royal orchid hotels ltd share price Management discussions

Economic Outlook

The World Bank Global Economic Prospects is a report that examines global economic developments and prospects, with a special focus on emerging market and developing economies (EMDEs). It is issued twice a year, in January and June2. The latest report, published in January 2023, projects that global growth will fall to 2.9 percent in 2023 but rise to 3.1 percent in 2024. The 2023 forecast is higher than predicted in the October 2022 report but below the historical average of 3.8 percent. Rising interest rates and the war in Ukraine continue to weigh on economic activity. Chinas recent reopening has paved the way for a faster-than-expected recovery. Global inflation is expected to fall to 6.6 percent in 2023 and 4.3 percent in 2024, still above pre-pandemic levels.

The outlook for the Indian hospitality industry remains positive. Domestic demand will continue to be strong and international travel is also expected to pick up, despite the looming threat of a recession in the US and Europe, growing global geopolitical issues, and an increase in COVID cases in some countries. In addition, the G20 presidency of India and the fact that India is hosting a number of international events, including the ICC Mens World Cup and the likes of the Dior global event in Mumbai, will increase demand for hotels in the cities where these events will take place.

GDP Growth

The GDP of 2023 is a measure of the total value of goods and services produced in a country or region in a given year. Different sources may have different methods and data to estimate the GDP of 2023, so the results may vary slightly. Here are some of the sources that provide GDP estimates or forecasts for 2023:

The Indian government released its Economic Survey 2022-23 on January 31, 2023, which projects that Indias GDP will grow by 7.2 per cent in FY2022-23 and by 6.5 per cent in FY2023-24. The survey cites various factors that support the growth outlook, such as the rebound of private consumption, higher capital expenditure, near-universal vaccination coverage, and the return of migrant workers to construction activities, the strengthening of the balance sheets of the corporates and banks, and the surge in credit growth to the MSME sector.

Global Tourism

The outlook for global tourism in 2023 is expected to show signs of recovery and growth following the significant impact of the COVID-19 pandemic on the travel industry. While the exact trajectory of recovery may vary across regions, several factors indicate a positive outlook for the global tourism:

- Increasing vaccination rates will boost traveler confidence and contribute to the recovery of global tourism.

- Countries are gradually easing travel restrictions and implementing flexible entry requirements to encourage international travel.

- Pent-up travel demand, combined with a desire for new experiences, is expected to drive a surge in travel bookings.

- Domestic tourism will play a vital role in the initial stages of recovery, revitalizing local tourism industries.

- Travel companies prioritizing health, safety, and sustainability will attract more tourists.

- Technology adoption, such as contactless check-ins and digital health passports, will enhance traveler confidence and improve the travel experience.

- Sustainable tourism is gaining momentum, with environmentally conscious travelers seeking eco-friendly and authentic destinations.

FDI inflows in the Tourism & Hospitality

The Indian tourism and hospitality industry has emerged as one of the critical drivers of growth among the services sector in India. Tourism in India has significant potential considering the rich cultural and historical heritage, variety in ecology, terrains, and places of natural beauty spread across the country. Tourism is also a potentially large employment generator besides being a significant source of foreign exchange for the country.

In the World Economic Forums Travel and Tourism Competitive Index (TTCI), India ranked 46th place in 2019 and 54th place in 2021. This sector is going to contribute $250 billion to countrys GDP by 2030.

Tourism tends to encourage the development of multiple-use infrastructure, including hotels, resorts & restaurants, transport infrastructure (aviation, roads, shipping & railways), and healthcare facilities. Five tourism mega economic zones were announced in the previous budget to attract global tourism players to India and drive the tourism sectors contribution to GDP.

100% FDI in tourism industries is allowed under automatic route.

100% FDI in tourism and hospitality sectors is allowed, including tourism construction projects like hotels, resorts, and recreational facilities.

(Source: Invest India)

World Tourism Economy Trends

According to new data UNWTO, more than 900 million tourists travelled internationally in 2022 - double the number recorded in 2021 though still 63% of pre-pandemic levels. Every global region recorded notable increases in international tourist numbers. The Middle East enjoyed the strongest relative increase as arrivals climbed to 83% of pre-pandemic numbers. Europe reached nearly 80% of pre-pandemic levels as it welcomed 585 million arrivals in 2022. Africa and the Americas both recovered about 65% of their pre-pandemic visitors, while Asia and the Pacific reached only 23%, due to stronger pandemic-related restrictions which have started to be removed only in recent months. The first UNWTO World Tourism Barometer of 2023 also analyses performance by region and looks at top performers in 2022, including several destinations which have already recovered 2019 levels.

International Tourist Arrivals, World and Regions

UNWTO Secretary-General Zurab Pololikashvili said: "A new year brings more reason for optimism for global tourism. UNWTO anticipates a strong year for the sector even in the face of diverse challenges including the economic situation and continued geopolitical uncertainty. Economic factors may influence how people travel in 2023 and UNWTO expects demand for domestic and regional travel to remain strong and help drive the sectors wider recovery."

India Tourism

According to the statistics of India Brand Equity Foundation (IBEF), the Tourism and Hospitality Industry in India is reaching to robust demand, and the travel market is projected to reach US$125 billion by FY27 from an estimated US$75 billion in FY20. The influx of international tourists in India is projected to reach 30.5 million by 2028. The statistics are a reflection of the booming growth and potential of the hospitality sector in India that is rising after the lull created by the pandemic. India is one of the most popular travel destinations in the world that has resulted in Indian tourism and hospitality as industry to emerge as the one of the key growth drivers amongst service sectors in India. The tourism and hospitality sector encompass hospitality services like restaurants and hotels that are a significant source of foreign exchange and crucial for socioeconomic growth. (Source: IBEF)

The Union Budget 2023 iterated the fact that the Government is recognizing the importance of the tourism sector as an employment generator and is looking to promote the sector on a mission mode with active participation from all stakeholders, including public-private-partnerships.

The revival of 50 additional airports, heliports, and water aerodromes to increase regional air connectivity and the development of fifty tourism destinations as a complete package for domestic and international tourism, as well as the governments continued emphasis on infrastructure development, including the significant investment in railways and last- mile connectivity, bode well for the sector. The Governments stated objective to actively promote tourism is a welcome announcement. Furthermore, the reduction in personal income tax will increase disposable income, which will drive demand in the tourism and hospitality sectors. (Source: Hotelier India)

Trend of Tourism in 2023

Also, experts predict an increase in the popularity of tourist routes based on sports, ecotourism and a healthy lifestyle in the period from 2023 to 2027. For example, trips during which most of the time is devoted to yoga, well-being and medical procedures in SPA centres as prescribed by a doctor.

Beach holidays, adventure and green tourism will be in demand, as the appeal of outdoor recreation continues to grow after the pandemic. According to forecasts, it will account for 57% of trips in 2023.

Currently, most people on the planet strive to have the most positive impact on the environment in their everyday life. For example, 57.3% of tourists noted that during their trip they are willing to pay more for environmentally friendly products or sourcing local food and beverages, using alternative energy sources, offsetting carbon emissions and paying fair wages for workers.

Also, with the support of tourists, governments and private businesses, the decarbonisation movement will become increasingly popular in 2023.

Sustainability at the core

Sustainability in the hospitality industry is the practice of minimizing the environmental, social, and economic impacts of the industry while maximizing the benefits for guests, employees, communities, and destinations. Sustainability in the hospitality industry is important for several reasons, such as:

• Preserving the natural and cultural resources that attract tourists and support local livelihoods.

• Enhancing the guest experience and satisfaction by offering eco-friendly products and services, authentic local experiences, and opportunities to contribute to social causes.

• Improving the brand reputation and customer loyalty by demonstrating corporate social responsibility and meeting the expectations of increasingly conscious travelers.

• Reducing operational costs and risks by saving energy and water, reducing waste and emissions, and complying with regulations and standards.

• Innovating and creating new business opportunities by adopting circular economy principles, green technologies, and sustainable business models.

At our core, we prioritize environmental sustainability through responsible management of energy and water resources, waste reduction, and carbon emission control. We strive to increase the utilization of renewable energy sources. By embracing innovative technologies, we efficiently plan, execute, and monitor our operations to mitigate climate-related risks, benefiting both our business and the communities we serve.

Sustainability is deeply ingrained in every aspect of our business strategy, from the initial design phase to the ultimate guest experience. We actively engage and collaborate with our associates, hotel owners, franchisees, brands, suppliers, business partners, and guests to actively minimize our environmental impact. Our focus is on constructing and operating hotels that align with sustainable practices, reducing potential risks to our business while preserving the environment.

Leveraging technology

Following technology which are implemented in our properties PAN India:

• Sales Force - Simplify the workflows of our sales, empower our team to be more productive

• Quality Management System - Stay one step ahead of the competition by addressing concern areas and highlighting opportunities

• Cloud technology connecting hotels.

• Contact less payment (All upi payment and smart pay options)

• Digital Loyalty Program(WANDERLUST)

• Contact less Menu(Dotpe & banquet cart)

• Virtual Events

• Metaverse

• Suitability - EV Station across the group

• E-procurement

• HRIS- Human Resource Information System.

Wedding Market

The wedding market in 2023-2024 is expected to rebound and see increased activity compared to the pandemic years. Key points include:

1. Postponed weddings will lead to a surge in demand as couples reschedule their ceremonies and receptions.

2. There is pent-up demand from couples who had to delay their plans and are now eager to celebrate.

3. With gathering restrictions easing, larger guest lists are expected, boosting various aspects of the wedding market.

4. Couples seek personalized and unique experiences, driving demand for innovative wedding services.

5. Technology integration, such as live streaming and online planning tools, will continue to shape the wedding market.

6. Sustainable weddings are gaining popularity, with couples opting for eco-friendly practices and vendors.

Regional variations and pandemic uncertainties may impact the market, but the wedding industry is poised for growth due to pent-up demand and the desire for celebrations of love and togetherness.

Details of Owned Hotels Website: Revenue & Room Nights

We made significant improvements to our website, resulting in a remarkable increase in direct bookings for our hotels. This success can be attributed to our diverse marketing strategies and unique selling propositions, such as tailor-made packages, seasonal offers, last-minute deals, weekend getaways, and festive promotions. By consistently innovating the digital aspects of the guest experience, we strive to go above and beyond in surprising and delighting our guests, thereby enhancing the overall quality of their stay. As a result, our website has become our most cost-effective customer acquisition channel, showcasing a substantial growth in numbers.

Owned Hotels	Room Nights	Revenue (In Lacs)	% Rev vs Total
Brand Web	10526	667.7	4.3%

Competition Report

Based on verified third-party data, our performance across various markets has been exceptionally strong, with consistently high occupancy levels serving as the foundation for our success. Through our strategic efforts to maximize room nights during periods of lockdowns and partial lockdowns, we have emerged as the market leader in occupancy across the majority of our target markets.

Apr 2022-Mar 2023	Occupancy	ARR	RevPAR
Hotels	MPI	ARI	RGI
Hotel Royal Orchid Bangalore	122.4	87.0	106.6
Royal Orchid Central Bangalore	112.6	70.4	79.2
Regenta Place Bangalore	109.1	45.6	49.8
Royal Orchid Resort & Convention Centre Bangalore	120.6	84.7	102.1
Royal Orchid Metropole Mysore	138.6	117.9	163.4
Royal Orchid Brindavan Garden Mysore	140.1	125.6	176.0
Royal Orchid Central Kireeti, Hampi	60.4	91.5	55.3
Royal Orchid Central Pune	132.5	78.2	103.6
Royal Orchid Beach Resort & Spa Goa	119.2	78.8	93.9
Hotel Royal Orchid Jaipur	114.3	65.2	74.5
Regenta Central Hotel & Convention Centre Nagpur	158.1	68.5	108.3
Regenta Suites Gurugram	128.8	54.8	70.6

Company Strategy towards performance

With over 90+ properties across India, having a Diversified Portfolio like wildlife (3), religious (8+), Hill stations(15+), Leisure (20+), Wedding (18+), Business (35+).

Source: HVS 2022

Royal Orchid Group has established itself as one of the top two brands in India (FYHVS 2022) when it comes to opening properties nationwide. Our approach has evolved to become highly localized and targeted, focusing on specific groups of potential guests. We have been actively promoting drivable destinations within a 300-400 km radius of selected cities, along with tailor-made packages and campaigns highlighting heritage, wildlife, hill stations, beach holidays, staycations, day- cations, and driving destinations.

We have witnessed an encouraging trend of guests checking into remote and off-beat properties across the country. Despite ongoing global challenges and intermittent COVID-related concerns, the Indian hospitality sector is projected to experience accelerated growth in 2023. This growth will be primarily driven by robust domestic demand, the resurgence of inbound travel, and the Indian governments renewed focus on expanding the tourism industry, which is anticipated to contribute $250 billion to the nations GDP by 2030. Additionally, the government intends to release the National Tourism Policy in the near future, aiming to foster sustainable and inclusive growth within the tourism sector.

To capitalize on the emerging opportunities in the Indian tourism industry, hoteliers should develop comprehensive strategies that address both short-term and long-term prospects. It is essential to stay abreast of the latest trends that will shape the industry in the coming year.

Company Performance and other details:

1. The details of the Financial Performance of Company are given in Directors report and the details of all the hotels and Management team are given in the Preface of the Annual Report. The Details are also available at the website of the Company https://www.royalorchidhotels.com/investors

2. The details of product-wise performance is given in Note no. 35 of Notes to Standalone Financial Statements and the details of segment-wise performance is given in Note no. 47 and 57 of Notes to Standalone Financial Statements.

3. The details of Risks and Concerns have been given in detail in Note no. 53 of the Notes to Consolidated Financial Statements.

4. The details of the Internal Control System are given in the Directors Report.

5. Details under the HR section are given in Annexure III to Directors Report.

6. Ratio analysis: The details of all applicable ratios are given in note no 59 of Standalone Financial Statements.

7. The Net worth of the company as on 31st March, 2023 is 215.45 Cr. The details of change in Return on Net Worth (i.e. the amount of profit or earnings a Company generates on the sheer strength of its shareholders equity) are available in Note no. 44 of the Notes to the Standalone Financial Statements.

Human Resource

Employees are your most valuable assets. Our employees very strong commitment to giving their best and looking out for the interest of the organization. It does not matter whether they stay for a mere 2-3 years; rather, what matters is how intensely they feel about the organization, while they are with our organization.

Below details are the HR data of year on Year:

	Consolidated
Year	FY20-21	FY 21-22	FY 22-23
Total Head Count Employees
Employees	9,641	11,602	11244
Average age
Average age	34	31	28
Employees by gender
Male	88%	87%	84%
Female	11%	13%	16%
Employees by age group
Age group 22-35	65%	69%	75%
Age group 36-45	23%	21%	18%
Age group 46-60	12%	10%	8%
Profile of employees as per education
Graduates	37%	42%	36%
Diploma	55%	48%	58%
Masters	8%	10%	8%
Person-hours spent towards training
Training in person hours	8,440	11,137	8664
Employee cost as a percentage of total revenue
Employee cost as % of revenue	27%	21%	17%
Employees by tenure
More than 5 years (as % of total)	23%	22%	15%
Room to Manpower Ratio	0.79	0.89	1.29

Outlook

We are thrilled to share our outlook for the financial year 2022-2023. The resilience we have demonstrated throughout the pandemic has brought us to a pivotal moment of transformation. With the pandemics shadow gradually lifting, we are now striding forward confidently toward a phase of increased profitability and remarkable growth.

In the preceding year, we observed pockets of pent-up demand that contributed to the hospitality sectors recovery across the nation. Today, we witness trends that not only invigorate our spirit but also display a promising momentum that shows no signs of abating.

Although the initial phase of this year posed challenges, our collective efforts have compensated for any setbacks. Our portfolio of hotels and resorts is currently thriving, poised to instigate a turnaround for our group. Fueled by our growth aspirations, we are resolutely seizing every opportunity that crosses our path.

At Royal Orchid and Regenta Hotels, the core of our ethos lies the profound realization that "Adoptability to the market demand." This foundational principle has not only served as our navigational beacon during periods of adversity but has also been the catalyst propelling us toward growth and transformation. As we stand on the threshold of the approaching year, our unwavering dedication to this maxim persists.

Our unwavering allegiance to this doctrine resonates in our resolute determination to uphold it. As we chart our course forward, we remain firmly dedicated to the tenets it encompasses. Our strategy remains a dynamic embodiment of change, innovation, and adaptability, converging to forge a trajectory of unceasing achievement.