Royal Orchid Hotels Ltd Management Discussions.

Economic Outlook

The worst of the pandemic is behind us and the hospitality industry is expected to make a full recovery in the coming months. India in specific was quick to jump on the recovery wagon and made a large stride pushing the economic growth trajectory upwards. Economists around the country spotted these trends early on and were very bullish in their projections for the year 22- 23.

With the ongoing Russia Ukraine crises economist were forced to take another look at their forecasts and revise growth projections for the year. The crisis has had some undesirable impacts on the global economy and that of India. Inflation, subsidies, capital outflows, and import bills have gone up and government revenue has dropped. Despite these challenges, the impact on long-term growth will only be marginal. This is because India?s underlying economic fundamentals have always remained strong. Various initiatives undertaken by the government such as growth-enhancing and schemes, pushing towards self-reliance, lower taxes, rising service exports, and digitization drives have put in India will help accelerate economic growth in the years ahead.

Deloitte created two scenarios baseline and pessimistic primarily based on the possibility of fresh variants of the virus emerging on the scene and the evolution of the Russia-Ukraine crisis in the coming months. Going by the study, even if the worst-case scenario were to unfold, India?s GDP growth will hover around the 6.7% mark. This is a very promising forecast.

Global Tourism

Global Travel and Tourism continued to show a positive trend in January 2022, with a much better performance compared to the weak start to 2021. However, the Russian invasion of Ukraine adds pressure to existing economic uncertainties, coupled with many Covid-related travel restrictions still in place. Latest travel data with UN shows global international tourist arrivals more than doubled (+130%) in January 2022 compared to 2021 - the 18 million more visitors recorded worldwide in the first month of this year equals the total increase for the whole of 2021.

After the catastrophic drop in 2020 and 2021, international travel has made a gradual recovery in 2022. As of March 2022, over 10 destinations across the world removed all COVID-19 related travel restrictions. Many countries are now following suit by lifting travel restrictions, which will eventually contribute to unleashing pent-up demand.

It is however certain that the ongoing Russia-Ukraine war will add further pressure to the existing economic challenges and will also undermine consumer confidence. The UN also noted "The Organization for Economic Co-operation and Development (OECD) estimates global economic growth could be more than 1% lower this year than previously projected, while inflation, already high at the start of the year, could be at least a further 2.5% higher. The recent spike in oil prices (Brent reached its highest levels in 10 years), and rising inflation are making accommodation and transport services more expensive, adding extra pressure on businesses, consumer purchasing power and savings".

The India Tourism & Hospitality sector has seen some major developments, investments and support from the Government in the recent past. Foreign Tourist Arrivals (FTAs) in March, 2022 were 342,308 with a positive growth rate of 177.9% as compared to 123,179 in March, 2021.

The percentage share of Foreign Tourist Arrivals in India during March 2022 among the top 10 source countries

FDI inflows in the Tourism & Hospitality sector reached US$ 16.38 billion from April 2021-March 2022.

The world might notice a drop in inbound travel coming from Ukraine and Russia, other markets will more than make up for the lost opportunity from the eastern block countries in Europe.

American Express report of consumer travel sentiment showed a positive sentiment towards travel.

Source: World tourism organisation (UNWTO)

A report on World Tourism Economy Trends (2022) put out by WTCF made the following observations:

6.6 billion Global tourist trips were made in 2021, and the total world tourism revenue reached US$3.3 trillion, showing a recovery of 54% and 56% of the 2019 levels respectively. The top 20 countries accounted for 80% of the total world tourism revenue in 2021, 12% higher than in 2020 and 1% higher than in 2019.

The report predicts that 8.45 billion global tourist trips will be made in 2022, and the total world tourism revenue will amount to US$4.0 trillion, 69% and 68% of the pre-pandemic levels in 2019 respectively.

India Tourism

The Indian tourism and hospitality industry has emerged as one of the key drivers of growth in 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 an important source of foreign exchange in India similar to many other countries. The foreign exchange earnings from 2016 to 2019 grew at a CAGR of 7% but dipped in 2020 due to the COVID-19 pandemic.

The Indian government has estimated that India would emerge with a market size of 1.2 million cruise visitors by 2030-31. Dream Hotel Group plans to invest about US$300 million in the next 3-5 years for the development of the cruise sector in India. The government is planning to boost tourism in India by leveraging lighthouses in the country. 71 lighthouses have been identified for development as tourist spots.

The Indian hotel market including domestic, inbound, and outbound was estimated at ~US$ 32 billion in FY20 and is expected to reach ~US$ 52 billion by FY27, driven by the surging demand from travellers and sustained efforts of travel agents to boost the market.

India will soon unveil a new tourism policy focusing on developing medical, and religious tourism and adding more destinations to the prevailing ones.

Electronic tourist authorizations, known as e-Tourist Visa, launched by the Government of India, has resulted in an increase in the number of tourist visa issued in the country. The facility was extended to citizens of 171 countries, as of March 2021. In 2020, 8.38 million (Jan Nov) foreign tourists arrived on e-Tourist Visa, registering a growth of -67.2%.

In 2020, the travel & tourism industry?s contribution to the GDP was US$ 121.9 billion; this is expected to reach US$ 512 billion by 2028. In India, the industry?s direct contribution to the GDP is expected to record an annual growth rate of 10.35% between 2019 and 2028. In 2019, the travel & tourism industry?s contribution to the GDP was 6.8%.

In 2020, the Indian tourism sector accounted for 39 million jobs, which was 8% of the total employment in the country. By 2029, it is expected to account for about 53 million jobs.

Travel & tourism?s contribution to capital investment in India is projected to grow 6.7% per annum during 2018-28. Under the Swadesh Darshan scheme, 77 projects have been sanctioned worth Rs. 6,035.70 crores (US$ 863.60 million).

Government Campaigns such as Swadesh Darshan, a theme-based tourist circuit was launched to harness the tourism industry?s potential. The government introduced a scheme to boost the tourism sector by providing a one-month free tourist visa to 5 lakh tourists until March 31, 2022. Rs. 2,400 crore (US$ 309.13 million) has been allocated to the Ministry of Tourism which is 18.42% higher than the allocation for FY 2021-22.

Sustainability at the core

As highlighted during COP26 in 2021, climate change and environmental degradation are worsening at an alarming pace, requiring urgent action to avoid a devastating impact on destinations, businesses, local communities, the global economy, and our way of life. With today?s decisions defining the world of tomorrow, there is a need to increase both ambitions and actions to protect people and the planet.

We minimize our environmental footprint by sustainably managing our energy and water use, reducing our waste and carbon emissions, and increasing the use of renewable energy. We employ innovative technologies to plan, implement, and track how we operate responsibly to mitigate climate-related risk, benefiting our business and the communities in which we operate. From design to the guest experience, sustainability is embedded into our business strategy. We collaborate with our associates, hotel owners, franchisees, brands, suppliers, business partners, and guests to actively reduce the environmental impact and risk to our business by constructing and operating sustainable hotels.

Leveraging technology

While the acceleration of digital technologies and the resulting innovations have been a prominent feature of the COVID-19 crisis, digitization has been a growing trend for decades. Although digitization should not be employed to replace human interaction given the high-touch nature of the Travel & Tourism sector, it should be leveraged as a means to enrich the traveller?s experience and enhance the liveability of the property.

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.

? Contactless payment

? Digital Loyalty Program(WANDERLUST)

? Contactless Menu

? Virtual Events

? E-procurement

? HRIS- Human Resource Information System.

Company Performance and other details:

1. The details of the Financial Performance of Company are given in Director?s 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. 33 of Notes to Standalone Financial Statements and the details of segment-wise performance is given in Note no. 45 and 55 of Notes to Standalone Financial Statements.

3. The details of Risks and Concerns have been given in detail in Note no. 53 and 64 of the Notes to Consolidated Financial Statements.

4. The details of the Internal Control System are given in the Director?s 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 57 of Standalone Financial Statements.

7. The Net worth of the company as on 31st March, 2022 is 187.23 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. 42 of the Notes to the Standalone Financial Statements.

Details of Owned Hotels Website: Revenue & Room Nights

Over the course of pandemic, our hotels have seen a surge in direct bookings from our website which was improvised during the lockdown. Due to various marketing strategies and unique selling propositions like tailor-made packages- Seasonal offers, Last minute deals, weekend & festive gateway, etc. The company continues to lead the way in innovating the digital aspects of the guest experience with a slew of initiatives designed to surprise and delight guests and enhance the quality of the overall experience. Today with a better booking experience we now see our website which is the lowest customer acquisition channel increasing the numbers

Owned Hotels Room Nights Revenue (In Lacs) % Rev vs Total
Brand Web 9169 406.28 5.8%

Competition Report

Whilst we observe a verified third party data, we have outperformed almost in all markets in our occupancy level with Number 1 being the base number. Our strategy to push room nights in the hotels during the lockdowns and partial lockdowns made us the market leader in occupancy in most our markets.

Apr 2021-Mar 2022 Occupancy ARR RevPAR
Hotels MPI ARI RGI
Hotel Royal Orchid Bangalore 1.72 0.78 1.34
Royal Orchid Central Bangalore 1.42 0.70 1.00
Regenta Place Bangalore 1.01 0.49 0.50
Royal Orchid Resort & Convention Centre Bangalore 2.04 0.83 1.70
Royal Orchid Metropole Mysore 1.35 1.06 1.43
Royal Orchid Brindavan Garden Mysore 1.54 1.28 1.97
Royal Orchid Central Kireeti, Hampi 0.70 0.88 0.61
Royal Orchid Central Pune 1.57 0.75 1.18
Royal Orchid Beach Resort & Spa Goa 1.12 0.77 0.86
Hotel Royal Orchid Jaipur 1.37 0.66 0.90
Regenta Central Hotel & Convention Centre Nagpur 1.64 0.66 1.08

Company Strategy towards performance

With over 75+ properties across India, having a Diversified Portfolio like wildlife (3), religious (7+), Hill stations(10+), Leisure (20+), Business (27+). Royal Orchid, as a group stands top 5 brands in India (FYHVS 2021), in terms of opening properties in INDIA.

Our communication now has become even more hyper-local and hyper-targeted to a predefined target group of potential guests. We have been promoting drivable destinations within a radius of 300 400 km from a particular city, and also promoting tailor-made heritage, wildlife, hill station, beach holidays, staycation, day-cation and driving destination packages and campaigns.

We saw guests checking into remote and off-beat destinations/properties all over the country. This marked the beginning of ‘Revenge Tourism?. The trend is not going to stop here. As we seen our occupancy levels steadily increasing along with the ARR.

Also our inherent business model, which is to remain an asset-light has helped us to develop a balanced portfolio of hotels and quickly adapt to the ever-changing competitive landscape. Apart from a healthy mix of business, leisure, and bi-leisure hotels that makes up our group, we?ve always endeavored to stay ahead of the curve with respect to industry trends, technology, building an agile workforce, and also making sure that we are consistently creating, reviewing and

Wedding Market

A wedding is the most special day of any couple?s life, and we at Regenta & Royal Orchid Hotels know how important it is for you to have your perfect wedding. Whether you want a beach wedding, a mountain wedding, in the city that has your heart, or a royal wedding, we got you covered. Our professional wedding planning team will ensure you get the wedding that you have been dreaming about all your life. Marriage is one of the biggest segments which we are focusing more on as per report new form of Tourism is causing a lot of excitement in the tourism industry. In some cases, it is also referred to as "Marriage Tourism" or "Destination Wedding". As per Conde Nast?s report globally, wedding tourism has seen a growth of 400% in the past 10 years.

Globalization and a growing interest in each others culture is probably one of the primary reasons for this trend.

For 2021as per a report published by KPMG, India?s current wedding market is estimated at $50 billion, accompanied by a rapid annual growth rate. Thereby, making it one of the biggest contributors to the travel and hospitality industries.

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 FY19-20 FY20-21 FY 20-22
Total Head Count Employees
Employees 16,756 9,641 11,602
Average age
Average age 33 34 31
Employees by gender
Male 88% 88% 87%
Female 11% 11% 13%
Employees by age group
Age group 22-35 70% 65% 69%
Age group 36-45 22% 23% 21%
Age group 46-60 8% 12% 10%
Profile of employees as per education
Graduates 41% 37% 42%
Diploma 50% 55% 48%
Masters 9% 8% 10%
Person-hours spent towards training
Training in person hours 13,431 8,440 11,137
Employee cost as a percentage of total revenue
Employee cost as % of revenue 23% 27% 21%
Employees by tenure
More than 5 years (as % of total) 21% 23% 22%
Room to Manpower Ratio 1.4 0.79 0.89

Outlook

The light at the end of the tunnel is finally here. We have emerged from the shadows of the pandemic and now marching steadily towards increased profitability and exponential growth. In 2021 we had noticed pockets of pent-up demand driving recovery for hospitality across the country. Today, we see trends that are not just encouraging but also showing no signs of slowing down.

We are now investing across segments such as in wildlife, spiritual, and leisure destinations while continuing expansion in Tier 1 and Tier 2 cities. Our expansion strategy is rooted in the fact that people today wish to travel further, more often, and to off-beat locations. We are constantly on the lookout for good locations and the right partners.

While the start to the year was sluggish, we?ve more than made up for all the lost ground. Today all our hotels and resorts are doing extremely well and are poised to turn things around for the group. With growth on our minds, we are leaving no stones unturned to seize every opportunity that comes our way.

At Royal Orchid we fervently believe in the mantra "change is the only constant". This principle has not just helped us navigate these challenging times but thrive and also grow. Our Approach in the coming year will be no different.