swadesh Darshan.
Under Budget 2019-20, the government allotted Rs 160.50 crore (US$ 22.25 million) for development of tourist circuits under Swadesh Darshan.
REVIEW OF OPERATIONAL AND FINANCIAL PERFORMANCE
The total turnover of the Company for the year was recorded at Rs. 19,419.27 Lakhs as against Rs. 17,528.61 lakhs in the previous year, a increase of around 10.79% over the last year. The Companys profit after tax is Rs. 2,506.96 as compared to Rs. 3,789.03
The average occupancy level of The Orchid, Mumbai, was around 85%. The average occupancy level of VITS Mumbai was around 80%. The Average Room Rate, during the year under review, was at Rs. 6,108 at The Orchid, Mumbai as compared to Rs. 5,869 in the previous year and at Rs. 4,404 at VITS, Mumbai as compared to Rs. 4,325 in the previous year.
SEGMENT WISE PERFORMANCE
The Company is presently operating in only one segment i.e. Hospitality.
INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
Adequate internal controls have been laid down by the Company to safeguard and protect its assets as well as to improve the overall productivity of its operations. The Internal Audit Department of the Company together with Internal Auditors, M/s. Anand Desai & Associates, Chartered Accountants, Mumbai, M/s. R. D. A. and Associates, Chartered Accountants, Bhubaneswar, ensures compliance with the prescribed internal control procedures. Internal audits are carried out at regular intervals and the audit reports are periodically laid before the Audit Committee for review. The Companys internal controls are in line with the requirements of the Company, however, in view of achieving excellence the systems are regularly updated as per the changing needs of the business.
INTERNAL FINANCIAL CONTROLS (IFC)
The Directors have devised a framework for Internal Financial Controls to be followed by the Company that conforms to the requirements of Section 134(5)(e) of the Companies Act, 2013 and incorporates measures that ensure adequate and continuing operating effectiveness of internal financial controls.
Furthermore, in accordance with Section 149(8), read with the Code for Independent Directors laid down under Schedule IV, Clause II (4) of the Companies Act, 2013, the Independent Directors have satisfied themselves on the integrity of financial information and have ensured that Financial Controls and systems are robust and secure.
In order to enable the Directors to meet these responsibilities, the Board has devised the necessary systems, frameworks and mechanisms within the Company. The Board has empowered the Audit Committee to periodically review and confirm that the mechanism remains effective and fulfill the objectives for which they have been created.
India is expected to lean towards domestic factors to drive its progress owing to a weak global economic environment. In FY 2019-20, Indias economy is likely to grow by 7.2% (Source: RBI). The countrys GDP growth will primarily be driven by continued momentum in private investment, as well as gross capital formation, growth in bank credit and strong financial flows to the commercial sector. Normal monsoon and lower oil prices will also augur well for the economy. However, India has been witnessing some downside on the domestic front since April 2019. Primarily, these were weakness in consumption led by automobiles and two-wheelers, reduction in non-banking financial companies credit funding, impact on exports from moderating and political uncertainty in anticipation of general elections, which has led to mixed views on whether the downside is transient or structural. There have been some recent forecasts, which have pegged the estimated growth of the Indian economy to sub-7% levels. The headwinds that the global economy is facing, including faster-than-anticipated deceleration in global growth, volatility in financial markets, geo-political events and worsening trade disputes could further impact businesses in developed markets as well as emerging markets and cause a plateauing of growth.
HUMAN RESOURCES AND INDUSTRIAL RELATIONS
Given the highly specialized nature of the Companys business and the large number of locations where it operates, attracting and nurturing the right talent is at the core of your Companys strategy for success and growth. The companys believe in employing the right talent and nurture and polish them vis-a-vis to Companys vision and mission. During 2018-19, significant improvements were made in the recruitment process in the form of standardized pre-employment evaluation as well as interview and assessment processes across locations based on the job profile.
Towards this end, it also institutionalized internal job postings to provide employees opportunities to grow with the organisation. During the year there were 1,082 employees on the pay roll of the Company. Constant efforts are being made to motivate the employees for coming with innovative ideas which may result into improving the operational efficiency, cost rationalization etc. All efforts are made to retain the right talent and also to recognize the talent of employees.
Statements contained in the Management Discussion and Analysis describing the Companys estimates, projections and expectations are forward looking statements and based upon certain assumptions and expectations of future events over which the Company has no control and which could cause actual results to differ materially from those reflected in such statements. Readers should carefully review other information in this Annual Report and in the Companys periodic reports. The Company undertakes no obligation to update or revise any of these futuristic statements, whether as a result of new information, future events, or otherwise.