undefined share price Management discussions


(a) Industry Structure and Developments

India, being one of the most popular travel destinations across the globe has resulted in the Indian tourism and hospitality industry to emerge as one of the key drivers of growth among the services sector in India. Tourism industry in India has significant potential considering the Tourism is an important source of foreign exchange in India similar to many other countries. It is widely acknowledged that the tourist and hospitality sector, which encompasses travel and hospitality services like hotels and restaurants, is a development agent, a catalyst for socioeconomic growth and a significant source of foreign exchange gains in many countries. Indias rich and exquisite history, culture and diversity is showcased through tourism while also providing significant economic benefits. The consistent efforts of the central and the state governments have helped the tourism industry to recover from the covid-19 pandemic shock and operate at the pre-pandemic level.

With its culture and diversity, India attracts many tourists worldwide, particularly as a destination for spiritual tourism. As a result, Indias position in the World Economic Forums (WEF) travel and tourism competitiveness index has improved from 65th in 2013 to 54th in 2021, reflecting its growth prominence in global tourism. Indias robust economic growth has resulted in a thriving middle class with higher disposable income fuelling domestic travel and heightened demand for high quality hotel accommodations.

Indias robust economic growth has resulted in a thriving middle class with higher disposable income fuelling domestic travel and heightened demand for high quality hotel accommodations. Occupancy in Indian hotels is expected to improve to 66 percent in 2023, according to hospitality research firm. Indias hospitality sector ended 2022 with occupancy in the 59-61 percent range, up 15-17% points from the previous year. Average room rates recovered fully in 2022, crossing 2021 levels by 37-39 % and revenue per available room in 2022 increased by 89-91% over the previous year. Some 166 new hotels with 14,885 rooms were signed in 2022, indicating a 33 percent increase in brand signings by keys over the previous year.

During the year under review, the Company has started its hotel operations under the name of “Pharos Hotels” which is a unit of Aruna Hotels Limited with effect from November 30, 2022. The Company is in the process of stabilizing its operations which might take a few quarters to post healthier numbers.

(b) Opportunities and Threats

India is geographically diverse and offers a variety of cultures that come with its own experiences, making it one of the leading countries in terms of international tourism expenditure. Travel and tourism are two of the largest industries in India, with a total contribution of about US$ 178 billion to the countrys GDP. The countrys big coastline is dotted with attractive beaches. Indian hospitality sector sees strong growth in Q1 2023, YoY (Year on Year) Rev PAR up 101%. US$ 2.1 billion is allocated to Ministry of Tourism in budget 2023-2024 as the sector holds huge opportunities for jobs and entrepreneurship for youth. Under the Union budget 2023-24 an outlay of around INR 15 crores has been allocated for Swadesh Darshan Scheme.

Domestic travel, especially the leisure segment, gave wind to the industry this year and is expected to continue into the next. Industry players believe that as international arrivals are also likely to pick up even further, the outlook for 2023 is buoyant.

As per industry estimates, recovering from the impact of COVID-19 by the third quarter of 2022-23, the hospitality industry had touched the occupancy of 70% while the average daily rates had moved up to Rs.7,260 as compared to Rs.6,540 in the same period in FY 2020. Also the revenue per available room had increased to Rs. 5,085 against Rs.4,499 in Q3 FY 20.

The Indian hospitality sector continued to witness strong Year-on-Year (Y-o-Y) growth in performance in Q1, 2023, primarily driven by corporate travel, weddings and MICE demand witnessed prior to the end of the financial year.

The performance in Q1 2022 was impacted by the third wave pandemic which resulted in a slowdown in travel in January last year. As a result, RevPAR growth of 100.8 percent Y-o-Y in Q1, 2023 over Q1 2022 is significant. Furthermore, the sector witnessed a RevPAR growth of 9.1% q-o-q in Q1 2023, as compared to Q4 2022.

This is due to corporate travel in Q1 2023 in comparison to Q4 2022 which witnessed a decline in corporate travel during the yearend holidays.

The Hotel room demand across both business and leisure destinations remained strong during the primarily driven by Meetings Incentives, Conferences and Exhibitions (MICE), weddings and fiscal year end and related travel and meetings. Most business cities performed well with occupancy levels at 70% and witnessed strong growth in Average Daily Occupancy (ADR) levels. 10 hotels signed in Q1 2023 were conversions of other hotels, which constituted 19 percent of the inventory signed. Bengaluru witnessed the highest growth in Revenue Per Available Room (RevPAR) in January to March at 183.7 percent over Q1 2022. 2022 was all about getting back on track for the hospitality industry after the covid-19 dark ages (2020-2021). In some ways, the year surpassed expectations and forecasts, but there is still a long road ahead. Some of the biggest challenges and trends for the hospitality sector are: Smart rooms are here to stay: This is one of the trends that gained traction during COVID-19 and its probably here for the long run. Modern smart hotels make routines more convenient and safer. But thats not the reason why they are the future of hospitality. When guests can adjust everything to their liking with ease, it creates a better customer experience.

One of the greatest trends within this is wider trend is voice recognition. Although this technology is still in the early stages of development, voice control has great potential to deliver the ultimate customer experience. Guests will be able to make a restaurant reservation, change the room temperature or ask for directions with a simple voice command.

RIP ‘Staycations, welcome back vacations: Staycations were all the rage in the last few years. Thankfully the trend is as done and dusted as Prison break and vacations are officially back. The hospitality and travel industries seem to be on a nice, upward trend that will be able to restore the health of the sectors and an all-around positivity is spreading through the professionals in these areas.

Sustainability as a major decision factor: Covid made people more aware of environmental issues and the role we play in them. The energy crisis and gen-z now being old enough to travel on their own just reinforced what was already a trend. Three changes we dare to make in 2023:

S Cut-down on single-use plastics, including miniature shower gel and shampoo bottles. If you insists on using individual packages and not refillable bottles, look for plant based bottles or recycled plastic.

S Source food from local farms and provide vegetarian options to decrease your carbon footprint.

S Install a vertical garden to offset emissions and bring nature to your hotel.

Cyber security: When was the last time someone phoned your reception, asked if you had a room available and booked a suite? And even if that happened, where did their personal date and payment details go? These days most guest book and pay for hotels online. Even travel agencies work online. Everything is stored somewhere on the computer.

Surprisingly, taking into consideration that hotels deal with quiet sensitive data, cyber security hasnt been tackled in the hospitality industry. Now, lo and behold, according to PwCs hotel outlook report (2018-2022), hospitality has the second highest number of cyber security breaches only behind the retail sector.

Even big hotel chains, like Hilton and Marriot, have experienced extensive credit card data breaches. But better late than never! 2023 sounds like a good year to work on your hotels cybersecurity. Stop using legacy systems and implement software thats regularly updated, has a strong firewall, and helps customers avoid phishing attacks.

Predictive Smart System: Data and facility management is highly crucial in hotel industry. Hotels can tremendously benefit from data to forecast trends and improve their guests experiences. Collecting data about what guests do or dont do, order or dont order, the services they use or dont use can help the hotel industry understand which experiences they value the most or what they like or dislike in the future and what kind of offers, which tempts them to book again. We can gather data about HVAC equipment to understand what room temperature the guests prefer and how long the equipment must be running before they arrive. Thats a specific example of how data can help you provide a better experience and cut costs at the same time.

Experience: Experiential holidays are one of the biggest trends in tourism and many people are choosing ‘experiences and ‘retreats often supporting local business over mass tourism. Previously only luxury hotels used to cater to the ‘experience niche presenting themselves as an experience on their own. If the hotel too focused on location, it may be a challenge to adjust to these experiences seeking guests. By joining with local guides and other local businesses to help the guests discover, enjoy and experience their destination to the fullest and help them to build memories they will treasure for life!. Even for conferences and meetings, the hotel should be able to offer innovative tools to impress the clients and make those corporate experiences memorable with the right event management software.

Up skilling: The popularity of remote work due to Covid-19 and the trend of quiet quitting is costing all sorts of companies money in increased wages and salaries, as well as supply chains disruptions. To avoid overpaying and ensure a good fit with new hires, many companies including the ones in the Hospitality sector are choosing to upskill or reskill their current items.

This not only helps employees feel valued and increases their value to the company, but also improves productivity and well-being within the business. Training current staff can be a cost effective way to address the labour shortage and meet the evolving needs of the business.

Embrace Maintenance: Maintenance is one of the most challenging tasks in hospitality. Several teams and assets deal with whilst maintaining customer satisfaction rates up and having all those sweet reviews of the business. With 2023 being the year, hotels and other accommodation solutions get back in shape. Few Housekeeper App allows staying informed about everything that is happening in one simple, yet powerful dashboard.

Challenges in hospitality industry:

Staff Shortages and Retention: Staff shortages have impacted the hospitality industry over the last few and now more than ever present a significant issue for businesses. Shortages are at an all time high, with an increase of 83% more vacancies advertised and a shortfall of 1,70,000 hospitality jobs currently available in UK. A further report noted that 45% of hospitality operators in the UK have been forced to cut capacity or opening hours due to shortages in staff.

To tackle staff retention, investing in team training has never been more important. To further attract staff various lobby groups are campaigning for fair wages, flexible set-ups to working hours and are also asking the Government to review its occupation shortage list in a bid to attract more overseas workers.

Cost of living crisis: The exponential rise in prices impacts the hospitality industry two-fold. First from a consumer perspective where the public have less money to spend eating or drinking out, then also for their businesses own rising costs. After two years of pandemic-impacted trade, recent trends indicate that consumers are returning to hospitality in promising numbers. Hospitality businesses now face the challenge of an increase in 55.2% in operating costs, with industry groups lobbying the government for extra financial support for the industry.

Increase in Hospitality Tech: Over the course of the pandemic we saw a huge shift in the use of technology throughout hospitality. This tech helped businesses adapt to changing needs and also to improve customer experience. As we enter into a post-pandemic stage customers have a higher expectation when it comes to experience and technology, with those who fail to address this risking efficiency and customer loyalty. Technology also offers opportunities for hospitality. Tech solutions will help to save time, improve efficiency and cut back on costs. Other back-office tech options can support all areas of the business.

Environmental considerations: The climate-crisis is at the forefront of the publics mind and conversation. In 2023, hospitality businesses must not just be conscious of their environmental impact due to the financial implications of rising energy costs, but also of consumer expectations and behaviour too.

In Booking.coms Sutainability Report it was found 83% of global travellers value sustainability as something vital. This is a growing trend and challenges that hospitality businesses will continue to face for the foreseeable future. Switching to digital is just one way you can save on costs while also being more environmentally-friendly.

c) Segment-Wise Performance

During the year under review, Profit before tax was Rs. (1,082.91) lakhs as against Rs. (259.24) lakhs in the previous year. The company reported a loss after tax for financial year 2022-2023 of Rs.808.35 lakhs. During the year under review, the Company started its business operations under the name of ‘Pharos Hotels, which is a unit of Aruna Hotels Limited. The Company is in the process of stabilizing its operations which might take a few quarters to post healthier numbers.

d) Outlook

It is no secret that among the many sectors that took a beating during the Covid-19 pandemic, the hospitality industry was one of the worst hit as travel restrictions and lockdowns severely impacted business. However, after the world began its return to the normalcy and the hospitality industry started to revive, it is expected that 2023 will take this resurgence to the next level. The Industrys recent performance has been promising, with occupancy of 70% registered in the third quarter of 2022-2023. This was followed by a record 11-13% higher average room rate in the fourth quarter compared to the same period in 2019, indicating a positive trend in recovery.

Despite the headwinds to the global economy in the form of recession, inflation and labour crunch, the Indian hospitality industrys performance in the new financial year is expected to be largely stable, driven by strong domestic demand and a rise in international arrivals.

Some of the factors that are likely to shape the Industrys outlook for 2023 are as:

Robust Domestic Demand: In 2022, the hospitality Industry received a significant boost from the domestic leisure segment, which is also expected to continue the recovery in demand this year. Domestic Tourism is touching prepandemic levels, with hotels reporting occupancies close to those seen before the Covid-19 outbreak. A study conducted last year revealed that 78% of Indian respondents had plans to travel in 2023, suggesting that the tourism industry is likely to experience a substantial increase in demand this year. The industry is anticipating a surge in business from both domestic and international markets.

Demand Supply mismatch: While the hospitality industry is experiencing a rebound, travellers can expect higher room tariffs in the near future due to the current demand-supply mismatch. With the resurgence in the travel and tourism sector, occupancy levels at hotels are approaching pre-pandemic levels and average room rates on the rise. In fact, hotel prices across most destinations have risen by 15-20 percent this year due to the surge in demand from the wedding season and events. The demand for rooms is surpassing the available supply due to lack of hotel developments over the past few years. A situation that may not change for at least the next couple of years.

Staycations to remain attractive: In the past couple of years, there has been a growing trend of people opting for staycations to unwind and take a break without burning a hole in their pockets due to travel costs. And staycations are here to stay due to their convenience, affordability and sustainability, as they involve less travel. Promoting sustainable tourism through local experiences can also help build a dedicated customer base for hospitality companies. Hotels must ensure that they have the necessary digital infrastructure, amenities and comforts to attract and retain remote workers as long-term customers, having the potential to help drive their business forward.

Shift toward sustainable practices: The hospitality industry has seen a rise in sustainable and environmentally responsible practices, and it is likely to persist in the coming years as travellers become more aware of the environmental impact of their choices. India has set a target of achieving net-zero carbon emissions by 2070 and the hospitality industry is working to contribute to this. To reduce their carbon footprint, organisations are making a shift to use environmentally friendly cleaning products and increasing efficiency in water and energy usage through judicious utilisation. Apart from implementing eco-friendly practices within their own operations, hotels can also ensure that the suppliers of the products and services they source are adhering to environmental, social and governance practices. By sourcing sustainable materials and products in terms of food and beverages or cleaning, hotels can contribute to the reduction of carbon emissions associated with transportation and production.

The hospitality industry is poised to continue its rebound in 2023 after showing signs of recovery in previous years performance. Business is expected to remain steady for this year and by capitalising on emerging trends such as staycations and sustainability, the industry can attract and retain loyal customers, create a positive impact and achieve long term success in the post pandemic era.

(e) Risk & Concern

The Company always ensures that the risk management process is also an integral part of yearly business plan and it involves a systematic approach to identify, assess, manage and monitor risks that can affect the organisations ability to achieve its objectives.

(f) Internal Control Systems and their adequacy

The Company has institutionalized an adequate system of internal controls, with documented procedures covering all corporate functions of the hotel. Internal controls provide reasonable assurance regarding the effectiveness and efficiency of operations, the adequacy of safeguards for assets, the reliability of financial controls and compliance with applicable laws and regulations. The internal audit provides a positive assurance, based on the audits of operating units and corporate functions. It converges process framework, risk and control of covering all critical and important functions inter-alia revenue management, purchase, finance, human resources and safety.

The establishment of an effective corporate governance and internal control system is essential for sustainable growth and long-term improvements in corporate value. To ensure that, the Company has created an adequate system of internal controls. These controls have been designed to provide a reasonable assurance with regard to maintaining of proper accounting controls for ensuring reliability of financial reporting, monitoring of operations, protecting assets and compliances with regulations and minimising of losses wherever possible.

The Company has appointed a professionally experienced internal audit firm to carry out periodical internal audit. The internal auditors appointed by the Company submit their reports with observations to the Management regularly. All the significant internal audit observations and corrective action plans are presented to the Audit Committee.

(g) Discussion on financial performance with respect to operational performance.

During the year under review, the Company started its business operations under the name of ‘Pharos Hotels, which is a unit of Aruna Hotels Limited. The company reported a loss after tax for financial year 2022-2023 of Rs.808.35 lakhs.

(h) Material developments in Human Resources:

Material development in human resources for hotels is crucial to ensuring the hospitality staff is well-trained, motivated, and equipped with the necessary skills to provide excellent service to guests. Here are some specific areas of material development in human resources for hotels:

Customer Service Training: Develop training modules and materials focused on customer service skills, including handling guest inquiries, resolving complaints, and maintaining a positive attitude.

Standard Operating Procedures (SOPs): Create comprehensive manuals that outline the hotels standard operating procedures for various departments, such as the front desk, housekeeping, food and beverage, and maintenance.

Hospitality Etiquette and Communication: Provide resources that guide employees on proper etiquette, professional communication, and the use of language to create a warm and welcoming atmosphere.

Technical Skills Training: Offer training materials that cover specific technical skills required in different departments, such as food preparation, housekeeping techniques, or event planning.

Health and Safety Training: Develop materials on health and safety protocols, including emergency procedures, fire safety, food handling safety, and workplace ergonomics.

Cultural Sensitivity and Diversity Training: Create resources to promote cultural awareness and sensitivity, given the diverse backgrounds of both staff and guests in hotels.

Upselling and Sales Training: Provide materials to enhance the sales skills of staff, such as techniques for upselling room upgrades, additional services, or special packages.

On boarding Kits: Prepare comprehensive on boarding kits for new employees, including welcome materials, company culture information, and an overview of their job responsibilities.

Language Training: If the hotel serves an international clientele, offer language training materials to help staff communicate effectively with guests from various regions.

Leadership Development: Develop materials to support the growth and development of supervisors and managers, focusing on leadership skills, team management, and performance coaching.

Technology Training: Provide resources to help staff become proficient in using hotel management software, reservation systems, and other technology tools used in the hotel industry.

Guest Experience Enhancement: Develop materials that guide employees on enhancing the overall guest experience, including personalized service, anticipating guest needs, and exceeding expectations.

Environmental Sustainability: Create materials that promote sustainability practices within the hotel, encouraging staff to be environmentally responsible and reduce the hotels ecological footprint.

Conflict Resolution and Stress Management: Offer resources to help employees manage conflicts effectively and cope with stress in high-pressure situations.

Career Development Plans: Provide materials that outline career paths within the hotel, offering guidance on advancement opportunities and skill development.

Regularly updating and refreshing these materials based on employee feedback, industry trends, and guest expectations is essential to ensure the hotels human resources strategy remains effective and aligned with the organizations goals. Additionally, integrating interactive and engaging elements into the training materials can enhance the learning experience and retention of information.

Total number of people employed was 15 employees during the year under review.

(i)Details of Significant Changes in Key Financial Ratios

Particulars

Current year (2022-2023) Previous year (2021-2022)

% Change

Debtors turnover*

4.14 - 100%

Inventory turnover

4.61 - 100%

Interest coverage ratio**

-2.17 0.30 -824%

Current ratio***

0.21 0.14 50%

Debt Equity ratio

4.86 5.72 -15%

Operating Profit margin*

0.57 - 100%

Net profit margin

-0.34 -0.67 -49%

Details of any change in Return on Networth as compared to the immediately previous financial year

-0.29 0.13 -321%

*the change in Debtors turnover, operating profit margin are because of revenue from operations

**there is a decrease in the net loss of the Company as the interest from loans borrowed from related parties has been waived off.

***Increase in current ratio is due to increase in Cash and Cash equivalents

(j) details of any change in Return on Net Worth as compared to the immediately previous financial year along with a detailed explanation thereof.

Since the company has started its operations in the current year and has incurred loss, the change in networth is primarily due to the losses incurred. Further in the previous year there was an impact of Deferred Tax

CAUTIONARY STATEMENT

Statements in the Management Discussion and Analysis Report with regard to projections, estimates and expectations have been made in good faith. The achievement of result is subject to risks, uncertainties and even less than accurate assumptions. Market data and information are gathered from various published and unpublished reports; their accuracy, reliability and completeness cannot be assured.