EIH Limited (EIHOTEL) Q4 FY22 Earnings Concall Transcript

EIH Limited (NSE: EIHOTEL) Q4 FY22 Earnings Conference Call dated May. 10, 2022

Corporate Participants:

Vikramjit Singh — Managing Director and Chief Executive Officer

Kallol Kundu — Chief Financial Officer

Analysts:

Vikas Ahuja — Ante — Analyst

Amit Agarwal — — Analyst

Anchal Kumar — HSBC — Analyst

Patrik Podar — — Analyst

Rajiv Pardhi — — Analyst

Unidentified Speaker —

Presentation:

Operator

Good afternoon, ladies and gentlemen. On behalf of Ambit Capital, we welcome you all to the Q4 FY ’22 Earnings Call of EIS Limited. We have with us Mr. Vikram Agra, Managing Director and Chief Executive Officer; and Mr. Kalol Kundu, Chief Financial Officer of the company. A brief disclaimer before we start, we would like to inform you that the management may make certain comments on this seminar that one could deem as forward-looking statements, specifically the financial guidance and any pro-forma information that the management will provide on this webinar are their estimates based on certain assumptions and have not been subjected to any audit view or examination procedures. Please be advised that the company’s actual results may differ from these statements, and EIS does not guarantee these statements or results also is not obliged to update them at any time.

I will now hand over the call to the webinar to the management for their opening comments, post which we can set the floor open for Q&A. Thank you, and over to you, Arianna.

Vikramjit Singh — Managing Director and Chief Executive Officer

Sure. Thanks so much, Karen. Good afternoon, ladies and gentlemen, and thank you for joining us on the call. [Indecipherable], just make some quick opening remarks before you go through the presentation. So I mean we’ve all been — our industry has been through two years of COVID and fortunately both corporate business and leisure business have picked up. When we look at the past two years, what really at Indian Hotels and Oberoi Hotels and Trident Hotels going was the large demand within the domestic market. We saw a strong demand for our leisure hotels, whether that was Trident or within the Trident or the Oberoi brands. Whereas corporate travel was really restricted people were working through other means like we are doing today and corporate travel took some time to resume.

I think India’s vaccination drive the low count of COVID or the low count of hospitalization have really seen that turn, and we saw a significant upturn in corporate business starting in March, and that trend continues today as well with strong demand even in our city hotels, driven by both corporate and the mice segments. The other thing that’s come to us is a positive surprise is the return of both international corporate business as well as international leisure business to our hotels and to India. We hadn’t really anticipated this would happen as quickly as it has. For leisure, we were looking at our Q3 of this financial year. And for corporate business, it was the second half of the year. But we’ve been pleasantly surprised in our hotels where like Delhi, Bombay, Rajasthan Agra, etc, where you get foreign travel coming in.

These numbers have picked up far greater or far more quickly than we had anticipated. So we hope — sorry, this coming financial year ’23 will be a good year for us and as well for our industry after COVID. We also hope that there are no variants that cause significant hospitalization, either in India or overseas. And if that continues as is, I think this financial year will be a very positive year for EIH and for the industry as a whole.

With that, Kallol, I’ll pass it on to you to go through the financial results, etc, which are part of your presentation.

Kallol Kundu — Chief Financial Officer

Thank you, Vikram. Good afternoon, ladies and gentlemen. Warm welcome to all of you to this conference call. I’ll begin with the key highlights for the Q4 of financial year ’22, where we see domestic air traffic increased by 38% as per HVS aeroport during March 22. The nationwide hotel occupancy for the first time crossed 60% on an overall basis since the onset of the pandemic sometime during this quarter of FY ’22. The return on big ticket conferences and events, such as IPL drove Mumbai’s occupancy to pre-pandemic levels for the month, the city along with Tuni saw the greatest increase in occupancy in March ’22 compared to the previous year. And as Vikram mentioned, the improving corporate travel demand is also assisting in occupancy movements.

Compared to the hospitality industry as a whole,our company’s RevPAR growth has been higher, fortunately for us for the last — during the last three months of financial year ’22. Where we see the ADR and occupancy and resultantly, the RevPAR grow by about 88% on an average in March for the industry. The same has grown by between 108% to 248% at EIH. And the RevPAR index continues to be high as compared to the industry in general at about 2.5x, which has substantially increased from 1.95 to two times of last year. The relative indices to competition in case of domestic hotels, the data presented here is for all the domestic hotels of which are owned or and/or managed by EIH Limited.

This shows a trend from April 2019 to March 2022, where we are happy to share that the RGI has been, by and large, except one month of June 2020. It’s always been above the dotted line of one, which shows that the index is at a higher pace than what the industry has been to and what our competition has been doing. And obviously, when you go through these charts in detail, probably there’ll be more questions which we’ll be happy to the answer. Our outlook continues to revolve around our three-pronged strategy of Endrerevitalized and flourish. When we talk of enduring, we continue to speak of our strong balance sheet, a strong asset base, the slight decrease that you see here at between 21 and 22 is because of sale of one of our non-crore asset, the printing press. But despite all of that, I think the bank debt has been at very reasonable levels.

The bank net debt at INR270 crores. The net worth continues to be high and positive. And the robustness of our balance sheet have helped in controlling the finance costs and as a result of which we do enjoy very competitive rates from our banks. The weighted average cost of debt as of 31st March ’22 was 7%, which is a reduction of about 90 basis points in the last one year. The other thing that has helped us and we’ve been talking about it in the past towards our endurance is our ability to improve on our operational efficiencies on all aspects of operational efficiencies and as numbers at the bottom of the graders that the total expenses vis-a-vis FY ’20 has reduced in FY ’22 by about 22%. Our corporate costs in the same period have reduced by about 22% again. And total fixed cost, we have something being consistently been talking about is the reduction in fixed cost has been 15% vis-a-vis FY ’20.

This means that this would take on to a significant quantum in number in absolute value. How much of this is sustainable in the long run is something that internally we are working on in the organization? But we believe that a substantial part of this will remain as such going forward. The third facet of our insurance has been our ability to maintain the highest standards of health and safety, and we are happy to share them that five audits were conducted during October 2020 to April 2022. And the good thing is that every single Oberoi and Trident Hotel has received the highest safety and hygiene rating, which is platinum by braveries. So all in all, as a result of all this, our guests continue to repose their faith in us.

And of course, adding to that, we initiated efforts even during this period of cohort, whereby we looked at energy conservation, carbon footprint, four of our hotels that we — two of them we own and all four of them we manage, of course, where we have commissioned solar plants, where the generation of electricity is close to 35% to 40%, which is completely through solar. Well, this has helped in reduction of our average cost reducing from about INR11 on an average to about INR6.6 per unit. The number of hotels, which consume renewable energy today in the group are [Indecipherable] Tradin Gokhan [Phonetic], which are 100% on solar energy, which are managed by each, Develas [Phonetic] and Develas, as we’ve mentioned here, the overall [Indecipherable],the Chinae [Phonetic], wind Chinae.

These are on wind power. So a substantial part of our initiatives in the energy conservation side or ESG initiatives as they call it, is really something that we are looking forward to within the company. We do talk of being revitalized as would be evident from the sharp RevPAR recovery post third we which clearly shows the impact of each wave as it came. The two parts that you can see are for own tens of IH and the other one is the domestic hotels in India, including managed hotels. And all of these, you would see the recovery, which is there after the third wave has been pretty good, especially in the month of February and March.

There are several kinds of analysis that we’ve provided, and I’m sure all our friends would like to go through them and come back to us with questions, if any.

The recovery in ARR and occupancy, the previous slide was on RevPAR. So that’s broken up into an occupancy in domestic hotels. And as you can see here, FY ’22 is represented by the red color in occupancy as well as in ARR. So both are seeing a significant increase in uptake, both in occupancy as well as NDIR [Phonetic]. City-wise, if you want to look at it, the revenue recovery has also been good, and I like to Vikram mentioned. The leaders were, in this case, Maharashtra and NCR, followed by other cities like other leisure locations where we are placed lidar, Jaco, Shimla and Chandigarh. There’s been an uptake in Bangalore and Hyderabad as well. The overall operating metrics if we were to compare them between the various categories of hotels that we have as we classify them traditionally as overall Metro properties, overall leisure properties or the Village properties, tried and Metro properties, tried in leisure, Triton City and others and followed by a total. So again, this again shows from a slightly different point of view as to what the various kinds of recoveries have been across different categories of our hotels.

Food and Beverage business in domestic hotels, including managed hotels also continues to be robust with an increase of revenues that we are seeing in FY ’22. In fact, it stands at INR58 crores, which is amongst the highest in several years. When we talk of flourish, the third leg of our recovery process.

There are several key initiatives that has been launched under the book direct, the best trade promise. A special mention for Diagram [Phonetic] Select, which has really been very popular and therefore, has been now brought out in its second half start. The Oberon is now picking up post opening up from after the pandemic. There are strong tailwinds in corporate and mice, and I think this graph is pretty revealing. It gives a picture of one year as to how the various segments have moved. And clearly, the happy thing is that the city hotels are beginning to pick up with an increase in mice and corporate business. Leisure has, of course, maintained its momentum and Direct has maintained its momentum.

Overall, the performance highlights, these have been published. So I won’t spend much time talking about it. While on a stand-alone basis, the PAT was a loss of INR7.3 crores. This included exceptional items of INR13.2 crores, which has been highlighted in the notes, which has been published along with the results in the stock exchange. On a stand-alone basis, this gives a picture of the results quarter-on-quarter for revenue, EBITDA, PBT and PAT. Of course, the last quarter, vis-a-vis the third quarter is because of January, which was really saw some effect from the Corona virus. But on a consolidated basis, we have a positive total comprehensive income of INR27 crores in Q4. The 12 month, of course, was a loss. Again, similar kind of results as we saw in stand-alone, except that the PAT here is positive.

One last point that I would like to make is that the process of looking at noncore assets and unlocking value from them has been taken as conscious decisions. So the printing press was the first one to go off the block, where we had a net gain of INR55 crores. This is going to definitely improve our profitability in the periods going forward. Because in the last few years, there was — this unit was having EBITDA losses. And therefore, we believe that this is on a corporate strategy side, this is a good thing for the company. The business blueprint is like the corporate structure is as it has been. There’s no major change here. We continue to have about 4,512 keys and 749 keys under the brand across the globe.

Thank you so much, and we’ll be happy to answer any questions that we may have.

Questions and Answers:

Operator

Thank you [Operator Instructions] So we have the first question from Vikas Ahuja Vikas from Antique, you compete on nearline and ask two questions.

Vikas Ahuja — Ante — Analyst

This is Vikas from Ant. So my first question is related to the margins. So if I compare the margins, we have achieved it in single digit on a consolidated basis. And if I look at your peers who have reported, they are closer to 18% to 20% EBITDA margins. So what am I missing? I mean, why our margins are kind of lower compared to the peers this quarter on one-off, you talked about around INR12 crores, but there’s anything else besides that?

Vikramjit Singh — Managing Director and Chief Executive Officer

Kallol, do you want me to…

Kallol Kundu — Chief Financial Officer

Sure…

Vikramjit Singh — Managing Director and Chief Executive Officer

So I think the — one of the things is if you’re referring to EIH hotels. EIH portfolio is 95% — in fact, yes, 95% of our room inventory is our city hotels. 5% are two leisure hotels that are owned and managed by EIH, which is — would they be last in [Indecipherable] they be last of 87 Keys and [Indecipherable] 25 keys. Other than that, our hotels are all in metro locations where you’re highly dependent on corporate travel.

So margins are a function of two things. It’s a function of your top line and your bottom line. And because of our large skew towards our city hotels that are highly dependent on corporate travel to that didn’t resume in March. Obviously, margins were squeezed — also during Omicron for example, and also the Altera in April and May of last financial year of 2022. That’s the first thing that got impacted. In fact, leisure hotels didn’t suffer as much. So it’s really a function of both top line and bottom line revenue and expenses.

And I think Kallor, we didn’t put the charts in for our — that showed the significant initiatives that we ran on at least some major expenses. I don’t know if you have those ready available and you can add anything beyond that, please, please feel free to do so.

Kallol Kundu — Chief Financial Officer

Thank you, Vikram. Yes, there are two points I would like to add. One is when you do a comparison. I think one of the factors that we mentioned was we are looking at our noncore assets. So when you look at our stand-alone accounts and you refer to the stand-alone accounts, by the way, it’s not in single digits, it’s in low double digits, the EBITDA percentage. But that includes the loss that basically we incur from the [Indecipherable]. So I think an apple-to-apple comparison would actually be to take out the flight services number and then do a comparison in which case you will find it’s much more comparable.

And it would actually be even better because there’s one expense which probably I must highlight here, that in the employee expense, there’s a INR7.5 crore expense which is on account of a onetime payout because the printing press came to a closure. So that’s not a regular expense, if that were to be removed, then overall, I think the EBITDA margins are pretty healthy subject to the points that [Indecipherable]

Vikas Ahuja — Ante — Analyst

And I think also the printing press, which now we don’t have any more–

Kallol Kundu — Chief Financial Officer

–In 31st we had — So yes, that’s right. I mean at 31st March, there was a contribution to the loss from the printing press well.

Vikas Ahuja — Ante — Analyst

Sure. That’s helpful. And secondly, this question is from more of a medium term. So if I look at your recover margins, we used to do close to around 20%. Some years, it was a little down or up. But — and also, you have highlighted the saving in terms of the payroll cost and corporate structure–

Vikramjit Singh — Managing Director and Chief Executive Officer

Sorry, you’re on mute.

Vikas Ahuja — Ante — Analyst

Yes. Can you hear me now? So I was just talking about our EBITDA margin, which used to be closer to 20% pre-COVID. Now with some of these savings, especially in terms of payroll costs and all, can you put some color on what are the puts and takes for the margin in terms of the medium term would be?

I mean, is it fair to assume that now, post-COVID margins would be much better than what we used to do, even there could be maybe a 300, 400 basis point improvement we can see in maybe three to five years, from the past? And I’m assuming a full-blown recovery and not — so not assuming any fourth favor or something.

Vikramjit Singh — Managing Director and Chief Executive Officer

Or do you want me to — I’m a bit mindful about what I can say what I can’t say about the future. But really, there are two parts to it. One is whatever we’ve seen in the recovery, which has taken place in March and April, our hotels, and we watch STR on an everyday basis. Our hotels are performing certainly on top line or RevPAR better than others in most of our city locations, if not all of them. And I don’t have the chart in front of me where as C1. So that’s a function of revenue.

And on the cost side, many of the initiatives that we’ve undertaken, whether that’s at our corporate office or at our hotels. A large part of that will be sustained even with the recovery. And I think this hasn’t finished for us here. We will continue to see how we can drive additional efficiency, particularly on our corporate side and how we can ensure or how we ensure that the assets and the investments that we’ve made, give a return. So those are the areas that we continue to look at.

Kallol Kundu — Chief Financial Officer

So I’ll just add one more point to that, Vikram, if I may. Yes. So if you follow the trend of the — of what we’ve tried to highlight in our presentation, it shows in buoyancy in terms of rates — room rates specifically. And because at one level, we have reached a point where our costs have really been optimized to a large extent. And of course, we’ll continue to be looked at as Mr. Mora [Phonetic] said. Therefore, one can assume that the baseline has already been set. So therefore, any uptake in revenue beyond what we are doing is going to directly flow to EBITDA. There is no — there is very little, I would say, fixed cost that would be incurred to earn that additional revenue that we are today earning or wherever the rates are going up.

So obviously, anything that is incremental will add up to your bottom line and will improve your EBITDA margins. Also, you’ve talked of EBITDA as a margin, but I would also like to highlight the fact that our returns on capital employed, etc, are also things that need to be looked at because we are looking very closely at the opportunities that lie in front of us in so far as what can be done in terms of structuring and restructuring. And that is also beginning to yield results for us as we speak.

Vikas Ahuja — Ante — Analyst

Sure. That’s very helpful. One last question. So your competitors have highlighted during the results that April and May, the corporate travel has picked up for them significantly, and it’s actually better than pre forward levels for them. Are we witnessing the same trend? And also if we can just talk about the pipeline of room additions we have maybe from maybe three, four years per se? And maybe any kind of a rough estimate around that would be helpful.

Vikramjit Singh — Managing Director and Chief Executive Officer

So let me break this up into two parts. Let’s talk about our City Hotel first, which are the bulk of EIH owned and managed hotels. In a number of hotels, not all of them that we’ve had — forget about ’19 ’20, we’ve had our best years ever on record. And so there’s been a significant, significant increase in average room rates and occupancies and therefore, profitability for those hotels. And like I mentioned to you, we watch SCR. And if I’m not mistaken, in the month of April, every single Oberoi City hotel, every single one of them that is owned by IH other than Trident Bandra Curra was SDR1.

Vikas Ahuja — Ante — Analyst

Thank you. And on the pipeline, if we can get number up.

Vikramjit Singh — Managing Director and Chief Executive Officer

Well, we have a number of projects in mind. One is the — we’re doing Rajgar [Phonetic] and I’m talking about EIH hotels. Now there’s Roger Palace, where work is underway. We’re also looking at Hebel, which is an amazing site on overlooking the lake where we can develop 1 million square feet. So these are the two ones. We also have a site in Goa, and we are really looking at what we do with that site as well. Kalal, I don’t know if you want to add. I just covered the main ones, not to–

Kallol Kundu — Chief Financial Officer

There are some hotels that have looked at some projects in some of our subsidiary companies as well. But since this is a meeting of the EIH, therefore, we’ll probably limit it to EIH.

Operator

Thank you — we’ll take the next question from the line of Amit Agarwal. [Operator Instructions] Thank you.

Amit Agarwal — — Analyst

I just wanted to know about Coku [Phonetic], — has the plan been formed for the expansion. There is the six months and some of visited — I was in Bombay, and I visit to Coku [Phonetic]. You do a wonderful job and your team is an excellent job. What are the plans for expansion for the same?

Vikramjit Singh — Managing Director and Chief Executive Officer

So I think in one of the previous meetings I’d mentioned on expansion of Coku [Phonetic] And this isn’t about an expansion over year-on-year. I think long term, we want to establish Coku [Phonetic] [Indecipherable], long term. Coku is — the mall has — the Gomo has had they’ve also had issues with Omicron. So that’s restricted the number of people. But again, to touch wood, it’s good. But the apples, which is the key anchor store in the mall is still not opened. And I’m sure that will bring significant more footfalls. But I think long term, our goal remains the same as what I’ve expressed earlier on to really expand Coku [Phonetic] into a brand across locations in India.

Amit Agarwal — — Analyst

But do you have some vision for the next five years, five places–

Vikramjit Singh — Managing Director and Chief Executive Officer

— We have–

Amit Agarwal — — Analyst

Having two couples and three couples five years down the line, that this is as good as insignificant.

Vikramjit Singh — Managing Director and Chief Executive Officer

Yes. No, I completely agree Amit. And we’ve identified locations that go beyond two and three for expansion of cuckoo over the next five years. We’ve done it city by city, location by location, and we do have that. I think really, our focus is to get the first cuckoo right. And no matter what we — how much we know we always learn. One of the things that we had anticipated was there would be significant high demand for confectionary items, pastry items. The reality actually is that there was far greater demand for food.

So we made changes to accommodate that. And we’ve seen corresponding a corresponding impact on sale. I think of it as a tree. If you think of a tree, they’re trees that grow very fast, but don’t have deep roots. And those trees tend to suffer those high winds. It’s much better to establish our roots first. And we’re not here for the short term. As you know, EIH is not — and our whole management approach isn’t short term. We want to get it right. We want to provide the best to our guests, and we want to learn and then roll out our expansion. So we’re still, I would say, in the phase of learning, but we have a very clear idea of where we want to go. But let’s first make the first one a success rather than focusing on growth just for the sake of growth.

Amit Agarwal — — Analyst

And one more thing, regarding Coco only. I saw a Cococart doing the same thing just in every mall and it’s already at the airports, it’s already in Delhi, Bombay. So, I hope because they’re similar name, and they’re doing a similar thing. So are you aware of the competition of this Cococart?

Vikramjit Singh — Managing Director and Chief Executive Officer

No, I wasn’t aware. It’s called Cococart?

Amit Agarwal — — Analyst

Cococart, Cococafe.

Vikramjit Singh — Managing Director and Chief Executive Officer

Cocoa. No, I’m not aware of coco.

Amit Agarwal — — Analyst

It’s everywhere. It’s in Bombay, it’s in Delhi, city walk. It’s in Bombay, in every mall.

Vikramjit Singh — Managing Director and Chief Executive Officer

And what is it, Amit?

Amit Agarwal — — Analyst

Cococart, Cococafe, they are confectioneries, all three.

Vikramjit Singh — Managing Director and Chief Executive Officer

I will certainly have a look. I’m not aware of it Amit.

Amit Agarwal — — Analyst

At the domestic or Bombay Airport, the City walk, and Bombay malls.

Vikramjit Singh — Managing Director and Chief Executive Officer

Yes. I’ll go and have a look. I haven’t — I’m not aware.

Amit Agarwal — — Analyst

With similar names, so I spoke to two or three people in Bombay. So they take it as the main Cococart.

Vikramjit Singh — Managing Director and Chief Executive Officer

How do you spell it? Could you just tell me the spelling.

Amit Agarwal — — Analyst

C-O-C-O.

Kallol Kundu — Chief Financial Officer

Oh, so it’s exactly the same.

Amit Agarwal — — Analyst

Yes. Cafe and cart, they have two brands.

Vikramjit Singh — Managing Director and Chief Executive Officer

Okay. That’s very good to know because I’m surprised that they’re using Coco as a name.

Amit Agarwal — — Analyst

I think they are two friends. They started started the business for three years, and I think there are many locations around the country now.

Vikas Ahuja — Ante — Analyst

Right. Okay. No, we will certainly look at that. Thank you for pointing that out.

Operator

Amit, maybe we can take that off-line. Thank you.

Amit Agarwal — — Analyst

And my another question is…

Operator

Amit, if you can please come back in the queue. I think we have a long queue…

Amit Agarwal — — Analyst

Okay. Okay, if you want. Okay.

Operator

We have the next question from the line of Anchal Kumar Actually, if you can please restrict your questions to two, thank you.

Anchal Kumar — HSBC — Analyst

Hi, good afternoon Mr Oberoi and good afternoon Mr Kallol. Hi, this is Anchal from HSBC. So I — of course, as a instructed will restrict to two questions. First of all, on the optimism versus pessimism. So now, of course, most of the hotels are sort of saying that — or rather more optimistic about the kind of recovery. Now — so on that point, I have two questions actually on the recovery self — so how much of your business was coming from inbound international tourism preCOVID? And now I understand that the recovery has still very — still we are far from where we were preCOVID level.

So do you think there is a reason to be very, very optimistic once the recovery starts and then we can sort of have a strong recovery or strong uplift to our numbers once the inbound interaction tourism starts? And similar on those lines, given that capacity still remains constrained and that’s the message we are getting from whether it’s from STR or from all the consultants. So do you think that is another reason we should believe that Oh my God, the capacity is constrained and the demand is rising so the ARRs would benefit from that also? So that is my first question. If you could please share your thoughts on that.

Vikramjit Singh — Managing Director and Chief Executive Officer

First of all, hello Anchal. I trust you’re well. So your first question was really on the optimism and related to foreign or inbound business into India. Like I mentioned in the opening remarks, actually, we were surprised at even in March when things were just opening up for inbound travel and also in April, the inbound business, both domestic and leisure, in fact, led by corporate was stronger than leisure first of all. And obviously, leisure is we’re in the middle of beginning summer, it’s not the ideal time for people to travel to India, but we were surprised at the number of guests and the percentage of occupancy of foreign guests in our hotels that attract these numbers or that attract foreign travel.

So that came as a very pleasant surprise. We never anticipated it to be as great as it is. And if that trend continues, I think it’s very, very positive for us and for others as well. If I remember correctly, and Kallol, you need to correct me if I’m wrong, but it’s about 55% historically of foreign, 45% of leisure. During COVID, it was, of course, sorry, what am I saying? Indian and foreign. So it was 55% foreign, 45% domestic. During COVID, it was primarily all domestic. And like I mentioned, those numbers are positive even in March and April of this year. And in between March and April, we also saw growth for foreign corporate business as well as foreign leisure business in our hotels.

Anchal Kumar — HSBC — Analyst

So do you mean Mr. Oberoi that 55% of the foreign travel or the 55% of the total revenue, which used to come from foreign is already back? Or do you think that we are still far away from that?

Vikramjit Singh — Managing Director and Chief Executive Officer

No. It’s not back. And this was year round – and like I said, India is seasonal. Even for our corporate hotels, foreign business picks up significantly more between October and March. But what I’m saying is that we’re surprised at how quickly both foreign corporate and foreign leisure have returned in March and April. Are they at pre-COVID levels, — absolutely not. So if I implied that they’re pre-COVID levels, that is not correct. And I apologize if I implied that.

Anchal Kumar — HSBC — Analyst

Okay. My second question is around the loyalty program. Now, given that the situation we are in, what are your thoughts about the focus on the loyalty programs, how important loyalty programs would be how they would feed into our recoveries and the revenues and the profits. So what are your thoughts on the loyalty programs?

Vikramjit Singh — Managing Director and Chief Executive Officer

I haven’t — are loyalty programs important. Is that the question or…

Anchal Kumar — HSBC — Analyst

Yes. I mean now given the current scenario, given the current trend, I mean do you — how important are the loyalty program going to be? I mean, how focused, how much focus do you think the hotel operators or maybe airlines or whatever it would be given to the loyalty program? And how would those feed into the profitability and the numbers? What are your thoughts on that?

Vikramjit Singh — Managing Director and Chief Executive Officer

So let me just start by, when we when we were launching Oberoi 1 and in fact, prior to launching Oberoi 1, with our guests, so we didn’t talk to other guests but we spoke to our guests, and it was largely qualitative in nature. So it was administered through a questionnaire – quite a detailed question on which we got, I think, an over 50% response, a large sample size, which means that the margin of error is small, and the level of certainty is high statistically. But when we administered these questionnaires, loyalty was not a key driver of selecting a hotel either for corporate or leisure. I think where we work for us, where loyalty comes in is very, very important or a recognition program is a today, guests can use multiple channels to make a reservation.

And unless the name and all the details match, you may have a separate profile for the signs. The water loyalty program allows us to do a recognition program allows us to do is make sure that every time that guest stays with us, he or she is recognized and especially amongst some more valuable guests, which in the platinum tier or in the gold tier, how we can provide an incredible experience to them because these guests come and stay with us on. They are also higher spending guests. They stay in the highest category of rooms and suites and spend the most amount of money on food and beverage, and they also are our brand ambassadors.

So how do we make sure that they have the most amazing experience when they come and stay at our hotels. And I think that’s a very, very important consideration for us in administering this loyalty program or the recognition program, which is the one at Overy. So it’s not a point-based program at Oberoi hotels. It’s a recognition race program at overall hotels, similar to what some of the other luxury hotel brands have.

Operator

Thank you, Mr. Kumar. I’ll come back in the queue since the queue is long. Thanks.

Anchal Kumar — HSBC — Analyst

Thanks, Sashi. Thank you so much.

Operator

Thank you. Can you take the next question from Patrik Podar and then Tom Basin Yes.

Patrik Podar — — Analyst

I just have one question. In your view, what is the sustainability of the numbers which the industry has seen in the month of March and April? Do you believe these trends are here to stay, and they will only get stronger as the recovery takes place?

Vikramjit Singh — Managing Director and Chief Executive Officer

Particularly, let me just break that cloth, please. I feel bad that I’m the only one talking, so please just barging this is recruitment issue but we can do it together. So it’s a team effort. It’s never one or the other. So please feel free to add. So again, I’d like to just point out two things in this. One is we have been pleasantly surprised by how strong demand has been in our city hotels across location. That’s the first thing. And the only hotel that hasn’t performed as well is Trident Bandola, — we had a buyout then when this took place, we hadn’t anticipated the strong recovery. But other than that, every single hotel has performed very, very well, both on occupancy and rate.

In cities like Calcutta, I still think there’s an opportunity to further drive our average run rate. Occupancies have been strong, so there may be an opportunity to increase rate over — in Caltrate. But in all other markets, rates have been very, very strong, and occupancies have been very strong. That’s as far as hotels go. I think the other thing that we’ve noticed is that borders opening up with the ability of guests to travel more seamlessly across a location or across geography. What we’ve also seen is that leisure hotels have — we’ve seen occupancies fall. And this is even in a hotel-like levels, which is probably amongst the highest RevPAR of any hotel in India. So — and certainly, SDR1 on RevPAR in lipo.

So last financial year, they last closed SDR1 in Ovi. So other than similar with demand is still strong. Rajasthan, we’ve seen occupancies come down. That may simply be because we’re entering the hottest months it may well be that people are now looking at going overseas or to other locations. So I think that’s something that we need to be mindful of in — for hotels where for hotels that are present in leisure locations. That hasn’t happened in similar like I said, but we have experienced that in our Rajasthan hotels.

Patrik Podar — — Analyst

And sir, a follow-up, you talked about riding BKC having a buyout. Is this the IPM thing which you are refi?

Kallol Kundu — Chief Financial Officer

This is the IP, yes.

Vikramjit Singh — Managing Director and Chief Executive Officer

So — but has the entire hotel being sold out or it would have been a part, right. The entire hotel. We created a bio bubble at the Trianon Bandra Kurla.

Operator

Thank you. We’ll take the next question from Rajiv Pardhi. — as if you can be in.

Rajiv Pardhi — — Analyst

Am I audible? So my next question — my question is in continuation to the previous parabens. So your slide number 16, where you share ARR occupancy recovery. So if we compare, let’s say, the leisure assets, which is Oberoi and Trident separately, so if we see the ARRs have been — since ARRs have been dropping on a Y-o-Y basis on the Oberoi leisure side. But while the Trident leisure, we have seen that the ARR is basically between 17% to 25% up to as compared to pre-covid levels for the last four quarters.

But the same number for Obuloverall leisure was 16% to 30% higher in Q1, Q2, and now we are below pre-COVID level below levels in terms of ARR? Stronger and occupancy is holding up 7% higher than the pre-core levels. What am I missing in terms of the two leisure assets?

Vikramjit Singh — Managing Director and Chief Executive Officer

So I think the key thing you’re missing is that in winter, traditionally Soprole, I’ll just give you some broad numbers. If hotels would overall leisure hotels were doing, let’s say, 25,000, 28,000 in pre-covid summer, they would — what are the numbers shown on the chart. If we can just put it on metal, we can just refer to the exact because I’m going by memory. So what was the AR precoded in the summer colo for Oberoi leisure. I think, firstly, let me get it right, Rajiv, are you referring to. So yes, the one which is seen here, yes.

Kallol Kundu — Chief Financial Officer

Yes. Yes…

Vikramjit Singh — Managing Director and Chief Executive Officer

Yes. So I think the question is on quarter 4… Okay. Quarter 4, then it’s very, very easy to answer. So the pre-core — let me again take one step back and start while what I was saying, pre-COVID, you would see rates driven by foreign travel to India, which would start in October through to March, with November and February being the two strongest months, and you’d see a sharp rise in average room rates — and if you look at historical data, you will see that certainly for us. I would imagine for others as well. The whole industry, or tag us and Lila, would significantly take their rates up. So in Q4, we were already at a very, very high rate in pre-COVID.

So any upside is very limited. Whereas in the summer months, because there was no opportunity for people to go to other locations, even in summer, we were able to charge higher rates in overall leisure hotels. As far as your point on Triton, that’s been driven by Trident Udaipur, that went under renovation. And we saw a sharp increase if I remember correctly, and I — can I give rates low or better not to. But we show a sharp increase in rates that Triepostthe renovation and particularly in Q4, driven by not only domestic leisure, but also by weddings and social events.

Rajiv Pardhi — — Analyst

Perfect. And my second question is on the flight services business. If you can give some headline numbers there in terms of revenue pack, DBT and what is the utilization and what is the capacity here?

Vikramjit Singh — Managing Director and Chief Executive Officer

Claude, do you want to just run through those? I don’t know if you have any.

Unidentified Speaker —

Yes, I wouldn’t be able to give numbers. So again, we are talking of a quarter 4, so the revenues of Q4 for FY ’22 would be in the range of INR31 crores as compared — this is double than what we did in FY ’21 last quarter. The EBITDA is also — was a negative of about INR9 crores in the Q4 of last year, and that’s come down to INR4.7 crores in this quarter. And obviously, this is when we just got three days of international flights, which started only on the 27th of March. What was your second question, Rajiv, on OFS?

Rajiv Pardhi — — Analyst

So the utilization yes, in the sense, what is the utilization we you’re talking right now, is in the latest month or last quarter?

Unidentified Speaker —

Yes. So utilization is hovering around 50%. But the important thing is that the mix of that is more domestic, as you would recall. And domestic business, obviously, domestic airlines come with — come at a much lower profitability. So yes, if that answers your question. And also just to add that our new flight kitchen in Mumbai, we just capitalized it on the 1st of January.

Rajiv Pardhi — — Analyst

And when do you break even in a sense that what you tell on domestic side do we break even?

Unidentified Speaker —

No, it’s a competition, like I said, that when the international travel increases, it’s not a straight formula like the hotel business because it’s a mix of the international and the domestic business, and that’s completely skewed in terms of profitability when you look at international coming in heavily. So there isn’t one level that we can say. It has to depend on the mix, and if, let’s say, what it was earlier, which was 90% international travel, then by now, we would have booked — it would the break-in would have been achieved.

Rajiv Pardhi — — Analyst

That’s very helpful. Thank you.

Operator

Thank you. So we have a couple of questions in the chat box. Firstly, Carlos, if you can take the first two questions. Firstly, how much of the cost control can remain when the things open up? Do you need to hire back again when occupancy picks up? And any thoughts on ability to hire in current times? That’s the first question.

Unidentified Speaker —

And?

Operator

Yes, maybe you can take the pause and share the second one after that.

Unidentified Speaker —

Sure. So as I mentioned earlier during my presentation that our fixed costs are down by about 16%. I’m sure the math can be done in a normal year, about 70% of the costs used to be fixed costs. And when you are talking of a 16% reduction, it’s easy to derive the numbers. there. I think in 2021, the reduction was a little more in terms of the fixed cost, which obviously, with increase in business levels in ’21, ’22, there is obviously a recruitment that has happened back and the numbers have started going up. We anticipate that we will be able to retain a large part of it, but it also depends on the mix of business, and it also depends on the pressure that the hotels are seeking.

And it’s also a conscious strategy for the company to improve the work-life balance. And as a result of that, even if it makes financial sense to have lower numbers, the organization has taken a conscious call to really make sure that hotels are adequately and evenly stopped so that really speaking, there is less stress on people and with increasing volumes of business. So some percentage of that will come down, but we still believe that a large percentage of the saving will continue to remain. On the recruitment bit, maybe, Vikram, you can add.

I mean, we — I can talk about some of the functions that are not front of the house. So there, of course, there is much more competition than what it used to be in the past, which are really industry-agnostic functions. But in terms of operations, I don’t think there’s a significant change Microban really add no one else. And actually, I would say that at our hotels, it is becoming more difficult to find the quality of people that we’d ideally like to have. So we just have to work a lot harder to attract and to select. And I’m talking about even entry-level positions.

So these are people who are very, very important to our guest experience because they’re the people that interact most with our guests. And our selection criteria is never to select for a position. It’s our selection based on the ability of the person to grow at least two levels. So that is entry-level, supervisory and manager — so when you interview me, you should ask the question, does Vitrum have the potential to become a manager in time at an Oberoi hotel or a Trident hotel or even outside our company. And with that criteria, we are seeing that it is more difficult to more difficulty for selection for a…

Operator

And second question, Karen, if you can highlight what’s the contribution from mice, breakover, and how is it today versus peak over any contribution from the…

Unidentified Speaker —

So Greg is also is really speaking, what we look at in — See, it’s not really about mice or any segment kind of contribution. It depends on which channel is being received from. So let’s say, if the business is from a direct channel, which is, let’s say, OTA, for instance, in this case, mice should obviously not be much to the OTA channels. So Vitran, would you like to have a guess of the margins or mice business?

Vikramjit Singh — Managing Director and Chief Executive Officer

The margins…

Operator

There’s a revenue contribution.

Unidentified Speaker —

The revenue contribution. On the whole, is it?

Operator

That’s right. from mice recovered and how is it today versus people.

Unidentified Speaker —

Okay. So that was — if I’m not wrong, pre-corporate victim would be around 20%. It…

Vikramjit Singh — Managing Director and Chief Executive Officer

Only 25% is my guess.

Unidentified Speaker —

Now it’s beginning to pick up. It has really gone down. And my guess is it would be in the range of 10% to 13% at the moment.

Vikramjit Singh — Managing Director and Chief Executive Officer

And again, you need to break this up into really two parts. One is leisure hotels and the other one is five hotels. So leisure hotels, even during coat in fact, hotels that had never done social events before started getting those business. That business because it’s high-paying business, weddings were small. There were restrictions on size. So you saw hotels that even a 100-room hotel, even at a 71-room hotel, Ragu las started getting weddings.and Raja’s in a location where there are no hotels that are in close proximity to rates of that standard.

But but we benefited from that because wedding sizes were restricted with COVID. So I think it’s very hard to just apply the same brush. It — what we’ve seen is what I anticipate is going to happen is in leisure hotels, actually, the MICE contribution is going to come down, and what I see in our city hotels is nice contribution is going to go up.

Operator

And just last couple of questions that we’ve received in the tank work. So Diana, maybe you can take that. Firstly, we are hearing across the industry that demand is dominating supply heavily for the hotel industry. So as compared to the FY ’03 to FY ’17 phase, which was a golden pace for the industry. How is the current scenario? And can we see a similar pace for the industry over the next four to five years. That’s the first question. And second, reliance as a shareholder. So what are the long-term thoughts on that?

Vikramjit Singh — Managing Director and Chief Executive Officer

That is the last question. So I think the first question is your ability to predict what’s going to happen over the next three to five years is probably as good, if not better than ours. What we know is that demand is at least so far strong and it’s still early days. We’ve seen strong demand in March and April in our city hotels. We hope that will continue. We also know there’s not a lot of supply that is coming on board in the next few years. So demand is strong, then you will see rates and occupancies go up. whether that’s as good as it was, I can’t tell you.

What I can tell you is what I said before in April. A number of our hotels outperformed their previous numbers. So forget about ’19, ’20, but even prior to that. So they did very well. I can’t tell you whether that’s going to continue for the next five years or not. But I think, again, what we need to look at is what’s happening. If we expect demand to be strong, what we know is supply is limited. And if demand is strong, supply is limited; occupancies and rates will go up. I also wanted to say one other thing, and again…

[Technical Issues]

Yes, I have no data to support this, but just in talking to our guests, I think with COVID, people will go to brands and hotels that are recognized for quality because safety is probably more important than price. And I think hotels that are of high-quality enjoy a high reputation will reap the largest benefit. Now do you have data to suggest this, no. I know if I were to travel, that’s what I would do, and I assume our guests will do the same. So that’s the other thing I wanted to mention…

Operator

And perhaps the second question on thoughts on Reliance being a long-term sale…

Vikramjit Singh — Managing Director and Chief Executive Officer

So Reliance is an absolutely fantastic partner. They have Board representation. And other than that, I have no further comment, but they are extremely supportive as is the rest of our Board, and we value the advice and the guidance of the EIH Board and off the reliance directors in that.

Operator

Sure. So that was the last question. Sir, any closing comments that you’d like to make?

Vikramjit Singh — Managing Director and Chief Executive Officer

No. Well, what’s nice is — current is that we there seems to be — and people on this call talk to other hotels and other hotel companies. And what’s encouraging is that there is a wide sense of optimism on future demand and which is good for our industry. And so this is not something that is just our perception, but it seems to be a perception that you hold and other hotel partners hold. So I think that is good for our industry.

More important than that, it’s good for tourism and tourism is such a large employer and has the potential to employ so many people, which is our greatest need in India is to create employment. So if that is — if these trends continue, our industry and the travel and tourism industry will employ more people which is a real benefit to our country.

Operator

[Operator Closing Remarks]