Lemon Tree Hotels Limited (NSE: LEMONTREE) Q4 2025 Earnings Call dated May. 30, 2025
Corporate Participants:
Patu Keswani — Chairman and Managing Director
Kapil Sharma — Executive Vice President – Finance & Chief Financial Officer
Analysts:
Anoop Poojari — Analyst
Sameer — Analyst
Archana Gude — Analyst
Samarth Agarwal — Analyst
Sumant Kumar — Analyst
Vaibhav Mule — Analyst
Jinesh Joshi — Analyst
Prashant Kothari — Analyst
Rohan John — Analyst
Prateek Kumar — Analyst
Presentation:
Operator
Ladies and gentlemen, the conference of Lemontree Hotels Limited will begin shortly. Please stay connected. Ladies and gentlemen, the conference of Lemontree Hotels Limited will begin shortly. Please stay connected. Ladies and gentlemen, the conference of Lemontree Hotels Limited will begin shortly. Please stay connected. Ladies and gentlemen, the conference of Lemontree Hotels Limited will begin shortly. Please stay connected.
Thank you ladies and gentlemen, good day, and welcome to the Lemon Tree Hotels Limited Earnings Conference Call. As a reminder, all participant lines will remain 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 the operator by pressing star then zero on your touchstone telephone. Please note that this conference is being recorded. I would now like to hand the call over to Mr Anu Pujari from CDR India for opening remarks. Thank you and over to you.
Anoop Poojari — Analyst
Thank you. Good afternoon, everyone, and thank you for joining us on Lemontree Hotels Q4 and FY ’25 earnings conference call. We have with us Mr Patanjali Keswani, Chairman and Managing Director; Mr Kapil Sharma, Chief Financial Officer; Mr Sanjay Rai, Chief Revenue Officer; Mr Mayank Sharma, CFO of Floor Hotels; Mr Prashant, Chief Operating Officer, North and East; and Mr South, Vice-President, Commercial Strategy of the company. We would like to begin the call with opening remarks from the management, following which we’ll 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 shared with you earlier. I would now request Mr Keswani to make his opening remarks.
Patu Keswani — Chairman and Managing Director
Thanks. Thank you, Anukh. Good afternoon, everyone, and thank you for joining us on this call. I will be covering the business highlights and the financial performance for Q4 and for the full-year FY ’25, post which we’ll open the forum for your questions and suggestions. In Q4 this year, Lemontree recorded its highest-ever 4th-quarter revenue at INR379.4 crores, our revenue grew 15% compared to Q4 last year, while net EBITDA grew 17% year-on-year to INR205 crores, translating into a net EBITDA margin of 54%, which increased 109 bps year-on-year. Q4 FY ’25 recorded a gross average route rate of INR7,042, which increased by 7% year-on-year. The occupancy for the quarter stood at 77.6%, which increased 557 bps year-on-year.
This translated into a RevPAR of INR5,462, which increased 15% year-on-year. The total revenue for the year stood at INR1,288 crores, which was an increase of 20% over FY ’24 and the EBITDA stood at INR637 crores for the full-year, which also increased by 20% over FY ’24. Fees from management and franchise contracts for third-party-owned hotels stood at INR16 crores in Q4, an increase of 11% year-on-year. Fees from hotels stood at INR23.3 crores in Q4 ’25, an increase of 19% year-on-year.
Total management fees for Lemontree stood at INR44.4 crores in Q4, an increase of 16% over year-on-year and INR149 crores for the full-year, an increase of 22% over FY ’24. The company’s profit-after-tax stood at INR108.1 crores in Q4 FY ’25, an increase of 29% year-on-year. Cash profit for the company stood at INR143 crores in Q4, an increase of 22% year-on-year. Total cash profit generated by the company during ’25 — FY ’25 was INR382.4 crores, an increase of 30% over FY ’24. The debt of the company decreased by about INR190 crores during the year from INR1,889 crores to INR1,699 crores this year. Debt-to-EBITDA ratio in FY ’25 for the company stood at 2.67 times, which is a 25% reduction over 3.57x in ’24.
On the asset-light side, in Q4, we signed 15 new management and franchise contracts, adding 833 new rooms to our pipeline and operationalized two hotels adding 121 rooms to our operational portfolio. As of 31st March this year, the total inventory for the group stands at 212 hotels and 17,116 rooms and divided into 10,269 rooms and 111 hotels being operational and the rest in pipeline. Going-forward, we are confident in the company’s ability to meet the objectives set forth in our five-year plan ending calendar year ’28. As of 31st March ’25, the current total inventory for Lemontree stands at 85% of the five-year target.
In fact, we are also confident that we will add at least 3,000 rooms to our pipeline this financial year, taking the total inventory this year above the 20,000 number, that is three years in advance of calendar ’28. EBITDA margin for FY ’25 stood at 49.4%, which is 60 bps less than the stable EBITDA margin of 50% as highlighted in the five-year plan. Renovation expenses stood at 2.7% of revenue in FY ’25, an increase of 30 bps over FY ’24. This increased investment and renovation expenses will continue into this year and a much lesser amount in ’27, so that the entire portfolio of owned hotels has been fully renovated and refreshed post which renovation expenses will close at 1.2% to 1.3% of revenue on an ongoing basis, which will help stabilize EBITDA margin over 50%.
We recently also relaunched our loyalty program, Infinity 2, along with technology upgrades to our website. With this, we should start seeing an uptick in the retail demand share, which stood at 45% in FY ’25 to achieve the target of 66% by calendar ’28. With this, I will come to the end of my opening remarks and would ask the moderator to open the forum for any questions you may have.
Questions and Answers:
Operator
Thank you. Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use their handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Sameer from Macquarie. Please go-ahead.
Sameer
Thank you. First question about Mumbai. Can you talk about the developments there? It seems like the ARR, at least the retail ARR or retail pricing continues to stay below about INR7,000 as we’ve seen in our spot check. So where do we stand there? What gives you confidence that you’ll be able to Bring it back up to, to 11,000, 12,000 range and do we need to wait for a seasonally strong period of the year? And if you can talk about within the same context, what’s the gating factor and a couple of other examples of maybe other brands that have succeeded in that kind of price range. Thank you. And then I’ll come back for a follow-up.
Patu Keswani
Okay. Sameer, let’s start with retail pricing. Retail pricing varies from bottom to top by 250%. So what do you see today is INR6,000 in winter on a Tuesday, it will be INR20,000. So when we talk ARR, we do not talk ARR of a date, we talk about ARR for the year. And typically, retail ARR in high season, which is H2 is 1.2 maybe even 1.3 of H1 because in H1 you are driving occupancy. In H2, you’re driving rate. So if you do a retail spot check you know six months from now you will have a very different number and then the possible question will be why is your ARR so low and your retail rate so high so what is the business?
Our business is roughly 55% what is called negotiated business and 45% which is non-negotiated or what we would broadly call retail, which is fundamentally business — direct-to-customer or through an intermediary. And the negotiated business is normally with an intermediary like a corporate and so on. How did we do? Well, Orica, as you know, is the largest inventory hotel in India. So for the first year, year and a half, our focus has been to fill the hotel. Typically, once you fill the hotel and there is enough demand generated and awareness of the hotel, both in retail and in non-negotiate — and in negotiated, then you start repricing once you have the base of demand. Orica was on that path.
If I look at Orica in Q4, it did over 80% occupancy versus 65-odd percent the similar period last year. So we effectively increased the occupancy actually as an exact number, we increased it by 18.2% of inventory. And for the full-year, therefore, Orica last year did 63% versus 53% in its first year of operation. Now we are at a point when we will start looking at price rise. You cannot really increase your price if you are doing subpar occupancy. So I hope that’s answered the first question.
We are pretty confident that Orica’s ARR will hit. I mean, if you look this winter, it will nearly certainly be over INR11,000, INR12,000 and then that becomes the run-rate. What is it going-forward? Well, in Q4 alone, Orica gave a return of, I think an EBITDA of about INR42 crores at about 67% EBITDA margin. And considering that we invested finally about INR880 crores in that hotel, I think I’m to say that it got nearly 5% return in 1/4, one year-after — 1.5 years after opening, I think is a very satisfactory outcome.
Sameer
Got it. Thank you. Second, if you can talk about the retail share that you’ve spoken about, what gets you from 45 to 65? What all do you need to do along the way apart from the program that you just spoke about, additional steps from here on to get it there? And what sort of efficiencies? How does it reflect in your income statement if that were to happen?
Patu Keswani
Yeah. So see, retail is a function of underlying demand of what you would fundamentally call individual travelers. So the first, see, when you have — when we look at a business, here’s how at least Clementary looks at business. We look at fundamentally trends to decide strategy. And after that, what we are very focused on is basically the execution and the cost. We really are very focused on frugality. So the trend-line is quite clear. India is at a kind of an inflection point. I think the number of customers who will start using mid-market hotels, which typically starts at 36 lakhs per household, which was on the total base of 330 odd million households in India was a very small number, is poised for a big increase.
Now this big increase is based on a very small base. So when that starts happening, as has happened in every other country in the world that is moving from lower-income towards, you know, middle-income, the consumption, the discretionary consumption of items becomes non-discretionary. And hotels is in the, I would say, the 70 percentile, which means you know after a bunch of other discretionary items like athletic wear, footwear, all these become nondiscretionary, then hotels and travel come in.
Yeah. So retail naturally will pick-up for all hotels in India in the next five to six years. So that’s a given. Now we need to capture our fair share of it and that is why when I gave these opening comments of mine, I specifically spoke about the loyalty program, the relaunch of it and the juicing of it. So let me give you an interesting number. Hilton has — with the largest hotel channel in the world is Marriott. It has 210 million. Last I saw 210 million loyalty members and 2.1 million rooms. So here’s a — well, a rule of thumb, for every room, they have 100 loyalty members.
On an average, loyalty members, I would say, should give them a few room nights a year. So here is the second proxy or second statistic. I think two-thirds of Marriott’s demand comes from its loyalty program and mostly through its own website. So advantage is stickiness and higher price because they don’t have to — they have no-cost of sales-through their own website. Let’s take. Has about 1.5 members and it has 11,000 rooms, but our rate of growth is obviously on a small base, much larger. So really, we think in another three years we will be operating 20,000 rooms or maybe four years so we have 2 million members by say in the next few months, we will have also 100 members per room, but we do not juice them the way we should.
Firstly, our penetration is, you know we — our loyalty membership is — it generates only 25%, 30% of the business, not 65 as in, as in Marriott. Number two, and I think this is even more important for us. They come through more through OTAs than through our own website. So the advantage of this loyalty program, Infinity 2 will be that we will be able to capture more through the cheaper direct channels using loyalty and upgraded websites. So let’s combine it. We think there are going to be tailwinds. This is the inflection point. We think we are going to significantly improve our own offerings and the reward we offer to members.
And as a combination, I am reasonably sure that we will achieve this two-thirds target of our customers as retail in the next three odd years.
Sameer
Got it. Thank you.
Operator
Thank. The next question comes from the line of Archana from IDBI Capital. Please go-ahead.
Archana Gude
Hi, sir. Thank you for the opportunity. Sir, very well explain that loyalty program thing. Maybe one small follow-up on that. Now considering the healthy RevPAR growth to continue and this increase in management fees and renovation costs behind us by FY ’28, is it fair to assume that full-year EBITDA margin would be at least 200 bps to 300 bps higher than our current EBITDA margin for, let’s say, FY ’28, what would be our internal target, sir?
Patu Keswani
Net of all expenses, net EBITDA, well, I don’t think it will be 200. Our internal expectation is at least 55%. That becomes then from 50%, you are saying 55% by FY ’28? No, what I promised is 50% based on Mr Naray Murti principles, which is under over-deliver. But since you are asking, I think it will be quite — it will be closer to 55. Sure, sir, that’s a pretty optimistic guidance, sir. Secondly on our revenue grows now, you have to keep in mind last two years a very interesting number. And I want to explain it actually generally as an industry number.
So here is Lemon Tree that does 50%. Various chains do from 32% 50% also. How does this 50% get realized? So let me explain. If we do like last quarter, we did 54%, 23% was fixed, 23% was variable. One of the — well, one of the benefits of COVID was variabilization of plenty of fixed costs or at least making them semi-fixed or semi-varable. Now for the last two years, our flow — so when we say our revenue grew 20%, it means 120 To 120 and expenses grew 20%, which means 50 went to 60. That means when revenue grew $20, our expenses grew 10, whereas what I broadly said was that the variable component, which should have been half of that, it should have only grown by-5. Am I making sense to you?
Archana Gude
Yes, sir.
Patu Keswani
So why did it grow by an additional 5. It was renovation, tech investments, which we are opexing. And all this will become stable and not increase. It will effectively become a — once we make these investments, which we are showing as opex, but some of them are investments which can be actually other than financially treated as a capex, they will all disappear. So the flow-through that you will — sort of think of it this way. We spent, I think about INR100 crores coupled last year in renovation, INR9,500 crores? Yeah. We normally spend INR25 crore INR30, we spent INR100 crores last year.
This year, we will spend INR130. What we’re trying to do in order to not give shocks to people like you is we’re trying to make sure the rate of growth of our — these extraordinary investments are such that they are equal to the rate of growth of revenue. So EBITDA margins are maintained. So this year, we will invest INR130 crores in renovation. At the end of which we’ll drop from two points. In fact, this year it will be 3% of revenue, but then suddenly we’ll drop to 1.2%. So that 2% will come back as EBITDA margin. Similarly, tech investments are 1.4% of revenue will become 0.2%.
Then of course, there will be the natural growth of non-growth of our fixed-cost because we were doing a catch-up post-COVID for the last two years where payroll went up significantly. But now going-forward, these three main contributors to an increase in fixed and variable costs will all start trending to what I would call norm, which means EBITDA margin automatically will be up by over 3%. Right. So I don’t need a very-high revenue hike. I mean if we grow at 15% 20% a year, which we will, we will automatically trend to, 54% 55%.
Archana Gude
Sure, sir. And so, we have given this debt to be debt-free in next four years. So should we consider this run-rate of INR400 crore repayment every year and maybe some guidance on plan or Shilong?
Patu Keswani
No, it doesn’t work like that. Firstly, Orika Shilong is not a very large investment. The government has been very kind. In the auction, they have given us a subvention on interest-rate of 5%. And so that — so when we look at debt-to-equity of, say, one is to one, here we can get away with loan-to-value of 75%. And that too the interest cost will be at 3%, 3.5%. And there is a GST refund for 10 years. Yes. Effectively, what it means our increment are our income will be 18% higher because of GST and our interest will be 50% lower and we don’t think we require much equity in this project as it happens, number-one, because even the lease-rent is very low. If I look at our repayment of debt, this year we generated — I mean this year, I think we generated INR350 because we invested in capex and this and that maybe I think about INR100 crore, INR120 crores and then we repaid INR200 and there is a bit of cash on our books, about INR60 crores is cash on our books.
Okay, next year, this will increase by another 120 crore 150. So we will start then investing that money, I mean you know, repaying debt at a higher-rate. And the following year when capex of renovation also drops by INR100 crores, so the repayment is not INR400 crores a year, it will be say INR300 crore this year, INR400 next year, is that right? Yeah.
Archana Gude
Sure, sir. I get it. Sir, thank you and all the best, sir.
Patu Keswani
Thank you.
Operator
Thank you. Thank you. The next question comes from the line of Samarth Agarwal from Ambit Capital. Please go-ahead.
Samarth Agarwal
Hi, sir. Am I audible?
Patu Keswani
Yes, you are.
Samarth Agarwal
Sir, just following-up on your point on renovation, what would be the current renovation status in the terms of number of rooms completed and how many rooms we expect to renovate in ’26 and ’27?
Patu Keswani
Okay. So the renovation is in on two basis and it is at two extremes. We are innovating high-value, high-demand hotels like our premiers, wherever we can reprice them significantly. So that is one extreme end of renovation. The other is we are innovating all keys hotels because they were in a very, very shabby state. So every year if we spend INR1300 crores INR130 crores, you can assume we are renovating anything from 1,000 crores to 1,500 rooms. We are also renovating public areas. Our entire owned portfolio is 6,000 rooms, of which about 1,000 do not need renovation.
They just need minor refurbishment. Another 1,500 need lower level interventions because they are not in-markets where we can reprice significantly, but we need to maintain brand standards and the balance will be renovated between INR5 to INR10 lakh crore. So at present, I think we have renovated about 75% of the — 70% of the portfolio and the higher-value renovation, we’ll do another 30% this year and knock it off. That will be done. Some of the renovation, which is the smaller refurbs and so on and so forth will continue into the next year, but will be in terms of investment significantly smaller.
So the view was very simple. You know, as a risk mitigation strategy, even when we take debt — new debt, we try and fund it through old EBITDA. So we do not take debt on an asset assuming the asset will cover the debt. We know we want stable EBITDA to mitigate risk. Similarly, renovation investments are made that anything we invest should be in high-value generating EBITDA and cash, which can then go into the other area, other hotels, which may not be generating that level of return. So it’s a front-end investment, so to speak.
Samarth Agarwal
Understood. Thank you so much for that. Just a question on the recent geopolitical developments that we are seeing. What would be our indication to Northern India would have been affected? And what would be the impact? Have you seen any impact in terms of any cancellations or any bookings getting deferred to a couple of months after from now?
Patu Keswani
Yes, there was a significant impact in May due to COVID also. You know that Hava game that of course the media reported 1,000 cases from 20 cases Sunday went up 50x so it’s quite scary hearing that and of course the war fortunately we are not while we have multiple hotels in the north and in Srinagar, these are managed hotels. So capital at-risk or EBITDA at-risk was very low for us. So if I look at it, I think we did about 20% revenue growth in March, guys.
Yes. So we grew about 20% in March ’21 April or ’22, 21% in April as well. Sorry, 21% in April, sorry. And then in March, it crashed to May — sorry, I’m so sorry. May, it crashed to 14%. So we’ll end this quarter maybe in the mid to-high teens. So that is the effect. It was not a good effect. But our — but our profit margins in this quarter will surprise Q4, Q1.
Samarth Agarwal
Understood, understood. And just looking at the managed schools that we are adding. So if I just go through the last four or five presentations, I think last year we were expecting to add around 1,700 keys under the managed model. And if I just sum-up the total number of openings over the last four quarters, it was around 680, 700 keys. But the total number of managed rooms increased just north of 400, I think from 4,100 to 45 unit plus. So firstly, just could you help to reconcile this difference? And just what is preventing us from sticking to our expansion plans in terms of the managements.
Patu Keswani
I wish I had the owners of these hotels on this call. See, it’s not in my hands. What we do is we give you a best guess estimate. So let me tell you how I try to mitigate it because I used to be asked these questions ever since we listed and we became — we started focusing on asset-light. Who owns the hotels we are talking about, which we are going to manage. What is our intent and who owns this? This is not asset-light growth is not to get some EBITDA. Everybody in India is announcing asset-light first is rate of growth of asset-light does not equal to rate of growth of EBITDA.
In fact, I am a little worried that these heavy announcements imply very fast-growth, but the growth in EBITDA will be 10% of the announced months. You one must understand that because most of the EBITDA remains with the owner, only The managed income comes to us. Now when you — so let me give you an example, if we hit 20,000 rooms and we open all of them in the next three years and 6,000 are owned. The other 14,000 will give me EBITDA equal to only 2,000 to 2,500 owned rooms. So even at 70% managed portfolio, my own EBITDA will be 3x of the managed EBITDA. That’s the first point, which I know you did not ask, but I want to just set expectations here. Number two, when we sign these contracts, you will notice the average size of the hotel is 60. These are not institutional owners. These are individuals, very-high net-worth individuals in different cities and it is our best. And since they build the hotels, we do not build the hotels for them. They tell us a date that we will open it by this date. Earlier, pre-COVID, I was reporting it that if they said we’ll open it in March of this year, we used to say, March, we’ll open these many rooms. We realized quickly that this was not working because they were not adhering to their timelines and it was our credibility. So we made it quarter, that didn’t work, then we made it half year, that didn’t work. So now we report full-year. And we are hoping that the — when they say they will deliver our hotel then they actually do. But there have been multiple delays and you know, each person who builds a hotel has his or her own cash flows, which they allocate to the project, sometimes they put it in their main business. So to ask me this question, well, what I can say is whatever we’ve signed, assuming there is a 5%, 10% drop-off because ultimately those hotels may or may actually not get built or get sold, they will all open. When they open is our best guess. So am I making sense to you, Samarth? It is we are just conveying what the owner tells us on an aggregate basis. We do not — actually we — maybe we should not even announce when these hotels are opening. I know it makes it difficult to assess management fee growth, but — but that is the hard reality.
Samarth Agarwal
Understood, sir. Thank you so much. Just a last, I think clarification. Were there some hotels that managed hotels that closed down during the quarter or the year because I think the number of rooms, yeah.
Patu Keswani
So if you look at worldwide franchise, on an average, everybody talks net additions. In India so-far, we have not been talking net additions. We just announced what comes, we deduct what goes. So maybe you know, we should going-forward tell you what is net. But the net we do is at the aggregate, not specifically defining what we added and what we removed. This happens sometimes for — this happens for multiple reasons. And the most — well, the most common reason is a disagreement on quality. So let me leave it at that.
Samarth Agarwal
Understood, sir. Thank you so much for this.
Operator
Thank you. The next question comes from the line of Sumant Kumar from Motilal Oswal Financial Services Limited. Please go-ahead.
Sumant Kumar
Yeah, hi, sir. So this is regarding hotels. So in this quarter also, we have seen the margin is under pressure. So I guess the increase in your innovation cost, okay. So can we expect — you are also talking about Q1 FY ’26, we are having a — we are going to have a better profitability. So can we expect FY ’26 towards we can see an improvement in improvement in key total performance?
Patu Keswani
You know, firstly, hi, Sumal. Number two, about. Keys is a work-in progress. I would urge you not to look at keys. While the EBITDA margin grew from 38% to 40%, if you remember about a year-ago or maybe more, you asked me a similar question on keys. And I said our current intent is to take it to about 40% EBITDA margins, which we did in Q4. But the reality is in keys, every single room and every public area needs renovation. It has not been touched when we acquired it, it had not been touched for 10 years. It was in criminally bad shape. So what you know what I have said to you is that when it’s fully renovated and it will continue throughout this year also, what we are targeting is roughly a 60% — INR60 crore north of INR60 crore net EBITDA from this portfolio.
And I would therefore like to just give this guidance that is in FY ’27, it will be north of INR60 crores. But in-between what we spend, what we shut-down, we shut-down 50, 100 rooms in one hotel sometimes because if we feel there is slight, you know if there are cribs and so on, we just shut that hotel or shut half that hotel and innovate it. Okay. And when we talk about the Q1 profitability is going to be better and we are talking mid-teens kind of RevPAR growth. the managed income comes to us. Now when you — so let me give you an example, if we hit 20,000 rooms and we open all of them in the next three years and 6,000 are owned.
The other 14,000 will give me EBITDA equal to only 2,000 to 2,500 owned rooms. So even at 70% managed portfolio, my own EBITDA will be 3x of the managed EBITDA. That’s the first point, which I know you did not ask, but I want to just set expectations here. Number two, when we sign these contracts, you will notice the average size of the hotel is 60. These are not institutional owners. These are individuals, very-high net-worth individuals in different cities and it is our best.
And since they build the hotels, we do not build the hotels for them. They tell us a date that we will open it by this date. Earlier, pre-COVID, I was reporting it that if they said we’ll open it in March of this year, we used to say, March, we’ll open these many rooms. We realized quickly that this was not working because they were not adhering to their timelines and it was our credibility. So we made it quarter, that didn’t work, then we made it half year, that didn’t work. So now we report full-year. And we are hoping that the — when they say they will deliver our hotel then they actually do.
But there have been multiple delays and you know, each person who builds a hotel has his or her own cash flows, which they allocate to the project, sometimes they put it in their main business. So to ask me this question, well, what I can say is whatever we’ve signed, assuming there is a 5%, 10% drop-off because ultimately those hotels may or may actually not get built or get sold, they will all open. When they open is our best guess. So am I making sense to you, Samarth? It is we are just conveying what the owner tells us on an aggregate basis.
We do not — actually we — maybe we should not even announce when these hotels are opening. I know it makes it difficult to assess management fee growth, but — but that is the hard reality.
Samarth Agarwal
Understood, sir. Thank you so much. Just a last, I think clarification. Were there some hotels that managed hotels that closed down during the quarter or the year because I think the number of rooms, yeah.
Patu Keswani
So if you look at worldwide franchise, on an average, everybody talks net additions. In India so-far, we have not been talking net additions. We just announced what comes, we deduct what goes. So maybe you know, we should going-forward tell you what is net. But the net we do is at the aggregate, not specifically defining what we added and what we removed. This happens sometimes for — this happens for multiple reasons. And the most — well, the most common reason is a disagreement on quality. So let me leave it at that.
Samarth Agarwal
Understood, sir. Thank you so much for this.
Operator
Thank you. The next question comes from the line of Sumant Kumar from Motilal Oswal Financial Services Limited. Please go-ahead.
Sumant Kumar
Yeah, hi, sir. So this is regarding hotels. So in this quarter also, we have seen the margin is under pressure. So I guess the increase in your innovation cost, okay. So can we expect — you are also talking about Q1 FY ’26, we are having a — we are going to have a better profitability. So can we expect FY ’26 towards we can see an improvement in improvement in key total performance?
Patu Keswani
You know, firstly, hi, Sumal. Number two, about. Keys is a work-in progress. I would urge you not to look at keys. While the EBITDA margin grew from 38% to 40%, if you remember about a year-ago or maybe more, you asked me a similar question on keys. And I said our current intent is to take it to about 40% EBITDA margins, which we did in Q4. But the reality is in keys, every single room and every public area needs renovation. It has not been touched when we acquired it, it had not been touched for 10 years. It was in criminally bad shape. So what you know what I have said to you is that when it’s fully renovated and it will continue throughout this year also, what we are targeting is roughly a 60% — INR60 crore north of INR60 crore net EBITDA from this portfolio.
And I would therefore like to just give this guidance that is in FY ’27, it will be north of INR60 crores. But in-between what we spend, what we shut-down, we shut-down 50, 100 rooms in one hotel sometimes because if we feel there is slight, you know if there are cribs and so on, we just shut that hotel or shut half that hotel and innovate it. Okay. And when we talk about the Q1 profitability is going to be better and we are talking mid-teens kind of RevPAR growth.
Sumant Kumar
So the profitability improvement, Y-o-Y is — can we assume the ARR growth in Orica is going to drive?
Patu Keswani
No, Orica’s ARR will not grow because in summer, again, as I said, as a policy, all hotels across India are focused on occupancies because summer is much lower demand than winter. So year
Sumant Kumar
Y-o-Y. I’m talking about Y-o-Y.
Patu Keswani
I’m sorry, you’re okay
Sumant Kumar
Y-o-Y basis, not on Q-o-Q.
Patu Keswani
Yeah, yeah. Yeah, but Orica, I don’t do not recollect what it did in Q1, but the occupancy will be much better in Q2. What I said is Orica is stabilizing. So one would like to see a summer occupancy north of 70% 75% and a winter occupancy north of 85% to average to 80%.. And we are well on-track there. And once that’s stable, then yes, you will see some level of repricing, but remember, most repricing Suman is a function of retail day-to-day dynamic repricing. And that really does not work-in summer. I don’t know unless it is very specific leisure destinations where demand in summer is very-high and you can reprice in summer.
But for large business or multipurpose hotels like in the metros like Orica and so on, ARR hikes, I would not bank on, I would bank on occupancy, driving EBITDA. And then in winter, high occupancies and high ARRs, which would drive a much higher flow-through.
Sumant Kumar
Thank you so much.
Operator
Thank you. We take the next question from the line of Vaibab Mole from YES Securities. Please go-ahead.
Vaibhav Mule
Hi, sir. Congratulations on a fabulous set of numbers. My first question was on your expansion pipeline. Majority of our pipeline is now into Lemontree Hotels and Keys portfolio, while Lemontree Premier seems to have limited addition, especially post FY ’26. Any particular reason for a lower addition in a upscale or upper mid-scale segment and do — can we expect more additions going-forward in Lamentary Premier and Orica?
Patu Keswani
So let me answer this in a kind of a slightly — let me talk strategy for you, Vaibab, for a minute. See, we are focused on getting to about 200 cities in India. Our view is that if we get into all the cities in India, which have 0.5 million population or more today or in the next three years, so some are growing in population. And those cities also have decent degrees of connectivity through highways, through Wanda Bharat, through current or future airports and are in states where the state G state GDP is rising faster than the national notional average of 10%.
Then these are markets we prioritize to get into earlier and then ultimately into all these 200 cities. Now unfortunately, in most of these Tier-2, maybe even Tier-3 cities, the product is such that it does not have five-star hotels. It does not even have four-star hotels. They basically have decent three-star hotels, okay? And in some cases, so I would say they have hotels which are like 2.5 to 3.5 star. So when you look at our — and the size of the inventory is also small, these are not 200 room hotels because the demand in that city is not so large yet.
So most of our growth and if you see our pipeline did we report those three pages, if you look at it, they are in Tier-2, Tier-3 cities. This is deliberate, it is strategic. We want to increase network. We want every Indian in every urban area to basically be aware of Lemon Tree literally physically. And we think that will ultimately drive growth. So we have generally found whenever we put up a hotel in a new market, the demand from that market goes up by an exponential amount.
So today, if I get two rooms from Bukhara across our network, if I put up a hotel in Bukhara, this is just illustrative and anecdotal, it will become 50 rooms a day and it feeds the entire network. So to answer your question, if you see the — this is on Their slide, no.If you see the hotels we signed in this pipeline last year or Q4, it’s in places like Niman in Madhya Pradesh, in Madhya Pradesh, Moga in Punjab, Chittorgar, Pali in Maharashtra. So look at where they are and those kind of — those can’t support premier, let alone in Orica and they are small inventory. So this is network strategy. And I think when this gets done, we will see an upsurge in-demand and in our loyalty membership, which will be pan-India. So the way we look at it is very simple, 1% — top 1% of India is 23% of GDP, bottom 45% is 15% of GDP and the middle 50 odd percent is 60% of GDP. So we are focused on that middle.
Vaibhav Mule
Understood. And regarding your — RedFox properties, so there I’m seeing limited expansion in Red Fox as well. Is it because the brand positioning of Red Fox is similar to that of Keys Prima or Peace Select? So you are preferring maybe higher addition in key select over Red Fox.
Patu Keswani
Yes. So very — actually that’s a very correct question. See, when we set-up Lemontree, there was sorry, Red Fox wond and Orica came up because we wanted to expand share of wallet to customers who were migrating up. We acquired Keys and suddenly Keys had an overlap of was supposed to be positioned as an overlap with Lemontree. But the reality is the product was much, much inferior. And therefore, when we acquired Keys, we said we would have to actually review our entire portfolio of brands. So if you ask me to do some crystal-gazing keys you know Prima select and key select and keys light will become the vehicles for franchise for really small hotels supported by tech and distribution from Lemontree and keys, Lemontree and Lemontree Premier and Orica will be the managed part of the brands, which will grow in future.
So, yes, we will have to look at all the Red Foxes once we finish this renovation and ask ourselves whether we should reposition them as, know, leave them as they are or reposition them as a lemontree or an equivalent in the keys portfolio. Understood, sir. Just last bit on the floor hotels, any update on the potential listing and asset recycling of standalone entry to own rooms to floor books? See, this is all under informal discussions.
I think what we — what we will do is, I think in the next, by the next board meeting we will try and come out with a very definite what we are going to do with the listing of and how fluor will be the vehicle that does asset development assets, well, let’s put it this way, where to go, what to develop, how to finance it and they will own all the assets. So they will be a development asset owning company with a large pipeline, which we are by the way, already identified and Lemontree will become more asset-light and will be a brand/technology/management platform.
Vaibhav Mule
Right. Understood, sir. Thank you and all the best.
Patu Keswani
Thank you.
Operator
Thank you. We take the next question from the line of Jinesh Joshi from PL Capital. Please go-ahead.
Jinesh Joshi
Yeah. Thanks for the opportunity. Sir, I just have one bookkeeping question on debt reduction, which was at about INR190 crores in this year. However, if I look at our standalone debt, the reduction is about INR70 odd crores, whereas our standalone PAT number is relatively flat on a Y-o-Y basis. So just wanted to understand how the apportionment of repayment happens between the standalone and the consol EBIT — consol entity, given the fact that resides in fewer and considerable cash-flow generation will happen at the consol level. So just wanted some clarity on this.
Patu Keswani
So let me summarize this. Most of our old hotels are in Lemontree, the newer hotels are in floor. Therefore, old hotels which had balloon repayment are — so suppose there is INR300 crore INR350 crores of debt in Lemontree. I’m giving you very illustratively, it’s around that number.
We would be repaying INR70 crore, INR80 crores of that because the old hotels, our typical debt, is we take 15-year debt, first three years is a moratorium. Next three — next four years is like 15% repayment of principal, next four years is like 35% and the last four years, that is year 11 onwards is the last 50%. Are you with me so-far? So it is ballooned out. And the reason we do this is, one is we want a long tenure because these are — these are capital-heavy projects. And number two is the asset inflation of a hotel after 11 years is significant enough to drive a much higher repayment by generating much higher free-cash, assuming you are repricing at the rate of asset of inflationary growth.
So Lemontree has a much higher repayment. Has a — relative to capital deployed or loan taken much lower because those loans are all newer. Are you getting me? Me yes yeah so think of it this way lemon tree if we did nothing between lemon tree and floor lemon tree would get debt-free much before put number-one number two is that the you know some I think Webav or Sumanth asked this — I think Webav asked this question on the listing of floor. Once floor lists, basically we will have zero to very limited gross debt. In fact, one of the questions the Board will ask is what is an ideal debt-to-EBITDA ratio to carry-forward to optimize return-on-equity.
And that could be two is one. We are already at 2.57. So I think you know, this is an inflection point for our company, both from tailwinds, which is structural change from asset deployment, asset upgrade, technology upgrades, so on and so forth. So the way the balance sheet looks will start looking substantially different and better year-by year in the next two years.
Jinesh Joshi
Sir, just to clarify this a bit better, I mean, I just wanted to know whether the cash-flow generated from old hotels in Lemontree, is that only used to repay the debt at the standalone level or whatever we generate at the consol level is fungible and can be used to make payment at the standalone level that
Patu Keswani
Absolutely not fungible. At FLOOR, the shareholders of Lemontree only own 60%, 40% is with the Dutch pension fund. So there is no question of moving money from Lemon Tree to.
Jinesh Joshi
Understood. Understood. And sir, secondly, on the Hyderabad market, I think the RevPAR growth in this quarter is at about 9%, but some of your peers in this market have done well. So any specific reason you would want to call-out for a slightly lower RevPAR growth number? And also if you can just clarify why the tax-rate was a bit low this time around?
Patu Keswani
Firstly, who is up here according to you? We are not — all five-star hotels. So I think you’re talking of different segments. It’s like comparing the growth of economy pricing and business-class pricing in a sector. So first thing, please don’t do that. Number two is, you can use five-star hotel’s performance as a general proxy. Now the reality is that I think 20% of our inventory or 18% of our inventory in Hyderabad was shut innovation. It is the very — it is precisely what you were saying. It’s a very-high demand market and we shut the inventory.
So we were constrained in terms of supply, that is number-one. Number two, if you look at on a total growth basis, we really shut a lot of inventory in Banjara Hills, which is our hotel in the city center to renovate. As a result, the gross ARR in Q4 ’25 dropped by — by about 10% or 8% and revenue also dropped by — by 20% in that market because occupancy was down and rate was down because there was noise and renovation and so on.
Similarly, Lemon Tree Premier Hyderabad, about 5% of the inventory was shut. So when you look at it from that perspective, you’re not comparing apples-to-apples . And overall, I’m actually not very dissatisfied with the growth in Hyderabad because while the occupancy hardly changed because of inventory shutdown, I’m quite pleased that as an average market, our ARR there was 7,700, which is 10% over our national average.
Jinesh Joshi
Understood. Sir, and the tax-rate part, if you can clarify. And lastly, if I can chip-in just one last question, because we are targeting to take our retail share to about 65%, a rough ballpark number, if you can share what is the pricing differential between, say, the negotiated business in the non-negotiated business, even a rough indication would help. Thank you.
Patu Keswani
So in good times, the non-negotiated business pricing is much — I’m just giving you rule of thumb is much higher than negotiated. In bad times, negotiated and non-negotiated becomes the same and in summer, the non-negotiated, which is the retail pricing becomes much lower. It is entirely just think of it very simply as the following a high-demand period negotiated non-negotiated or retail pricing is like airline pricing it can be very-high and in low demand it can be very low contracted business or negotiated business is the same round the year so one actually offsets the other am I making sense to you yes and the ARR we report is a combination of the two.
Jinesh Joshi
Understood. Sir, only on the tax-rate part, if you can clarify, then I’m done. Thank you. Thank you.
Kapil Sharma
Yeah. So on the tax-rate, actually, you are right that this time the rate is coming lower and that is primarily due to the deferred tax adjustment, that is identification of the deferred tax assets. So as we explained earlier also that due to conservative accounting, we deferred the recognition of asset till there is a taxable profits available. So now we have started recognizing that’s why the tax — effective tax is coming lower.
Jinesh Joshi
Thank you. Thank you, sir. All the best.
Patu Keswani
I think in Q4 last year also there was a lot of — there was an annual excess and so it’s an annual excess in Q4. Yeah, is that correct? So even last year, Jinesh, in Q4 the tax for the quarter was lower than the year average. Is that correct? Yes.
Jinesh Joshi
Sure, sir. Thank you. Thank you so much.
Operator
Thank you. Thank you. The next question comes from the line of Prashant Kothari from Stock Market REIT. Please go-ahead.
Prashant Kothari
Hello, good afternoon everyone. Am I audible? Yes, you’re audible just wanted to ask about the IPO for hotels. We are retaining a majority, we are intending to retain a majority even after post listing, right, for fewer. So right now what are the plans to deploy the unlocked capital that we will be having from the listing.
Patu Keswani
I’m not sure we’ll have a majority or not, firstly, that is a function of Board and discussions. We may deconsolidate to show a very-high management fee income growth in that portfolio. So let me talk about see there are three there is a midpoint and two extremes of return in the hotel industry. If I do pure franchise, any income I earn is 99% flow-through. If I do management contracts, income flow-through is 80%, 85%. If I do and here the deployment of capital is practically zero. So this is one extreme, that is say one sigma. Franchise is 2 sigma.
At the other end is and there is zero risk other than reputational risk if you don’t perform. And the other extreme is asset ownership, where the EBITDA is very chunky, risk is 100%, capital deployed is 100%. Risk is 100%. In a JV, like ours with APG, we own 60% of the company but our effective economic share is 60%, which is ours, plus we take 15% of the revenue as between 10% to 15% of the revenue as management fee. So effectively our economic interest is 65% to 70%. Am I making sense to you?
Prashant Kothari
Yes.
Patu Keswani
Then, so as you go — suppose hypothetically we owned only 30% of. Then our economic interest would be we would get 30% of the EBITDA. So suppose the — the EBITDA was INR100 and we took 20 of it as fees. Then we — our economic interest would be 30% of the balance 80, which is 24 plus 20, which is our fees. So our economic interest is 44, but the investment is 50 or 30. So the lower the ownership and skin in the game and it should ideally be at least 25% in my opinion, but this is, as I said, subject to discussion.
The much higher-return on capital — our return on capital and equity we give to the shareholders of Lemontree. So the other funny thing is that the multiple on management fee income is a higher multiple than on asset, if you look at the Indian market. It is literally double. So if I take an asset of — which gives me INR100 crore EBITDA and and let me assume the multiple is, I’m just taking it illustratively is INR18. The valuation is INR1,800 crores of enterprise. But suppose out of that INR120 is management fee that is multiplied at 2x and the balance is multiplied at you see so it’s really this is a global standard and average of course it varies from country-to-country but broadly these are the rules.
So for the shareholders of Lemon Tree, we want to give very, very-high growth in EBIT — in profit. We want the market to evaluate. We want high-growth. We don’t want asset heaviness. We just want skin in the game. The other advantage of that is that if we create floor as a growth vehicle, then every asset it adds, we will have a good shot to get it to manage. So from every perspective, segregation of risk, segregation of return it makes sense for us to list clear.
Prashant Kothari
That I understood but whatever money we will be getting from the IPO, what Lemon Tree will be getting from the IPO, is there any plan for that, okay, how that will be utilized?
Patu Keswani
How would we utilize it doesn’t make sense for us to get money. It makes sense for us here to go debt debt-free. And so if you ask me and this is not discussed to the Board, I would expect to become very asset-light, very-high in profit and a dividend distributing company within the next year or two. It would need no capital. The only capital it would need would be perhaps in marketing spend and in technology investments and in distribution to very rapidly expand the network. And here would need capital for growth, for strategic growth and for growing that portfolio, which would be, by the way, from a governance perspective, we are very clear, it will be completely firewalled from Lemontree
Prashant Kothari
Okay. Second question, Infinity 2.0 and tech upgrades that were expected to boost the retail demand share from around 45% to 66% by CY28. So what measurable changes have you seen in the customer acquisition or repeat bookings or direct channel since the relaunch?
Patu Keswani
We have not — we had shut-down our website or have shut it down for upgrades. So in fact it dropped to be very specific. The loyalty program was also launched very recently. It went through multiple iterations. We wanted to be best-in-class. These are work-in progress. I think the way to look at it is what happens by the end of this financial year will be the final platform for — for me to give you a definitive answer of how this is changing.
But the intent is very simple Prashant. It is that we make it easy two clicks preferably it’s super-high in reward. It also offers multiple choices and the best possible rates to any customer in India
Prashant Kothari
Understood. Just one more question. Beyond rooms revenues, are there any strategic priorities for expanding on the non-rooms revenue side like bankets, F&B, co-working spaces or branding experiences.
Patu Keswani
So see if you look at global companies I think one interesting thing again speaking as a proud Indian is that there are finally companies in this country which can operate on a global scale. And as India’s economy grows and relative share of the economy increases in the global economy because we are growing at 3 times of the global economy, we are going to see some wonderful changes in this country, both in terms of domestic consumption, private capital expenditure expenses and in terms of our impact on the soft impact and economic impact on the rest of the world.
So where should Lemon Tree be? So let me take you through a the growth of normal large hotel companies, they all start with one brand like we did in one city like we did. If the brand does well, they start expanding that brand across a geography, which is normally their home country. The brand does better and their customers start traveling to other countries, they expand the brand to that country in order to follow the customer and offer them a brand they are — they are familiar with and like.
Over-time, these brands go up-and-down. So from, say, a three-star brand, which Marriott launched at, they went into four and five and two and one, but not one but two. So they started offering multiple price points to multiple customers who have now become familiar with their brand. So first, expansion is one brand, then all brands in their home countries, then markets where the customers go and ultimately they become global players. So an XY, access pricing, which is brands and geographies. Over-time, they start following customers into what I would losely call adjacencies, timeshare, holiday resorts, they go into, you know, casinos, they go into cruise liners, they go into service departments and so on.
So Lemon Tree, I have no doubt in due time will follow a similar strategy. I think we need to juice our brand where it is still underpenetrated and we want it to be dominant in its space. So that is our focus. It is a singular focus, adjacencies and monetizing it will come alongside. Okay, so now I can say we are focusing on the hotel part only, not on the adjacent side.
Prashant Kothari
Yes. Okay. Last question about the international survey. The Dubai property First International Survey, right? There is little — limited communication there. Are there any concrete plan for further international expansion?
Patu Keswani
Not strategic but opportunistic and fundamentally asset-light. So wherever Indians go, so I’ll give you — I think I gave this example a year-ago. You know 11 million — I think 18 million foreign arrivals come to India, which I think 7, 8 million are Indians only and the other 10, 11 are foreigners. But 26 million Indians go out. And we expect that by FY 30, it will become 100 million. So we have a good loyalty program. We have captured a large share of these customers. They are familiar with our brands. We have a positive outcome to offer to owners of hotels outside India, where these Indians go.
And I have absolutely zero doubt that we will be in all these places in the next three to five years.
Operator
Thank you. We take the next question from the line of Rohan John from Quantum AMC. Please go-ahead.
Rohan John
Yeah, hi. Thanks for the opportunity. Just a couple of questions. So on the Mumbai Hotel.
Operator
Rohan, I do apologize to interrupt you. Could you please speak up? Thank you.
Rohan John
Yeah. Hello, am I audible now?
Operator
Yes, please go-ahead.
Rohan John
Yes. So yeah, firstly on the Oraka Mumbai Hotel. How much of the business is currently coming from the crew segment?
Patu Keswani
The current business is I think about 190 crews. Yeah, about 25% road waste, 25% to 7% yeah.
Rohan John
So yeah, so the follow-up question on this is with the Tier-1 renovation, which is going to be happening. So do you expect any impact on your occupancies in the next two to three years maybe on your, Mumbai portfolio and even the premier Apple Hotel given this renovation is going to take a good two to three years.
Patu Keswani
No, firstly, Orica is not undergoing renovation, it’s a brand-new hotel. Oh, no, no, I’m also talking about the T1, the terminal one. So sorry. Well, it’s not visible because Orica, Bombay is doing a better than our portfolio in Q1. If I remember right, the portfolio is doing north of 70%, Orica is closer to 80%. So, so no, there is no impact. In fact, the outcome is positive. Generally, renovations we are a little — by and large the trade-off is we try and renovate at a time where demand is low, but given the fact that during renovation, rooms are shut for up to three months, we try and time it with where we think the displacement or the loss of — the opportunity cost is low.
So if we shut 25% of inventory. We expect the impact would be only on those days where demand is more than 75% or the balance inventory. So we do displacement analysis. It’s tech-driven. And I think by and large, if you ask me for a flat number, it would not be a material number of loss of revenue, maybe INR10 crore, INR15 crores, maybe INR20, but not much.
Rohan John
Yes, sir. Sorry, I think I wasn’t clear with my question. So the thing is that the T1, the Terminal 1 airport is going through renovation starting November. So asking whether that will have any impact on your Orica or Mumbai or the Lemon Tree Premier app.
Patu Keswani
I have no idea but I can tell you when they shut the — you know, I think it happened in Delhi and demand didn’t go down.
Rohan John
Okay, sir. Thank you.
Operator
Thank you. We take the next question from the line of Prateek Kumar from Jefferies. Please go-ahead. I do apologize to interrupt you, Pratik, but your audio is not clear. Could you please use your handset to ask your questions?
Prateek Kumar
Yeah, am I audible now?
Operator
Yes, please go-ahead.
Prateek Kumar
So my first question is on your region-wise mix of operating inventory today and how does it look when it goes to 20,000 rooms?
Patu Keswani
So as far as asset heaviness goes, where we have 5,760 keys, we are opening a 90 key Orica and Shimla and 160 key Orica in Shilong, which are two nice markets and these are resort markets. So our asset-base is currently still about 6,000. Where are we going elsewhere? It’s a mix of opportunistic and strategic. Opportunistic is wherever we get within these 200 cities, wherever we get opportunities, we just sign it and we add it to our network. As far as strategic goes, we’ve identified about 15 cities where we think we should be present because currently and going-forward, we — because of connectivity, they are close to an airport, either the airport is in the city or within two hours drive, the highways are coming up or have come up.
So when we can identify using multiple datasets, cities where there is a population, there is consumption, there is high-demand of outbound travel, that is people traveling from that city to the rest of India. We want a strategic presence there, which means we would look then at acquiring a hotel to manage or even lease because if we do that, then the benefit to the network is a very-high one. So think of it this way that if we have a hotel you know in — I’m using this example loosely in Ranchi and we discover that there are about 1,000 people from Ranchi who visit the rest of India every year and right now we are getting only five of them.
But with a presence, it will become 100, then we would strategically go into that city as quickly as possible. So when you look at this growth, I would say 90% or 95% of these 101 rooms we had, it’s 113 rooms. Well, as of Today, there are another 12 13 rooms — hotels we signed. But if you look at our pipeline, which is a little larger than our operational hotels now in terms of number of hotels. I would say about seven or eight are in cities which we hunted out and the rest are all over the place, all the 200 cities we want to be in
Prateek Kumar
Sir, my question was regarding recent announcements by some of the global companies which you would have seen, how do you see this having an impact on industry supply maybe a few years down the line? Thank you.
Patu Keswani
You know, I think it’s a good thing personally. I’m not talking only from a — from a Lemontree perspective. When a market gets more organized, pricing becomes rational, customers get used to better-quality. And then the high performers are the ones who are delivering that. Unfortunately, in India, 90% of the hotel rooms are not branded. In Europe, it’s 30% in America, it’s 70% branded. So this is a part of the natural evolution. I think what is unusual in India is such a large part of 15-odd — 15-odd lakh rooms is small hotels of 30, 40 rooms, which are really subscale.
So it does not make sense to manage it. So to just give you a number, if we charge 15 — say 10% of the revenue — 15% of the revenue of a hotel has fees, in our minds, 10% is for the brand and 5% is for management. So why if two-thirds of the fees of our franchise and these are very small hotels, why target that remaining one-third, where the effective cost of delivering management is more than the cost of — is more than the revenue we earn from it. So going-forward, all these international companies who are trying to announce or trying to get-in or have announced a growth in India, they are all equally foxed as to how to reach-out to these small hotels.
But it will happen. I have no doubt somebody will crack it. I think we are also fairly strongly positioned to crack it using technology and our keys brands. And those who do will be the big winners of the future because they will basically consolidate supply, which is unconsolidated, very fragmented and very poor in quality. And if they can manage to solve for that, it’s a — you know it’s a — it’s a massive opportunity.
Prateek Kumar
Sir, thank you. These are my questions.
Operator
Yeah. Thank you. We take the next question from the line of Vikram Shah from Vikram Securities. Please go-ahead. Hold per-line per. The person you are speaking with has. Ladies and gentlemen, if you wish to ask a question, please press star and. As there are no further questions, I would now hand the conference over to the management for their closing comments.
Patu Keswani
Thank you. Thank you all once again for your interest and support. We’ll continue to stay engaged. Please be in touch with our Investor Relations team for any further details or discussions and we look-forward to interacting with you soon.
Operator
Thank you. On behalf of Lemon Tree Hotels Limited concludes this conference. Thank you for joining us and you may now disconnect your lines