Lemon Tree Hotels Limited (NSE: LEMONTREE) Q3 2026 Earnings Call dated Feb. 10, 2026
Corporate Participants:
Patanjali Keswani — Chairman and Managing Director
Analysts:
Unidentified Participant
Mitesh Jain — Analyst
Karan Khanna — Analyst
Achal Kumar — Analyst
Abhay Khaitan — Analyst
Rahul Jain — Analyst
Shruti Khopade — Analyst
Prashant Biyani — Analyst
Ashish Kumar — Analyst
Sumant Kumar — Analyst
Presentation:
operator
Thank you. Ladies and gentlemen. Good day and welcome to the Lemon Tree Hotel Limited’s earnings conference call. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing Star and then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Mitesh Jain from CDR India. Thank you. And over to you sir.
Mitesh Jain — Analyst
Thank you. Good evening everyone and thank you for joining us on Lemon Tree Hotels Q3 and 9M FY26 earnings conference call. We have with us Mr. Patanjali Keswani, Executive Chairman, Mr. Kapil Sharma, Executive Director and Chief Financial Officer and Mr. Nilendra Singh, Managing Director and CEO of the company. We would like to begin the call with opening remarks from the management following which we have the forum open for an interactive question and answer session. Before we start, I would like to point out that some statements made in today’s call may be forward looking in nature and a disclaimer to this effect has been included in the earnings presentation that was shared with you earlier.
I would now request Mr. Keesani to make his opening remarks over to you.
Patanjali Keswani — Chairman and Managing Director
Good afternoon everyone and thank you for joining us on this call. I’ll be covering the business highlights on the financial performance for Q3FY26 post which we will open the forum for your questions and suggestions. In Q3, Lemon Tree recorded its highest ever revenue and EBITDA at rupees 407.8 crore. Our revenue grew 15% compared to Q3 last year. Net EBITDA grew 12% year on year to 206.4 crores. Translating into a net EBITDA margin of 50.6% which decreased by 133 bips year on year. The decline was primarily due to continuing increased investments in renovation technology and the GST impact.
While these expenses investments accounted for 6.4% of revenue for this quarter, we expect all these three expenses to reduce to about 3.5% of revenue by FY28 and onwards leading to a corresponding expansion in EBITDA margins. The change in GST in this quarter accounted for 1.8% of revenue in a seasonally strong quarter of the year and we expect this to be 2% for the full year in FY27 and then further reduced to 1.7% in FY28. This decrease will be a year on year trend as the number of customers paying a rate below 7,500 keeps reducing in the medium term with our planned price hikes and ARR growth.
Additionally, all our future supply is being planned under the upper upscale Orica brand which remains largely unaffected by this change. Q3FY26 recorded a Gross ARR of 7487 which increased 11% year on year. The occupancy at the quarter stood at for the quarter stood at 73.4%, a decrease of 82bps year on year. This translated into a RevPAR of 5494 which increased 9% year on year. We incurred an expense of 31.3 crores as one of exceptional items related to the Labor Code impact Ex Croatia payments to employees which is finally over and a property tax payment in relation to the properties in New Delhi.
Consequently, the company’s profit after tax stood at 81.8 crores for Q3.26 an increase of only 2% year on year. Cash profit for the company stood at 131.1 crore in Q3.26, an increase of 14% year on year. On the asset light side in Q3 we signed 17 new management and franchise contracts adding 1855 rooms to our pipeline and operationalized 9 hotels adding 816 rooms to our operational portfolio as of 9-30-2002. 5 Sorry, as of 12-31-202, the total inventory for the group stands at 259 hotels and 2,100 sorry, 21,942 rooms with 11,772 rooms and 130 hotels being operational and the rest in pipeline.
Fees from management and Franchise contracts for third party owned hotels stood at 22.9 crores in Q3.26 an increase of 24% year on year. Fees from Fluor hotels stood at 25.3 crores in Q3.26 which stayed flat year on year due to the impact of GST change and accelerated renovation in the FLIR portfolio. Total management fees for Lemon Tree stood at 48.2 crores in Q3. 26. Now briefly touching upon our other initiatives, we have finalized the designs for Orica Nehru Blades, a glimpse of which you can see in the Annexure section of the Investor presentation. Secondly, we plan to open two out of the three blocks of Orica Shimla by Q2 this year to capture the increased demand during the summer season.
Thirdly in January this year we have signed a license deed for a 47 room Heritage Orica hotel at Varanasi. Located right on the ghat adjoining the River Ganges. This hotel has the potential to do extremely high rates owing to both the strategic location and the deep demand of the Varanasi market throughout the year. With this I come to the end of my opening remarks and would ask the moderator to open the forum for any questions that you may have. Thank you.
operator
So should we open the floor for questions?
Patanjali Keswani — Chairman and Managing Director
Yes please.
Questions and Answers:
operator
Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and then one on their touchstone phone. If you wish to remove yourself from the question queue, you may press star and two participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles again to register for a question. You may press star and then one. Our first question comes from the line of Karan Khanna from Ambit Capital. Please go ahead.
Karan Khanna
Thanks for the opportunity. Part of my first question is on the revpar growth during the quarter. Most industry reports mention a 12% RevPAR growth for the industry in three QFY26 and even your peers have reported repar in the range of 11 to 13 14%. Despite some renovation benefits, you seem to have fallen short here. Could you share the reasons behind this?
Patanjali Keswani
Yeah, just go to the regions and brands. So basically Karan one is we don’t have peers who are currently operating in the Indian listed space. They are all mostly luxury heavy. So the ability to reprice in winter is normally higher than us as I’m sure you’ve observed in the last three years. Now if you look at what has happened to our portfolio, we have been affected by Gurgaon. Gurgaon has gone through a very weak quarter and in fact our revpar growth has been negative. But if you look at the rest of the markets, Delhi has been 11%, Hyderabad has been 19, Bangalore has been 14.
So it is the tier 2 markets, the and Gurgaon which have really affected us the most. Secondly, Bombay is still while we are, we are still focused on the occupancy side in Bombay. So if you notice that you know our focus has always been how do we drive higher and higher occupancies before we reprice. So I’m quite pleased that for a very large inventory hotel Although it’s been only two years, we’ve gone to 79% for 1,000 rooms at the airport micro market. So overall I’m not unhappy with the performance. And you will see Revpar expansion once stabilization occurs really in Bombay and Gurgaon picks up again.
Rest of India is anyway, if you look at all the reports has all gone through minor increases in what is called Revpar growth. It is the main markets, the deep markets that have shown the highest growth.
Karan Khanna
Sure. My second question partu on the renovation benefits, you know in the Keys portfolio we’ve seen almost 25% RevPAR growth. Are there any other brands where you’re expecting such growth going ahead and consequently going into FY27, what are your Revpar growth expectations overall?
Patanjali Keswani
See if you notice our performance Karan, we have grown, you know like if I look at 24 to 23, we grew about 23, 24%, 25 to 24, we grew about 20%, 26. We have shut a lot of rooms. So you know, while we report Revpar on full inventory, actually we had shut 1200 rooms this year, part of which is still shut by the way like the Keys portfolio and so on. So you’re not getting a really a full picture of how the the performance will be. I would say we look at 28. That is when the entire portfolio is renovated and we go back to our standard minor interventions in 1/6 of our portfolio for refurbishment.
So please realize that there is a, you know, a shut inventory which affects us. And I am not, as I said, if I look at competitive performance in these markets, for competitive hotels where we operate, we have shown actually a very significant improvement in performance relative to the market.
Karan Khanna
Sure. And then lastly on Orica, given that now even the demerger process is underway, how should one think about growth for both Lemon Tree standalone and for Fleur? And in your post demerger call you also spoke about a thousand crore EBITDA for Fleur. So you were mentioning that you are looking to close a few opportunities as far as Orica is concerned. So by when do you expect to close more announcements on this front.
Patanjali Keswani
So you saw we did a small closure but actually the one we just closed which was Orica and Varanasi is the equivalent of 150 room Orica because its ARR will be 3x of what the other Oricas will be. That is the market in say Varanasi we are now, you know, hopefully in the next two, three months we will start construction of the Orica Delhi which we hope we will complete in three, three and a half years. So going forward, I mean I think you will hear a bunch of I hope you will hear a bunch of announcements from us on acquisition greenfield opportunities.
I don’t want to give guidance as to how many and where they are but let me assure you that we are in. As I mentioned last time there are roughly two and a half thousand rooms we are looking at and we are pretty sure we’ll be able to, you know add that level of inventory to our company in the next one year. That’s point 1.2. I said EBITDA of thousand crores. I meant in by FY28.
Karan Khanna
Sure, sure. This is helpful. Thank you. I’ll come back in the queue.
Patanjali Keswani
Thank you.
operator
Thank you. The next question comes from the line of Vaibhav Mule from High Tong Securities. Please go ahead.
Unidentified Participant
Hi sir, thanks for the opportunity. My first question was regarding our status of renovation of the portfolio. Can you share the current percentage of portfolio that’s being renovated and for Q3 how what was the portion of inventory that was shut down?
Patanjali Keswani
Okay, so you see we have think of our renovation as in two parts. There is a, a whole bunch of hotels that opened in just before COVID so they didn’t, you know we were, they don’t really need renovation except a refurbishment. So the if I take those 14, 1500 rooms out the portfolio that really needs renovation is about 4100 rooms of the owned portfolio. We have completed over 65% of them this year. I think we renovated about 1200. So at any given time there were about 7, 800 rooms shut. There was an overlap obviously in the middle of the off season and we still have I think about 200 rooms shut which are really in various parts of the keys portfolio.
So my expectation is that the full portfolio which we target will be done by next year which is those 4,100 rooms and after that we will go back to what is called just a refurbishment cycle. So every year we just refurbish 1/6 of our hotels and that will be at a much much much lower cost. And I think that’s explained in various slides in our investor presentation. Does that answer the question? Vaibhav?
Unidentified Participant
Yes sir. My second question was on our performance for Lamentary Premier and Lamentary Hotels. I believe key properties in these two segments in these two brands have also been renovated mainly for Hyderabad Delhi markets. But the overall revpar growth for these brands is in still high single digit. There has been bit of occupancy decline in Lemon Tree hotels as well. So any particular reason for that?
Patanjali Keswani
Yeah, one is the Lemon Tree hotels that you see the major decline was in the portfolio in Gurgaon. So Gurgaon we have Lemon Tree hotel in Sector 60. By the way, the same impact you will see in red Fox sector 16. Gurgaon, which is 250 rooms had very large blocks last year in Q3 which did not materialize this year. Number two is that the other hotels of the Lemon Tree brand and the Red Fox brand also were notably weaker this quarter than the previous year. Same quarter when you come to Revpar improvements, really if I take out, if you take out Gurgaon as an example, then the improvement for the and the rest of India, which is tier 2, tier 3 kind of products, you will see our actual growth is Delhi was 11% but of course 100 rooms were shut in Delhi out of 500.
Hyderabad had 60 rooms shut out of I think 660, but still managed 19%. Bangalore had about 15% of the inventory shut, grew 14%. Pune we renovated. We have finished renovating the Pimpiri Hotel. Hindi was I think 20% of the inventory but 25 rooms were shut. So these markets where we have actually got nearly fully renovated products are showing quite a healthy growth. In fact for Delhi you will see the same thing from this year by the way, because now we have more or less a fully renovated portfolio in Aero City too.
Unidentified Participant
Understood sir. If I may squeeze in the last question regarding the slide which are included in the presentation for impact of renovation, GST and tech investments. So tech investment portion you are saying will actually increase next year as well. So any particular infrastructure where you want to increase this expense? Because I believe our loyalty program is now into place. We have already revamped our website as well.
Patanjali Keswani
No, I think we have to make a lot more investment in loyalty frankly. We are looking at, you know, like agentic AI for our. We’ve got a big call center where we, where we have a certain amount of expense which is obviously not reflected here and we want to see significantly reduce it, move towards chatbots, so on and so forth. So let me just assure you that all the tech investments we are looking at, we are looking at clear monetization of them. And this is really, you know, we started it only last year in FY25 if you notice.
And this will continue for the next four or five years. It will become increasingly a smaller and smaller percentage of our revenue. But we hope and expect that it will yield fairly positive outcomes for us, especially for the managed and franchise portfolio.
Unidentified Participant
All right, sir, understood. Thank you so much and all the best.
Unidentified Participant
Thank you.
operator
Thank you. Your next question comes from the line of Achal Kumar from hsbc. Please go ahead.
Achal Kumar
Yeah, hi, thanks for the opportunity. First of all, you know, just want to understand now, given that you’ve already done sort of a draw line in terms of your structuring and all, what is your key priority for the next one year or until you list your fluor? I mean, where do you want to see Lemon Tree and Fluor at the time of listing in terms of size of the business margins in Aru Roki? And if you could please give a bit of a color in that.
Patanjali Keswani
So, Achal, you’re asking me to give guidance, which is. Which is not something I really want to do because you come in, stick it down my throat one year later. But let me tell you broadly how we are looking at this. You may have seen that our fee income did not go dramatically this year in spite of the fact that we added 1600, I think 1600 rooms to our portfolio. So, you know, here is the deal about a management company. Suppose you sign 5,000 rooms, I explained this earlier. 5,000 rooms this year. Typically the full impact of the revenue stream or fee income from those rooms comes after three, three and a half years because some of those hotels have to be, you know, are being built, some are being converted, some are being renovated and then once they open, they have to all stabilize.
And the full impact of the fee income takes say three, three and a half years. So really what you are seeing of Lemon Tree is the fee income of hotels we signed three years or in fact pre Covid. Now, if you look at those 1600 rooms we signed this year, half of them we opened this year, half of them opened in H1. And the impact is actually already showing at 24% growth in fee income. We opened another 800 rooms in this quarter, that is Q3. There was nearly zero impact to those 800 rooms. So the way I would urge you to look at it is we earn a certain amount of fees per room.
It is fairly easy. And I. That’s why I don’t want to give guidance. It’s fairly easy to say we are going to have 22,000 rooms as of today within the next three years. It is very easy to work out what the fee stream will be. Now as far as floor goes, because we are going public, I have given some form of guidance. That is by FY28, which will be the first year, we think it will be full Year public we should do an EBITDA about a thousand crores. I’m pretty, not pretty. I’m very confident we will achieve that number.
And this is after our fees and we will charge fairly significant fees, you know, out of, to a company of that size. So if you add floor fees, you add our 15, 16,000 rooms beyond floor that we are going to be on a stable basis operating in the next three years and excluding any new hotels we sign who which may or may not be operational three years out. The numbers are fairly substantial and it’s not difficult to calculate them. I don’t want to give a number but I will say clearly it is substantial. And keep in mind that Lemon Tree will be the first asset fully asset light brand owning tech and distribution and management company in India.
The first. So I think it will be an interesting split and you’ll have to wait till that moment for us to actually show you the actual numbers.
Achal Kumar
Right, fair enough. Then. Second question. I wanted to understand about your plan in terms of rebranding. So you rebranded one of your folks hotel this quarter. Do you have plans to rebrand more inventory and you know, just want to understand what kind of, what kind of spending does it or is it like the same hotel you just rebranded or you spend first you upgrade the rooms quality and all and then you sort of, you know, rebrand it. So how easy or how difficult it is to rebrand. So could you please give a bit.
Patanjali Keswani
Of color on that? So for example, let me give you specifics. Since we are renovating as opposed to refurbishing our entire older portfolio, we said that we would look at those hotels in that portfolio where we felt there was a significant ability to reprice based on the product, the new product that we imagined for it and its location. So a classic case is Red Fox Hotel New Delhi. We rebranded it lemontree and it showed a fairly significant increase in ARR. It is not visible really because in the revpar growth of lth but it was quite significant.
Now we plan to rebrand since we are renovating Red Fox Hyderabad which is again in a great location with large rooms. We are planning to call it a Lemon Tree Hotel. It is adjoining the Lemontary Premiere and this will happen in Hyderabad by October this year. Similarly, we rebranded Caius select into a Caius Primer in Pimpiri Chinchwad and we intend to actually rebrand Caius Whitefield into a Caius Prima which is the equivalent of a Premier once the renovation is complete by in the next six to eight months because that is a large inventory 220 room hotel and it is already showing significant improvement in performance.
Other than that, I don’t think we have a clear thought on what else we should or clear view on what else we should rebrand. There is no incremental cost in rebranding since we are renovating. All we are doing is fitting it into those new brand standards. We will however, look at Lemon Tree Alipi, which is a small but very attractively located hotel outside of Cochin. And we will perhaps make it in Orica, but not in the very near future. Another opportunity we feel faces us is that the Red Fox in Jaipur which is 183 room hotel.
The land has become so extremely valuable that if in our minds we look at monetizing that land then there is a case because of its location. It is between the airport and Rambag. On the main Jawaharlal Nehru Marg. There is a case to make it 150 room Orica. So these are the thoughts we have. This is obviously subject to a return on investment and other than that we are not really looking at rebranding anything. Does that answer the question?
Achal Kumar
Yeah, absolutely. That’s fantastic. Thank you. My final question was on the tech side. So basically if you could sort of take a bit of a deeper dive as to what exactly are you doing? Are you strengthening your sales and distribution channel? Of course you talked about loyalty. You’re doing a lot on the loyalty side. But what else are you doing on the tech side and what kind of benefits do you think it would cause? And especially I’m sort of thinking about the sales and distinguished channel because you know, if I see, I mean everybody sort of trying to, trying to sort of have extended sale distribution channel.
You know, big hotels are talking about Marriotts and all Marriott and that kind of word for you guys. What are your plans? And then we are sending in in terms of tech, please.
Patanjali Keswani
So take to us is well one is the hygiene side, one is the, the, the revenue side. Okay. So from the hygiene side we feel it is necessary for us because we don’t want to miss the boat. And you know, we are a small company, a mid sized company, maybe in the hotel space. We do not have, you know, enough tech backbone as a standalone company. So we asked ourselves what were our pain points and how do we look at the whole tech journey for our company? And this is about a two years ago when we first started talking to BCG about this.
So we realized that one is that we need to go AI first, digital first and really for us it’s been a short journey, it’s only been two years. We focused initially on, initially actually only on creating a single source of truth because we had multiple systems which were talking to each other through API, some of them were not talking to each other. So the classic case of growth from small to medium. So first was putting getting all our data sources together, a single data lake, migrating it to Amazon with a private cloud, so on and so forth.
Then we asked ourselves, how do we use this data for better and more informed decision making. So the areas we looked at was revenue management. Then we tied up with Salesforce for a better way of doing sales. It’s called next gen sales. We also looked at personalization and loyalty. So they were all in phases. You see, this requires a cultural transformation in a company. It requires the technology side is only 1/3. 2/3 is actually the cultural change. And it’s a journey we are going through. It’s encouraging. We are also asking ourselves now that we have started creating products, what I would call, you know, minimum viable products is how do we monetize it now with third party users of this? Because if for Lemon Tree at our size, we find a whole lot of tech painful and difficult to digest, then the question arises, what happens to 1.5, 1.6 million rooms in India which have much smaller individual hotels? The owners of those hotels, is there a way we can offer them similar services? So it’s a three step process.
It was first getting our house in order, number two, seeing how it would help us. And now number three is how do we go to market with it and then how do we overlay this with our own brands and move the franchise management route in a more aggressive way. So that’s the vision. It’s right now only two years, but I think the way we looked at it at the most basic level was that we have invested in a few, you know, 4,5000 crores worth of assets we have created. Even if we improve the return by 1%, we are still talking a 50 crore improvement from technology alone.
And I think frankly we have achieved at least half of that. So from a pure technology investment and return perspective, even within the system, it has been a good journey.
Achal Kumar
Perfect. Thank you so much. I’ll come back in the queue. Thanks.
Patanjali Keswani
Thank you.
operator
Thank you. Your next question comes from the line of Abhay Ketan from Access Capital. Please go ahead.
Abhay Khaitan
Hey. Hi. Thank you for the opportunity. So, a couple of questions. Firstly, a quick clarification on the management fees growth that we have seen. So in terms of operational rooms we can see around 32% growth in terms of managed rooms. But the fees has only grown by 10% in aggregate and from third party only 24%. So is there any reason why is there a discrepancy? Because one would assume that the growth would be at least the number of room growth and then there would be some risk on top of it. So any reason for this discipline?
Patanjali Keswani
Yeah. So if I looked at it really, we added 1600 rooms in the nine months of this year. 800 rooms were added in the first NH1 and 800 rooms were added in. Now really fee income becomes meaningful with new hotels only after they stabilize. Because a large portion of it is the kind of business you’re pushing in there, the revenue that you generate and the incentive fees that you earn. So when I look at these 1600 rooms, I would say they have generated a return only that of one fourth of what their potential is. But it will take a year more for them to really give a return because many of them are new, many of them are, you know, in the undergoing stabilization.
Do you get me away? So it’s not like they will immediately start giving the full set of fees that we require or intend to earn. As far as FLIOR goes, there was an impact of GST changes and accelerated renovation. So I think you will have to wait because when the renovation intensity at FLIOR moderates and the full renovated inventory ramps up, then fee income growth will reaccelerate and it will be aligned with the new income that we earn per room from this fully renovated portfolio.
Abhay Khaitan
Understood, that was very clear. My second question is mostly more on the strategy bit in the sense that I understand that there is a strategic restructuring that is going to happen from the flyer side. But in terms of your own room addition, right now I think it’s completely focused on a few Oricas. But would it be fair for us to assume that all the other own room addition that is going to happen from floor end will only happen after the demerger is completed? Or can we expect some announcement even before that as well for other brands like Lemon Tree or Lemon Tree Premier?
Patanjali Keswani
See, we would certainly like to show a good growth pipeline and I am pretty sure that in the next 12 months we will show a bunch of additions. Some may be Greenfield, some may be Brownfield and some may be outright acquisitions. We are looking at all kinds of opportunities and I think you will have to wait over this next one year to hear what and how we intend to grow the portfolio. But it will be quite Exciting.
Abhay Khaitan
Thank you for this. Okay.
operator
Thank you. The next question comes from the line of Samit Sinha from Macquarie. Please go ahead.
Unidentified Participant
Yes, thank you very much. A couple of questions here, Patil. So if I remember when you did that call in January, you spoke about the GST impact at 3 to 3.5%. Seems like that’s come down. Is that kind of a revaluation of how you’re planning to increase ARR and repricing after the renovations? That’s question number one. Secondly, you spoke about what happened in Gurgaon. Can you point us to, you know, what we should be looking out for. Next couple of quarters maybe if you have visibility into some of these odd things that happened and you know, which may or may not reoccur, that will help us in kind of thinking about the quarter or the year. Last question is in terms of Orica. Nehru Place, did you increase the room by number of rooms over 50 and does that change the capex number that you’d originally given?
Patanjali Keswani
Okay, so let’s start with GST. The number I gave for GST was based on H1, our assessment of H1 because GST became operational on the 23rd of September. September. So we worked backwards and said this is the maximum impact as it happened. Fortunately, our prices did go up because the price impact started from October but played out through till January because some of our prices are what are called RFP prices and that changes on a calendar basis. So we are giving the best, you know, we can look at the impact of GST and say it will be about 2% next year, year based on just what we expect to do in revenue terms and how much of that revenue will be above 7,500.
So it’s an approximate figure, but we think it’s pretty accurate. So that was the first point. Point two is how do I see the next two or three quarters? This quarter is a good quarter. It started slowish, but February is looking very positive. I think my best guess is that all the listed players will report the same thing, which was January was sluggish. February is great. I myself am amazed to read this article today about some luxury hotels charging rooms in lakhs. I don’t think. I think it’s a bit of a, you know, a headline number.
I don’t think it’s true really across the board. But February is very good and March also looks excellent for us. So I would hope that we do better in growth than we did in Q3 that is nearly certain how much of that will be impacted by what happens in Gurgaon. Gurgaon is still frankly a work in progress because we have to find a replacement for the very large groups that we had in Q3 and Q4 last year in Gurgaon in the Lemon Tree and Red Fox portfolio. We also have 150 room red fox there which is.
Which is doing significant underperforming significantly versus last year for the same reason. Third is how do we. What was the third question? Actually sorry, could you repeat the third question?
Unidentified Participant
The Orika Nehru place seems like the number of rooms increased by 50.
Patanjali Keswani
So you know that was our best guess case when we first informed. That’s why we said 500/Summit. Now that we’ve got our architects. Architects are SRSS out of Singapore. They’ve done the Orica Bombay. They also work I think with the Marriotts in India. So they have now done a broad massing which is the pictorial we have put in our investor presentation. In fact the lead, the principal architect is coming to meet us next week and based on the early drawings and the options they sent us, we looked at it from a slightly space optimization perspective and it turns out that we wanted a very large convention center which we managed to get.
I think the main banquet is like 14, 15,000 square feet and we wanted obviously not as many suites as they recommended. They recommended something like 50 suites. We reduced it significantly and so we think we’ll CROSS I think 550 or maybe even 560 rooms. In this there is no change in cost because it is the same built up space which is 370,000 square feet approximately.
Unidentified Participant
Got it. One final question. I know last call you had mentioned Gurgaon and Bangalore as the two properties which are being renovated. So Gurgaon, I guess we know why the revpar was down in the case of Bangalore. Why? Any thoughts on the occupancy side? We had great ADRs over there but the occupancy was lower. Was it because this is. You’ve grown, you’re just repricing it higher and hoping that that price will. You’ll be able to maintain that price.
Patanjali Keswani
No, actually you know it’s interesting same we shut different parts of our portfolio in the last two years for accelerated renovation. So if you look at for example our operational performance by region you will find that Delhi, in spite of the fact that we closed 100 rooms in Delhi we managed to do it in bunches. It’s also a function of floor plate by the way. So these hotels had a very large floor plate. So each floor had 100 rooms. So we could shut one floor and renovate it and fill the balance. Now if you look at Bangalore, these are tall buildings and it’s very peculiar.
Since you mentioned it, I will explain that the floor plate has much fewer rooms. It has 20, 30 rooms. So we don’t shut one floor. Then we shut like four or five floors. And we’ve allocated more resources in Bangalore this year. Our earlier focus was on Delhi and Hyderabad because those were showing the most promise. And that is why you will find that our Hyderabad portfolio, the ARR really went up because it was fully renovated, more or less. Delhi was already on a very high base. So if you notice, it’s still gone up significantly though it includes a low rate.
Red Fox East Delhi which is due for renovation now Bangalore, we had to. We actually shut a heck of a lot of rooms in Bangalore, especially the Quays rooms, which is so a lot of Bangalore, 874 rooms. Nearly half of them are keys rooms and we were renovating them left, right and center. Even right now we are renovating them because our view is we take the short term pain. So it’s a mix of many things. It’s a lot of noise. Guests get upset because we are banging and breaking because these are full scale renovations. But bear with us.
I think by next year, as I said, when we finish this renovation, you will see a massive improvement in performance in all these, including keys. I mean, you haven’t seen anything. Keys is showing 25%. I’m very dissatisfied. I think Keys should show 50% growth in RevPAR. And I have said earlier that the average daily rate should be equal to at least Red Fox. So to me it is still 12% short though we’ve grown the rate by 19%. Red Fox has also grown and we intend to take Keys up to Red Fox.
Unidentified Participant
Got it. Thank you very much.
operator
Thank you. The next question comes from the line of Rahul Jain from Philip Capital. Please go ahead.
Rahul Jain
Good afternoon sir. My first question is basically on the strategy that you mentioned earlier in Mumbai is right now more occupancy led. So how do you expect this to transition to a more ARR led strategy? Is there a timeline or a threat level that you’d like to reach before you switch to an ARR led strategy in this market.
Patanjali Keswani
So you know, the question is really in Bombay is we’ve got a large base of crew. So let me bring it to the crux. We took this large base of crew though we’ve reduced it quite significantly. In fact, when we started it was about 100 rooms more than what it is today. So we have managed to replace it. But crew is the lowest rate but the steadiest business. So our intention is very simple that once we build all the various segments that are supposed to fire to provide room nights then we will reprice all segments because our ability to churn the portfolio, churn the mix, improves significantly.
So really in Bombay our strategy because of the very large inventory was fill the hotel first, get base so that you cover your cost, then start getting additional customers and then over time keep increasing the prices as you are able to replace the customers with newer higher paying guests. So that is the process. Normally in a 300, 250, 300 room hotel we’d have achieved achieved it in one one and a half years. But this is more than double that size. It’s 670 rooms. So it’s an ongoing journey. I’m pretty sure like I have seen that there is a material improvement in ARR in Orica Bombay in this quarter because as you can see we achieved, you know, a 79% occupancy means really that you know we are close to where we can start repricing and you’ll see some medium sized impact in it in Q4 and hopefully next year you will see a very significant impact.
Rahul Jain
Understood sir. So my second question is on the Pune market. We’ve seen a very healthy Revpar growth in this market as well for the quarter. Any specific reason on why we are. Seeing a healthy growth or is it. More macro led or a one off for this quarter?
Patanjali Keswani
No, I think there are two reasons. One is Pune out of the four 26 rooms, 25% is the Keys Prima which went through a 25, 30% hike in RevPAR. So that is one impact then Keys then lemonary Premier. Pune is also stabilized so it’s performing nicely. Hindjwadi was a market which is, which was very good when we opened this hotel 20 years ago. But today has become completely oversupplied. But fortunately the supply started getting absorbed and we had taken advantage in Pune of the drop in demand in Hindi by starting to renovate that portfolio. So I think about 80% of Injwadi is also renovated or 70% and now you will start seeing the outcome.
So Pune is in fact an interesting example of, you know, a nearly fully renovated portfolio.
Rahul Jain
And so my last question is on the managed pipeline, we currently sit on a 9400 pipeline for on the managed and the franchisee side. How much of this pipeline can be operationalized in the Next year or two. Just a ballpark figure.
Patanjali Keswani
Your guess is as good as mine. We have given some numbers. What are the numbers we have given for next step? Roughly how many rooms do we expect to open? So we. So this is a guess, Rahul. Because you know things flip from one quarter to the other because so much of it is not in our control. But based on our best guess by the end of next financial year we should have opened another. I don’t know 1200-1500 more rooms. Because we are actually opening rooms which we signed three years ago. Okay. After Covid. So you know lots of things change.
Those owners have their own allocations of capital. Sometimes they delay investing in the hotels that they have promised they will open. So you assume 1500 rooms what we opened in these nine months. Assume a similar number in the next next year.
Rahul Jain
Understood, sir. Thank you for your answer.
operator
Thank you. Your next question comes from the line of Shruti Kopare from Yatna Investment Academy. Please go ahead.
Shruti Khopade
Thank you for giving opportunity. I just want one clarification regarding the occupancy rate. I know you already mentioned about Gurugram and Bengaluru region. I. I just wanted to ask about Hyderabad also. Because there also I can see why decreasing occupancy rate. So it will be helpful to give clarification.
Patanjali Keswani
Why so. So Hyderabad is a very interesting example of the earlier question I was answering. If you noticed Hyderabad last year had a 80% occupancy. It was the second highest occupancy after Delhi. And we decided. Right. And Hyderabad had no supply coming in interestingly. So we decided to reprice aggressively. And I think Hyderabad we took the price of 25%. Is it here? Yeah. So Hyderabad, across all four hotels their average rate became the second highest after Mumbai. We took it up 25%. So the highest rate hike was Hyderabad. As a result there was a churn.
And so 80% became 77. But we have obviously done this with a view that we will catch up. So Hyderabad has been repriced. The occupancy has come down marginally. But we are confident we’ll be able to catch up. So that’s why you see the highest revpar growth is in Hyderabad.
Shruti Khopade
So it will be fair to say in next few years there will be aggressive growth.
Patanjali Keswani
We keep increasing the price. No, no. We keep increasing the price. You will find.
Shruti Khopade
Okay. I think other questions are asked. Thank you so much.
Patanjali Keswani
Thank you.
operator
Thank you. The next question comes from the line of Prashant Biani from Elara Capital. Please go ahead.
Prashant Biyani
Yeah, thank you for the opportunity, sir. How has this quarter been till date? And based on business on books, how is the remainder of the quarter looking like?
Patanjali Keswani
So as I said earlier, Prashant, that the first month was a little sluggish, but we’ve caught up. I think we are expecting February and March to be very. We are very bullish on it and I think it will be a good outcome. I don’t want to give specific guidance but I can say it will be a good outcome.
Prashant Biyani
Long. When are we planning to start it? Within FY28,
Patanjali Keswani
I think it will be somewhere in the middle of calendar 2027, I think. Second half. Q3 of 27. Yeah. Calendar 27.
Prashant Biyani
Right. And how much is the investment in it?
Patanjali Keswani
Totally it will be, I expect, about 200 crores. But you know, we have a very interesting deal there. We can borrow 70% of that money at a rate which is 5% lower than our cost of debt, which means we will basically be borrowing 140 crores at 3% or 2 and a half percent. That’s the deal. Number two, we will be entitled to keep GST for the next, I think nine years or 15 years. Next. Nine years. The state share of GST we will keep ourselves. That’s an incentive given to us. So all in all it will be a very, very profitable investment from an asset perspective.
We’ve looked at currently the performance, I think there is a Marriott there and a Taj there and this Orica will also compete with them. It is fantastically located. It is directly opposite the Chief Minister’s house. And we think it will be an outstanding performer once we operationalize it next year.
Prashant Biyani
Okay, so that’s it from my side.
operator
Thank you. The next question comes from the line of Ashish Kumar from Infinity Alternatives. Please go ahead.
Ashish Kumar
Hi. Thanks a lot for taking my question. There was one request which we had and one clarification. Now that we have decided on the split of the two businesses, what might be helpful is if we can add pro forma financials for both of the assets as they look like so that while we are waiting for the listing we do get a good sense of what the numbers are looking like. Secondly,
Patanjali Keswani
so the scheme is effective. Ashish, the scheme is effective from 1st of April. So from next quarter we will start reflecting both of them as two independent companies, pro forma. Okay. But effectively if you have announced you. Could, if you can maybe guide us to what those numbers look like for this quarter or maybe subsequent to the call, we can.
Ashish Kumar
Second question was as far as fluor is concerned when you’re showing the P income. This is actually what we are earning from the existing pure hotels. So it’s more a clarification. So the new hotels that are being. Transferred or proposed to be transferred in the scheme, is the fee income of that also included in. In the. In the P income from Fluoros or that’s not. That will be additional.
Patanjali Keswani
No, that’s not. That’s not included.
Ashish Kumar
That’s not.
Patanjali Keswani
That is a limit fee standalone. It will be included from next year.
Ashish Kumar
Okay. Now I’m just looking at from performer perspective. So would it be fair to assume a similar percentage as what we get as a percentage of real revenues as. As incremental fees revenues? I’m just trying. Yeah, no, there’s a fixed and available component. So I’m net of that. I’m saying. So I’m just trying to understand.
Patanjali Keswani
It will be the same actually. Management fee income of your will start shooting when we start. One of the big contributors is Orica Bombay. And it is still in my opinion doing 75% of what it should be doing in terms of revpar. So I’m expecting that it will have a significant impact once it stabilizes. And number two is that the Lemon Tree portfolio is an older portfolio of fully stable hotels though they are in not in similar markets, they are in secondary markets. But the fee income will be in terms of percentage terms identical. Yeah.
Ashish Kumar
Okay. Thanks a lot and wish you all the best.
Patanjali Keswani
Thank you.
operator
Thank you. The next question comes from the line of Nikhil from Kizuna Wealth. Please go ahead.
Unidentified Participant
Hi sir. Thank you for giving me the opportunity. So I just wanted to ask when you see that you’re targeting brownfield acquisition targets.
operator
So sorry to interrupt. Nikhil sir, your voice is sounding muffled. If you’re using any other mode apart from handset, may I request you use the handset please?
Unidentified Participant
Yes. Am I audible now?
operator
This is slightly better.
Unidentified Participant
Yes sir. So I just wanted to ask like when we’re targeting greenfield brownfield expansion or acquisition targets. So in which micro markets are we going to target those acquisition or expansion? So that is my first question.
Patanjali Keswani
Well, I am traveling for example immediately after this call to Bombay. We are looking at a couple of hotel sites there. Then we are going to Pune. Then we will be looking at Bangalore near the airport. So we have identified key markets which have deep demand which we feel would where we would have a competitive advantage. And we are looking to, you know, some land acquisitions. There are a couple of operating assets. And then we are looking at certain other markets where we Think which are, which are where we will significantly benefit by deploying capital that is under some form of NDA.
I don’t want to get into to it but those are large opportunities. And. Those are operating assets.
Unidentified Participant
So is it fair to assume that we can go ahead and see acquisitions like environment that we did and will there’s a leisure type of portfolio that we will build around somewhere something like that?
Patanjali Keswani
Yes and no. Actually you know right now the opportunities we are looking at are not so much leisure right now other than the Orica in Varanasi. The rest of them are more focused on deep demand markets in generally large cities.
Unidentified Participant
Thank you sir. That’s great to hear. Sir, also the last question that I have post our renovation on our console portfolio like we have seen a great impressive ADR growth in Keith Hotel. So what kind of ADR growth and occupancy ramp up are we looking at post our renovation like in, let’s say FY28.
Patanjali Keswani
We are simply looking at a 60 crore EBITDA.
Unidentified Participant
Okay sir. Thank you sir. That’s it for my.
Patanjali Keswani
Thank you.
operator
Thank you. Your next question comes from the line of Sumant Kumar from Motilal Oswal. Please go ahead.
Sumant Kumar
Yeah. Hi Patu. So my question is when we talk about FY27 the normal industry error growth compared to Lemon Tree. So do you think Lemon Tree overall renovation of the product, the new product, the higher value product launches. Okay. And the benefit of GST in FY27 will will have outperformance versus industry in ARR growth side. And can you quantify the how much outperformance we can do that?
Patanjali Keswani
I don’t want to. Again this is guidance Suman. So I would say broadly that we would be really looking at at least a 15% revenue growth with our existing portfolio. And beyond that. Well it may or may not happen but 15 is something we are pretty sure we’ll achieve.
Sumant Kumar
Okay. And considering over the year we have seen the mice activity in India is increasing and say the say when we compare FY25 and FY26 and the level of MICE activity because of increasing business activity in India is increasing significantly versus other other countries. So how do you see the MICE business contribution to overall industry and for elementary is going to have a better pie in next couple of years.
Patanjali Keswani
Yes, we definitely see that. So our earlier hotels are first say 2025 hotels were not built to focus on MICE frankly. But the last many hotels that we have built have much larger banquet halls and like I mentioned even Orica and Heru Place will have an enormous convention facility just like Orica Bombay has. So as we, you know, as we see new segments growing in India, we ourselves are redesigning our hotels to capitalize on them. And I have no doubt that mice as a segment will become increasingly important for the Indian hotel industry. And of course for Lemon Tree.
Sumant Kumar
Okay, thank you, thank you, thank you, thank you.
operator
Your next question comes from the line of Sashi Ranjan from Anandan Capital. Please go ahead.
Unidentified Participant
Thank you for the opportunity and congratulations for the good set of work that you are interested in. Just as Lemon Tree has like a very renowned brand among the Indians, what are, what are our plans for international destinations? Especially where most of the Indians are buying properties, especially Dubai. I understand that Dubai we have some property. Are we going to expand there more aggressively?
Patanjali Keswani
Hundred percent. So sooner rather than later.
Unidentified Participant
Okay, so by when we are, I mean I understand with the capex and the renovation, everything going on, they are focused more on India. So by when we can start grabbing more space in international market.
Patanjali Keswani
Okay, so let me go back for a moment. See at different times of our journey as a company, we are now two decades old. We have found sometimes we have grown faster than our customer base and sometimes our customer base has grown faster than our assets. So right now we are actually fairly well positioned. We’ve kind of relaunched our loyalty program, we’ve massively improved our distribution. So this was all work in progress. A large part of it was technology and a large part of it was talent. And we’ve been putting these building blocks together and we now feel we are at a point where our brand is exportable which is that it has high recognition, trust and ability for the mid to upper mid market Indians traveling globally.
So we have looked at multiple markets where Indians go and we feel now we have the ability to go to those markets with a moat. Which means that any owner who signs with us or even if we ourselves deploy capital, we will be able to have a asymmetric edge, some arbitrage. So this is very much on our and will be to able are only interested in capturing more and more wallet share of Indian travelers. I was interested to read today that MakeMyTrip has announced something called loved by Indians. So MakeMyTrip has started some label called Loved by Indians and they are focusing increasingly on international travel by Indian travelers.
And we are very sure we will get that table if we export our brand internationally. And we have every intention of doing so, but with a singular focus on following Indians where they go.
Unidentified Participant
Thank you for the enlightenment, sir. That’s done from my side. Thank you.
Patanjali Keswani
Thank you.
operator
Thank you. The next follow up question comes from the line of Achal Kumar from hsbc. Please go ahead. Mr. Achal Kumar, your line is unmuted. Please proceed with your question.
Achal Kumar
Sorry, I think I’m on mute. Sorry. Just last two questions and thanks for giving another opportunity. So first one is this AI conference happening in Delhi. What kind of benefit do you see from that? And secondly, just wanted your thoughts on the cyclicality. You know, given that this upcycle looks very strong, do you think we are sort of closure to the peak or do you think we are still very far from the peak? Thanks.
Patanjali Keswani
Okay, so the first question was a summit that said Bharat Mandapam. The beneficiaries will be hotels nearby. It will be the Oberoi Certainty which is the closest, followed by Taj Mahan Singh, followed by a bunch of other hotels in Connaught Place in Seoul. We will be indirect beneficiaries in the sense that the pricing there has gone up significantly and a bunch of people who. And of course demand. So a bunch of people who would normally have stayed in those micro markets will now be. Will obviously look at Aero City as the alternate where they will get much better pricing and supply availability.
So we will be indirect beneficiaries. As far as you know, the. What was the other question? As far as the cycle goes? The cycle goes Anshal. I don’t think it’s a cycle anymore. I really feel we are seeing early signs of a structural change in demand and a whole bunch of new customers, especially post Covid and these are young, younger customers want to stay in branded hotels. It’s quite clear to me. So the upcycle is still actually on a pure cyclicality basis we are nowhere near at the top of the cycle. Top of the cycle is defined when your India occupancy crosses 70, 75.
In fact, you know, you have to hit closer 75 to 80% when you can significantly reprice. We are not there as far as I know. The report reports I read say India’s occupancy is still about 66% but this is an aggregate. In certain micro markets we’ve already hit top of that kind of cycle and there is not much supply coming in. Delhi is a classic case. Bombay is another case where the cost of new assets is very, very high. So I think these markets will continue to show and so is Hyderabad as a matter of fact.
Now these markets will continue to show significant increases in revpar year on year. And if you overlay it with what I think will happen which is a structural shift in demand as the Indian economy grows then I think there will be a reset. So basically there will be some kind of a small hockey stick where there will be a huge number of new Indians who will want to stay in hotels in branded hotels in India and it won’t be a growth of 10, 11%. It will certainly be a massive growth in three or four years and it’s going to happen in the next few years because look at airline traffic, look at new aircrafts on order.
After all they all going to carry passengers and those passengers are going to want to stay in hotels.
Achal Kumar
Thank you so much.
operator
Thank you. Your next question comes from the line of Vaibhav Mule from High Tong Securities. Please go ahead.
Unidentified Participant
Thanks for the opportunity. Again my quick follow up on the potential acquisition that we are planning to do with 2500 keys. Assuming this is a branded chain, would we be open to have additional brands in our portfolio or would that be rebranding that will happen across that acquired chain? That’s the first question. And secondly on the, if you can just guide on the overall CapEx for next two, three years and since we mentioned during the fluorid merger call that Lemon Tree would be a net cash company. So when do you expect the entire debt repayment to happen? That’s it from my side.
Patanjali Keswani
So firstly that 2500 rooms are multiple acquisition opportunities and anything we acquire we will not look at adding more brands, we would look at rebranding them, whatever be the current brand. So that’s the first point. The second point is our Capex, you know was very significant starting from last year, this year and next year because that is when all the renovation, the main, the main point is the renovation happening as far as. Yeah, so you know our CapEx would be, this year would be I think about. Well this is opex. So opex would be over 100 crores.
Capex would be another 70, 80 crores. So it’s, it’s significant numbers which will all shrink dramatically after FY27. What will happen is in the scheme of Demerger, all the assets of Lemon Tree including its debt will be transferred to Flirt. So Lemon Tree will immediately effectively be a debt free company from next year. And all the fee income that it earns which will be fairly significant will therefore be not redeployed in capital but will rather be available as free cash. So then obviously one of the things we want to come out with is what is the dividend policy of Lemon Tree going to be? How are we going to.
To reward shareholders, so on and so forth. And that’s something really the board has to decide in the next six months. But we will come out with clarity on how we are looking at the free cash flow that lemontree generates, considering that the only requirement going forward will be in technology and investments in marketing, branding and so on. And those won’t be anywhere near the kind of cash we generate. So that’s a call we have to take in the next six months. It’s a good problem to have.
Unidentified Participant
Perfect. Thank you so much and all the best.
Patanjali Keswani
Thank you.
operator
Thank you. As there are no further questions from the participants, I now hand the conference over to the management for closing comments.
Patanjali Keswani
Thank you all once again for your interest and support. We continue to stay engaged. Please be in touch with our investor relations team team for any further details or discussions, and we look forward to interacting with you soon.
Patanjali Keswani
Thank you on behalf of Lemon Tree Hotels. That concludes this conference. Thank you for joining us. And you may now disconnect your lines. Thank you.