Silver Pearl Hospitality & Luxury Spaces Ltd Management Discussions

ANNUAL OVERVIEW AND OUTLOOK

Despite significant interest rate adjustments by central banks aimed at restoring stability in pricing, the global economy has shown resilience. Projections indicate continued worldwide economic growth at a rate of 3.2% for both 2024 and 2025, in line with the momentum of 2023. While advanced economies are expected to experience a slight increase in growth from 1.6% in 2023 to 1.7% in 2024 and 1.8% in 2025, there will be a modest deceleration in emerging market and developing economies, stabilising at 4.2% growth for both 2024 and 2025, following a commendable 4.3% in 2023. Looking ahead five years, the global growth forecast remains steady at 3.1%, indicating overall stability. Inflation is predicted to gradually decrease globally, declining from 6.8% in 2023 to 5.9% in 2024 and 4.5% in 2025. Advanced economies are expected to reach their inflation targets sooner than emerging markets and developing economies. However, core inflation is projected to decline at a measured pace overall. There is a growing expectation for the Indian economy to achieve a growth rate of 7% or higher for FY24, with forecasts even suggesting continued growth at this level for FY25. Such sustained growth, if realised, would mark the fourth consecutive year post-pandemic that the Indian economy has demonstrated resilience, exceeding the 7% threshold. This achievement underscores the robustness and potential of the Indian economy, presenting promising opportunities for its future trajectory.

Meanwhile, the global economy grapples with challenges in maintaining its post-Covid recovery amidst successive disruptions. Notably, supply chain disruptions have resurfaced in 2024, threatening to impact trade flows, transportation costs, economic output and global inflation. While these disruptions pose challenges, India, having adeptly navigated the adversities of the pandemic and previous energy and commodity price shocks in 2022, maintains a cautious confidence in its ability to navigate through emerging disturbances.

INDUSTRY OVERVIEW

The Hospitality Industry In India Market size is estimated at USD 247.31 billion in 2024, and is expected to reach USD 475.37 billion by 2029, growing at a CAGR of 13.96% during the forecast period (2024-2029). India has been successful as a leading global destination for leisure and business travelers, which has undoubtedly positively impacted the countrys hospitality sector. Indias attractiveness as a global travel destination has been further enhanced by its geopolitical stability, world-class infrastructure, and commitment to hosting international events. Therefore, these factors contribute to the growth of the tourism industry and, as a result, keep the hospitality industry firm. Indias domestic tourism has shown remarkable resilience and strength, and an increasing preference for staycations among Indian residents has been noticed.

This preference for staycation is driven by several factors, including convenience, safety, and the opportunity to discover hidden gems within India. The growth rate of the hospitality and tourism sector has seen a notable increase. India is included in the list of the top 100 countries with favorable conditions for conducting business (EoDB) and holds the first globally regarding greenfield FDI ranking. To enhance the cruise tourism industry, the Government of India (GoI) has chosen to develop the Chennai, Goa, Kochi, Mangalore, and Mumbai ports as cruise tourism hubs. These ports will have various amenities such as hospitality services, retail outlets, shopping centers, and restaurants. Indias hospitality sector has experienced a notable boost due to the surge in hotel projects. The industry saw an increase in occupancy rates ranging from 60-67% compared to the previous year. Despite this, average rates (ARR) have fully recovered, showing a significant rise of 37-39 % from the prior year. Consequently, Revenue per Available Room (RevPAR) has seen a remarkable growth of 89-91% in the current year compared to the previous year. Driven by a robust rebound in demand, hotel companies have expedited their expansion strategies this year, leading to a more than 35% increase in brand signings by keys compared to the previous year. According to the Top Hotel Projects construction database, India is set to welcome 481 projects with 57,879 rooms.

For example, IHCL aims to incorporate 8,700 rooms, while LTH plans to add 2,600 rooms by FY26. Additionally, Marriott International anticipates opening 12 hotels in India this year, contributing around 1,200 rooms to the hotel chains current portfolio in the country. Radisson Hotel Group has also extended its footprint in India by signing 21 hotels across nine brand portfolios last year. Hoteliers have been expanding their presence in leisure destinations and Tier-3 and -4 cities, acknowledging the vast untapped potential in these regions. Moreover, during Indias G20 presidency until November 2023, over 200 G20 meetings were held in 55 different locations nationwide. This significantly benefited the Indian hotel sector, as there was a notable increase in demand for hotels in the cities hosting these meetings.

OPPORTUNITIES & THREATS Opportunities & Threats

The Indian hotel industry is poised for a remarkable growth driven by long-term demand. Notable drivers of this growth are

(i) improved connectivity with new airports and national highways across the country,

(ii) increase in business travel led by buoyant economic conditions, new convention centres and global capability centres,

(iii) recovery of foreign tourist arrivals, additional middle-income households and a clearly visible trend of premiumisation leading to higher demand for leisure destinations.

The advent of spiritual tourism, weddings in India, a resurgent M.I.C.E (Meetings, Incentives, Conferences and Exhibitions) tourism surrounding recent and upcoming conventions centres and growing wildlife tourism give rise to new destinations and circuits providing a strong impetus to growth. Continuing infrastructure development projects within the country, growth in air and railway passenger traffic and growth in demand are expected to provide a long and sustainable upcycle for hospitality in India. Growth in demand for branded rooms is expected to outpace growth in supply of those rooms. A report from Horwath HTL estimates growth in all India demand at 10.6% till 2027, with growth in key leisure markets at 13.3%. Supply, on the other hand, is estimated to grow at 8% with 60% of the supply outside the top 10 destinations. In the top 8 cities where IHCLs core assets are located, supply growth is estimated at 5%. This growth will be mainly in various micro markets, providing adequate protection to IHCL. While challenges such as inflation and geopolitical tensions persist, proactive government support and policies, alongside a renewed focus on sustainability are likely to bolster the sectors resilience and foster sustainable growth in the coming fiscal year. Growth in Indias services sector and higher disposable income of people working in it, referred to as ‘Affluent India, are also expected to increase demand for holidays.

RISKS AND CONCERNS

Silver Pearl Hospitality & Luxury Spaces Limited (SPHLSL) has exposures in the business of hospitality. SPHLSL are exposed to specific risks that are particular to their respective businesses and the environments within which they operate, including market risk, competition risk, credit risk, demand risk, risk of spread of pandemic, human resource risk, operational risk, information security risks, regulatory risk and macro-economic risks. The level and degree of each risk varies depending upon the nature of activity undertaken by them.

HUMAN RESOURCE DEVELOPMENT

The Company recognizes that its success is deeply embedded in the success of its human capital. During 2023-24, the Company continued to strengthen its HR processes in line with its objective of creating an inspired workforce. The employee engagement initiatives included placing greater emphasis on learning and development, launching leadership development programme, introducing internal communication, providing opportunities to staff to seek inspirational roles through internal job postings, streamlining the Performance Management System, making the compensation structure more competitive and streamlining the performance-link rewards and incentives.

CORPORATE SOCIAL RESPONSIBILITY INITIATIVES

The provision of the Companies Act, 2013 relating to CSR Initiatives are not applicable to the Company.

COMPLIANCE

The Compliance function of the Company is responsible for independently ensuring that operating and business units comply with regulatory and internal guidelines. The Compliance Department of the Company continues to play a pivotal role in ensuring implementation of compliance functions in accordance with the directives issued by regulators, the Companys Board of Directors and the Companys Compliance Policy. The Audit Committee of the Board reviews the performance of the Compliance Department and the status of compliance with regulatory/internal guidelines on a periodic basis.