Thomas Cook (India) Ltd (NSE: THOMASCOOK) Q2 2025 Earnings Call dated Nov. 14, 2024
Corporate Participants:
Madhavan Menon — Executive Chairman
Mahesh Iyer — Managing Director and Chief Executive Officer
Debasis Nandy — President and Group Chief Financial Officer
Vikram Lalvani — Managing Director and Chief Executive Officer, Sterling Holidays Resorts Limited
K.S. Ramakrishnan — President and Chief Executive Officer, DEI Holdings Limited
Urvashi Butani — General Manager, Investor Relations
Analysts:
Aryan Jain — Analyst
Chetan Sharma — Analyst
Dhaval Shah — Analyst
Nirav Savai — Analyst
Deepak Lalwani — Analyst
Mithun Aswath — Analyst
Sukant Garg — Analyst
Akshat Bairathi — Analyst
Meet Shah — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to Thomas Cook Q2 FY ’25 Earnings Conference Call, hosted by IIFL Securities Limited. [Operator Instructions]
I now hand the conference over to Mr. Aryan Jain from IIFL Securities Limited. Please go ahead.
Aryan Jain — Analyst
Thank you, Joshua. Good evening, everyone. Welcome to the Thomas Cook (India) Limited’s 2Q FY ’25 earnings conference call.
Today, we have with us, Mr. Madhavan Menon, Executive Chairman, Thomas Cook (India) Limited, and the senior management team. Without much ado, I invite Mr. Madhavan to begin the call with his opening remarks, post which, we’ll begin the Q&A session. Thank you, all, and over to you, sir.
Madhavan Menon — Executive Chairman
Thank you. Thank you, Aryan. Ladies and gentlemen, a warm welcome to the quarter two FY ’25 earnings call of Thomas Cook (India) Limited.
Let me sort of kick off by first introducing my colleagues in the room. We have Mr. Mahesh Iyer, Managing Director and CEO of Thomas Cook (India) Limited; Mr. Vishal Suri, Managing Director and CEO of SOTC Limited; Mr. Vikram Lalvani, Managing Director and CEO of Sterling Resorts; then we have got Mr. Ramakrishnan, President and CEO of DEI. We additionally have Mr. Debasis Nandy, who is the Group CFO; and Mr. Brijesh Modi, who is the CFO of Thomas Cook (India) Limited; and, of course, Urvashi Butani, who is responsible for Investor Relations.
I’m going to sort of make my opening comments, and then hand over to the concerned people, so that we can sort of walk you through our numbers, so that you will have a better appreciation of some of the numbers that we reported yesterday. So, I think, we declared a reasonable set of results to the market, with a 9% growth year-on-year of the total income from operations, without the month-to-month — the mark-to-market number of the shareholding that we have in Quess.
Our operating EBITDA margin increased from 7% — 7.04% to 8.05%. The earnings per share — or if I talk of the operating PBT, we closed with INR1,063 million as against INR775 million in — for the same quarter in the previous year. But from an earnings per share point of view, we closed this quarter with INR1.39 as against INR1.01 in the previous year.
I think, the — while the performance has been good across all our businesses, barring certain businesses, the reality is that there are several challenges out there, essentially geopolitical and the economic slowdown that we are witnessing across the world. While we have built internal controls to mitigate and manage these risks, I think, it’s important that we recognize given the very diversified geographic nature of our businesses, one business or the other is likely to get impacted by this. And, I think, in the quarter, if you look at — in the quarter gone by, if you look at the results of DEI as well as Desert Adventures, to some extent, they have been affected by these geopolitical issues that surround — that exist in the Middle East.
In terms of consumer appetite from the Indian market, we continue to see sustained demand, especially if I look at the leisure business, both in the short-haul as well as in the medium — I mean, domestic markets. If I look at the foreign exchange business demand, our billings on the card have grown year-on-year, and this has supplemented the floats that we have as well as the margins that we have. If we look at the MICE business, it continues in both companies, SOTC and Thomas Cook, to report good numbers. So, I think — and, of course, most importantly, our destination management businesses, both the SITA in India — TCI, SITA in India, as well as all the other entities across, have started firing on all cylinders, and most of them with the exception of the United States, South Africa [Speech Overlap] — no, I mentioned, but South Africa and Allied Tpro, who go into — who are the Southern — in northern — North America and in the Southern Hemisphere, who go into winter. I think, these — all these companies will report a very good season based on the forward bookings that we have received.
I will end by saying, once again that, we see great benefit in the diversity of our geographical locations, that is the DMS businesses spread all over the world, with Thomas Cook and SOTC in the B2C space in India, you have got the B2C business out of Hong Kong and the rest being B2B, but we’re getting the benefits of that diversity in our businesses. And lastly, I think, the geographic spread again, I will reiterate that. I think that’s an important beneficiary for us during a period of crisis.
So, with that, I’ll hand over to you Mahesh.
Mahesh Iyer — Managing Director and Chief Executive Officer
Thank you, Madhavan. Good afternoon, everyone, and I will just take off from where Madhavan left, a quick summary on the numbers that we have at a consolidated level.
If you look at the income from operations, we grew by about 9% as Madhavan said from INR1,871 crores to INR2,043 crores. And what worthy here is to look at the PBT number, as Madhavan spoke about, the PBT margins, we expanded from about 4.1% to 5.2%, that’s about 110 basis points improvement on the PBT margin. If you look at the absolute number, we delivered a PBT of INR106 crores, which is more comparable with what you look at a seasonally very strong quarter, which is the April, June quarter. So, despite the fact that this is not a seasonally strong quarter, I think, as a Group we have delivered a strong set of numbers, led by the travel services, and within the travel services, the DMS operations, Sterling Holiday Results, and, of course, the MICE and the Corporate Travel business within Thomas Cook and SOTC. Noteworthy also to mention here is the foreign exchange services, which has had a very good run in the current quarter. And I’ll give some synopsis of that in the segmental review.
Moving on to the segment side of it. And if you look at the foreign exchange business, the income from operations grew by about 8% from INR77 crores to INR84 crores. I will call out here again, and as I have been saying in the last three quarters, if you look at the Q2 of FY ’24, we had the Bangalore Airport sitting in Q2 of FY ’24, which is not there in Q2 FY ’25, and hence, they are strictly not comparable. If — just to put a number to that, that INR77 crores had a INR5 crore of revenue sitting from Bangalore Airport. It didn’t have an impact on EBIT or EBITDA, purely because it was a break-even case, but it did have an impact on the revenue side of it. So, if you look at from that growth point of view, essentially, this growth will look more like a 10% or 11% growth.
If you look at the EBIT margins, they have expanded from about 37% to 48%. And if you recollect, we’ve guided the market to a 45% EBITDA margin — EBIT margins. And this 48% that we are talking about in the current quarter compares to the sequential quarter, which is the April, June quarter, where we’re close to about 50%, so we’ve been holding on to these margins, and sequentially, a healthy margin that we have.
Some of the key highlights on the foreign exchange business has been the growth in the retail business. Our overall retail business grew by about 23% in the current quarter, led by education, which is the overseas travel — overseas education business, which grew a strong 49% as compared to the comparable quarter last year. This was driven by a strong rebound in the U.S. market and also in the markets of Australia. Canada was subdued and, as you know, there is a lot that’s happening there, and we expect the impact of that to continue in the next year also. So, not much to be expected out of Canada, but, I think, markets like U.S. and others will catch up on the deficit that will come out of Canada.
If you look at our card loads, they increased by about 6% in the current quarter as compared to the previous quarter. So, we are talking about $250 million of load that we did in the current quarter. Now, if you look at from a run rate point of view, we are inching closer to $1 billion mark for the full year, and my expectation is that we’ll come very close to that number.
During the quarter, we also added two new currencies to our forex portfolio, forex prepaid card portfolio, which is Saudi riyal and New Zealand dollars, which means, now, we have more options for the customers to choose from. We’re also reducing the dependency on customers looking at currency note and preferring prepaid cards as an offering to go.
Speaking about the digital side of it, I spoke about it last time around, we’ve invested in a lot of technology, using technology not only as a route to get across to the customer, but also to manage productivity. Our app bookings, the forex app that we launched, has actually grown by about 119%, so a little bit on a small base. So, if you look at the number of transactions, same quarter last year, we were at about 68 transactions; we are at currently about 140 transactions. So, clearly, two times growth that has happened in that range in a limited period of time.
On the VKYC, which is the video KYC, I think, we’ve had about 1,350-plus bookings, which represents an 85% — or close to about 80%, 85% growth, and also high success rate, an 85% success rate on a digital mode, I think, is remarkable. And there are some fine-tuning that we still need to do on this process to make it far more seamless for the consumer. And we are working at it. WhatsApp, as I mentioned previously, again, which generally is used by most companies as a service tool. We are actually using it as a sales tool. We have close to about 2,000 interactions that happen on WhatsApp every day. We have about close to five times growth in the — in terms of leads and we have about 370-plus bookings that have happened through that [Phonetic].
Consequently, to these initiatives that we have taken, the EBITDA improved for the business from INR29 crores to INR42 crores and EBIT improved from INR29 crores to INR41 crores, and in a healthy EBIT margin of 48.8%. Looking ahead, I think, into the quarter of October to December, we believe, while there will be some softness that will come in the month of December, because a lot of travel is not happening during that time, or spends will rise as compared to loads, we believe that the business is poised to that 8%, 10% growth in terms of revenue and about 12% to 15% growth in EBIT, and our guidance to the EBIT margin on this business remains steady at about 45%.
Moving on to the travel vertical, as we have spoken about it in the past, there are two segments of B2B and B2C to it. And as you will realize, the pie consists of the MICE, it consists of Corporate Travel, it has got Holidays, and it has got DMS. So, if you look at it from an income from operations perspective, they grew 11% from INR1,432 crores to INR1,591 crores. That’s a strong growth of about 11% on a very high base. If you look at from an EBITDA margin — EBIT margin point of view, if you will again recollect, we guided the market for a full year guidance of close to about 5%. I’m happy to report that in the current quarter, our margin stacks at about 4.9%, this is at the backdrop of a very strong comeback on the DMS performance, as Madhavan and Debasis will speak subsequently. We have had some good accounts coming out of it. A lot of those units, which were either break-even or loss-making, have turned profitable and they are adding to the profit margins in the current quarter.
If you look at the mix of business, 25% — 24% of our business is B2C, and 76% is B2B, which consists of the DMS, MICE and Corporate Travel. If you look at some of the key initiatives that we have taken, or that’s helped the performance during the quarter, has been our range of product offerings for the customer, be it in the long haul or the short haul side of it. We guided the market last time around that we expect a bit of a longer summer this year, and we saw some shades of it in the July, September quarter. While long haul continued, it was not a very strong long haul, but, I think, the short haul and the domestic side of the business actually held the business very strongly in the current quarter. We actually saw the short haul business growing by close to 30% and the domestic business actually growing by about 10% during the current quarter.
You’ll appreciate that domestic is not the flavor of the season. People preferred the delay or rather the delay in travel that happened because of the elections in the April, June quarter. Actually, it resulted in travel happening in the July, September quarter. And hence, people prefer to do the short haul destinations of domestic. But if you look at the overall domestic portfolio on an H1 basis, we’re actually — the full year that we did for FY ’20, we are actually at the same level in H1 of 2025. So, clearly, I think, the comeback on the domestic side is very, very strong. The short haul side of the portfolio is also firing very, very strongly.
Our focus on digitization on this business continues. We’re trying to acquire customers digitally, and continue to do a lot of activation on the marketplace. You’d have also seen that we have gone to the market with our offerings on Europe for summer of 2025 with some attractive price points. And I believe that we are trying to excite the market as we prepare our journey for the long haul in FY ’26.
If I talk about the MICE businesses, I think, as you will again recollect, last year, we had the benefit of G20 and government events that happened during this quarter. Obviously, this whole year, we haven’t done any G20 or government initiatives. Notably so because of the election and some indecisiveness on their part. But despite that, our MICE business continued to grow, specifically mention of SOTC, where they’re having a record year this, where they will actually surpass all their previous numbers in terms of top-line as well as profitability.
As far as Thomas Cook is concerned, again, we are having a good year. My expectation is that we will close on a high on the MICE side this year also. If you look at the destinations that we have covered, right from USA down to New Zealand, I think, we have got customers traveling all across, which also says that almost all the markets are now ripe, and customers are choosing their destinations to travel, and we are making them to travel to.
If you look at the Corporate Travel business, again, if you look at the mix of the pie, you will look at it as a small contribution of 2%, but that’s because we only recognize the revenue here. And putting that call out, because this question usually comes out to us, saying why is it a small component. But if you look at the portfolio, that’s a very strong portfolio, that’s about close to INR650 crores-odd of volume every quarter. In that, volume has grown by about 13% in the current quarter as compared to the comparable quarter last year. We added six new corporate accounts during the year. Digital adoption has been very high. We nudged that by about 400 basis points, moving from 54% to 58%. Again, we have spoken about margin expansion as an opportunity on this business. If you see our non-air and car business, they have grown by 49% and 23%, respectively. I had mentioned this in my previous conversation also, our focus is on the non-air side of it, which is we believe the margin expansion will happen. And, I think, we have executed well on that front.
Overall, I think, it’s been a good journey as far as the travel vertical is concerned, both on the B2B and the B2C side of it. And we believe that the growth rates that we have indicated to the market will help sustain this in the medium term.
Debasis, you want to talk about the DMS?
Debasis Nandy — President and Group Chief Financial Officer
Yeah. Thank you, Mahesh.
So, as Madhavan said, and Mahesh also alluded to it, the DMS business as well as the inbound in India grew by about 20% during the quarter. Of course, this is not the season for the inbound business in India. The season really starts on October and goes on till early April. But nevertheless, in spite of that, it has a decent quarter.
The overseas DMS business grew very strongly, especially markets related to Southeast Asia, where you have entity called Asian Trails. We saw good growth in countries like Thailand, [Technical Issues], Vietnam and Malaysia, as well as — of course, as well as Singapore. Likewise, in U.S., our unit Allied Tpro [Technical Issues] strong growth in this quarter, largely because of Group travel. And South Africa delivers steady growth in this quarter, with focusing mostly on the Group travel as well as the MICE. Our unit in the Middle East, Desert Adventures, lagged behind, primarily because this was not the season for Dubai or UAE. This is the summer for Dubai, and also it did get influenced by the geopolitical tension that exists in the Middle East.
So — and in East Africa, the performance has declined slightly, because one of our key customers had gone bankrupt in the first quarter. We have spoken about that during last meeting that we had, and obviously, it is taking time to recover lost ground and find new customers to replace that volume. But overall, I think, it’s worthwhile saying that the DMS business has really sort of come back on its own. It has recovered greatly, and today, as a Group of companies, it’s a far cry from what it was when we took them over in 2017, that’s become profitable. And between the DMS and the inbound India business, they contribute to about 50% of the overall travel sales and volume.
I would now — with that, I would now like to hand over to Vikram Lalvani and his team in Sterling. Vikram can you take over from here?
Vikram Lalvani — Managing Director and Chief Executive Officer, Sterling Holidays Resorts Limited
Yeah, sure. Thanks, Debasis, and good afternoon, ladies and gentlemen. I’m Vikram Lalvani, the Managing Director and CEO of Sterling Holiday Resorts Limited. I’m based in Chennai, and I’m also joined by Mr. L. Krishna Kumar, our Chief Financial Officer of Sterling. It’s such a privilege to speak with all of you again today.
I’m pleased to announce that Q2 FY ’25 marks our 17th consecutive profitable quarter at Sterling. Q2 is typically the leanest quarter in the leisure business as we are all aware. Sterling has delivered a respectable EBITDA margin of 32.7%, up from 31.9% in the same quarter last year. Our EBITDA has grown by 25% from INR313 million to INR391 million, and our EBIT has increased by 24% in value terms, resulting in margin improvements of 80 basis points and 50 basis points, respectively.
From a turnover point of view, we’ve grown by 22% reaching close to INR1,200 million. During this quarter, we also took the opportunity to ramp up our inventory supply, and we’ve added and opened five new resorts in the previous 90 days. This brings our total resort count now to 54 resorts across 47 destinations in India, and with over 3,000 rooms. So, quarter two, actually we had two milestones achieved. One is the 50 resorts, and the second is 3,000 rooms. I’m also pleased to announce that we’ve achieved these two milestones in quarter two by September 30th of this year.
Just to give you a sense of indication as to how the ramp has taken place, in the last 18 months, we have added practically on an average one resort a month. We remain committed to our focus and strategy of expansions to an asset-right model, thus adding two [Phonetic] revenue lines going forward. And we have a pipeline of another 23 resorts in the pipeline, slated to open in the next 18 months. We will continue to invest in strengthening our leadership, given the ramp that’s coming in the next couple of months, investing in pre-opening leadership teams, and shall also continue to invest in the right opportunities involving technology and processes for efficiency and scalability.
As you are aware in the past, we had putting a lot of investments in revamping our entire ERP system, the back-end and changing our entire property management, the front-end. Apart from that, we’ve also launched Sterling One, which is our proprietary digital distribution platform, and we are now investing also in leads generation platforms as we go ahead. In quarter two, our occupancy rate was 49%, which includes the new resorts added during this quarter in a staggered manner over these 90 days, with over 250 as a room base. So, therefore, there was an increase in 8% in the total inventory. We sold 124,000 room nights in the quarter, when compared to 113,000 room nights in the same quarter last year, and we maintained a healthy average rate despite a lean season of INR5,400.
Our F&B revenue has shown a strong growth of almost 18% year-over-year, driven by increased participation in dining at our resorts. F&B, our food and beverage, remains an important area of focus, and we expect it to contribute to our top-line as well going forward in the coming quarters.
We continue to remain debt-free and with healthy cash reserves. As previously communicated, we sunset the acquisition of members for our long-term membership product, that is the 25 years in July 2023 as part of our shift towards ramping our hospitality segment. This strategy also enabled us to expand our number of resorts quickly, and on an asset-right model. Just to give you an indication, again, that last year same time, we had 41 resorts, and today, we have 54.
I would also like to share that with effect from September 2024, we have also sunset the acquisition of new members for our short term membership product, 10-year — which is a 10-year term and have significantly reduced its member acquisition activities during this quarter. As a result, Sterling will no longer acquire new vacation ownership customers, but will continue to service our existing eligible member base by focusing also on growing our hospitality business.
On the customer satisfaction front, we have seen significant improvements in our Trip Advisor ratings. 65% of our resorts are now ranked in the top five in their respective locations, and 25 resorts hold the number one position in the market. Looking ahead, we expect our Q3 to be a strong quarter, given the holiday season that’s kicked in and the wedding season as well. On a longer term basis, we continue to remain optimistic on a growth trajectory. We expect the demand to continue to grow at a CAGR of approximately 10% over the next few years and driven primarily by a strong domestic demand growth of 20% that’s where Sterling’s major focus is.
We are excited about our ongoing portfolio expansion plans as well. That adds on to new lines of businesses on the top-line and shall continue to focus on delivering strong financial performance and enhanced customer experiences in Q3 as wells as in Q4 [Phonetic]. Thank you.
Debasis Nandy — President and Group Chief Financial Officer
I would now like to pass on — hand this over to Mr. Ramakrishnan, who will talk about DEI.
K.S. Ramakrishnan — President and Chief Executive Officer, DEI Holdings Limited
Good evening, ladies and gentlemen. My name is K.S. Ramakrishnan. I’m the President and CEO of DEI.
We, at DEI, have had a fairly challenging, but anticipatedly challenging quarter. It’s not our best quarter in the year always, particularly because most of our business is in the Middle East, and it is the warmest month in the Middle East for that matter. Our revenue has dropped from INR235 crores in the previous year’s quarter to this year to INR210 crores — INR209 crores. This drop has been largely due to the — largely due to one of the U.S. operations closure. Looking into the profitability, we had decided to wind down the U.S. operations, which had a revenue gap and has a clear effect on cost until the last quarter of this year.
The geopolitical situations, as quite a few of my past colleagues have mentioned, has not been in our favor in the Middle East, and Maldives in particular. But with the U.S. Presidential elections off the back, we are anticipating the environment to get a bit better. To hedge ourselves, we have focused a lot on our — acquiring more accounts in the Far East. For example, we have grown the Indonesian market by 50% this year, which will continue to be accretive [Technical Issues]. In our business, typically, when we start — when we expand into new partnerships, it takes about two quarters to three quarters, [Technical Issues] delivering profitability on the same.
As we hit the peak season this quarter, we believe the pent up travel from the Western tourists will be hopefully in our favor both in the Middle East and Far East. To add to this, the quarter also has been challenged with again a planned double cost that comes to us on our technology implementation. This would probably continue for another quarter or two as we go live on the second half of next year fully with our new technology solution. Over and above this, the good part of the business has been that we have had some successful renewals of 13-odd partnerships between UAE, Maldives, Malaysia, Singapore and Indonesia. More than 80% of our key partnerships that was due for renewal for 2024 has been renewed. There are 14 new partnerships signed in the UAE, Maldives, Malaysia. Particularly in Indonesia and China, we have had about eight new partnerships signed up. Nine of these partnerships have already been launched as operations, predominantly in Malaysia, Indonesia and China.
On a concluding note, this while is not — is an aberration, as I call it and will be there for a quarter or two, but would not be a norm. We are very hopeful that the future looks much better than what it was in the past. Thank you very much.
Debasis Nandy — President and Group Chief Financial Officer
Madhavan, may I request you to make some closing comments before we start-off the Q&A?
Madhavan Menon — Executive Chairman
Okay. So, I think, I’ll draw your attention to the last paragraph in my statement made in the press release is that, so far, our primary — our first priority was recovering the business volumes, and our focus looking forward is on ensuring sustainable growth and profitability. I think this is an important point that I would like to reiterate, because it does allow a degree of change in our focus. Thank you.
Urvashi Butani — General Manager, Investor Relations
We’ll now open the floor for Q&A.
Questions and Answers:
Operator
Thank you so much. We will now begin the question-and-answer session. [Operator Instructions]
The first question is from the line of Chetan from Systematix. Please go ahead.
Chetan Sharma
Yeah. Thank you for the opportunity, and congratulations to the team on the good set of numbers. My question is on DEI, like, where all our businesses are showing steady growth, DEI has seen a high-single-digit decline in the first-half of the year. So, what kind of growth and margins can we expect for the full year and for FY ’26?
Debasis Nandy
First of all, I think, before I hand over to Ram, let me also just remind everybody on the call that it is not — against our policy to make forward-looking statements. So, we can talk about the performance of this quarter, for which this call is intended, and we can talk in general without any numbers about how the business is shaping up in the current quarter. But if you want definite guidance in terms of numbers for the rest of the year or even the year after, we would be constrained to avoid that. Thank you so much. Ram?
Chetan Sharma
Yeah, qualitative guidance would do.
Debasis Nandy
Thank you.
K.S. Ramakrishnan
Yeah. So, to answer you, the — as I said, the last quarter, in fact, the last two quarters are not our best quarters. Our best quarters are the quarter — the next quarter, that is October to December and January to March. From that perspective, fundamentally, our business is looking robust and strong from our operational perspective. We did close U.S., and that was a sizable reason. The reason we closed was, it was not profitable. We took that call to make sure that we focus towards only profitable businesses. So, on that aspect, I think, we are staying pretty comfortable.
As I said, one of the biggest reasons was the geopolitical scenario. 50% of our business is focused between Middle East and Maldives, and that, I guess, I won’t have any foresight on how quick it will get settled out. The current trend looks that it’s getting better, and hopefully, we should not have the same thing recurring next year. As far as future goes, we are, as always been focusing on growing our business, we have been signing new businesses all the way through for the last couple of years, and that will continue.
Chetan Sharma
Okay. Thank you. And one more question, what is the cash for the business, excluding the restricted cash for forex as on the end of the quarter?
Debasis Nandy
Okay. So, we have over INR1,800 crores of cash on our balance sheet, on which about close to about INR1,500 crores is on account of the float. So, the balance can be considered to be unrestricted. And by the way, I would also like to mention the BPC cash is not really restricted in terms of — yes, it is restricted in terms of long-term usage. We cannot use that money for long term, but it is perfectly within the rules to use that money for short term purpose for managing working capital.
Chetan Sharma
Okay. Got it. Thank you.
Operator
Thank you so much. The next question is from the line of Dhaval Shah from Girik Capital.
Dhaval Shah
Yeah. Hello, am I audible?
Debasis Nandy
Yes, you are.
Dhaval Shah
Yeah. Hi. Hello, sir. Excellent set of numbers across the segments. I have a couple of questions. Sir, first question, a book-keeping one. Sir, what is the India outbound number for the quarter, which was INR610 crores last quarter?
Mahesh Iyer
Dhaval, this is Mahesh. Thank you so much for the compliment on this performance. With that number that you are referring to is INR385 crores.
Dhaval Shah
INR385 crores. This is including both long and short, right?
Mahesh Iyer
Excludes domestic.
Debasis Nandy
Excludes the domestic part.
Dhaval Shah
Yeah, exclude domestic, this is outbound India, including long haul and short haul?
Debasis Nandy
Yes, including long haul and short haul, yeah.
Dhaval Shah
Got it. And sir, my second question is, on this — on that RBI, some paper which was floated, I forget the name, which was — we should have basically led to consolidation in the forex market. So, any new development happening on that, you would like to highlight?
Mahesh Iyer
Dhaval, we haven’t heard on that. We understand that there have been conversations. And if I to just look at as an indicator for that, in the recent past over the last two quarters, RBI has been cancelling a lot of FFMC licenses, and there will be multiple reasons for it, not saying this is directed towards that policy only, but I think a lot of cancellation that I have seen indicates that RBI is striking to move in that direction, but I am conjecturing at this point, and I don’t have data to do that.
But on the specific policy that we referring to which is around consolidation and trying to govern a few set of entities, there has been no fresh update, either from RBI or no discussion paper. Obviously, there was a discussion paper that was rolled out. And as industry participants, we have participated and given our view also on that.
Dhaval Shah
Got it. And sir, my third question is on the — again on the outbound travel. So, broadly, when we talk about upgradation of the consumer, more premiumization. So, in our business — outbound business, how do we see a customer upgrading? So, one is, taking its first foreign holiday, or it could be taking one more holiday, and within that foreign holidays, do you see a trend, where they are upgrading from your, say, different categories of packages, an upgradation within that, anything just to understand the trend of how the spending is changing over the last three-year period?
Mahesh Iyer
So, last three year may not be a good comparison at this point in time, purely because we have seen only recovery coming from ’23 and we are in ’24, so I really don’t have a ’22 data to comment on, Dhaval.
But, yeah, just to give you a sense on how the market behaves, typically, we can acquire customers as first time holiday seekers going overseas, or they could be domestic travelers. You will appreciate that Thomas Cook was not a dominant domestic travel player prior to 2013-2014, it’s only in 2013-’14, that we started to do some noise around this business, and we build it to scale at this point in time.
And India is a very disbursed large market, so we are not relevant at every place. We are looking at certain markets, certain states, and then we are very focused on those, and that’s where we want to continue to build, because otherwise, we’ll be very irrelevant and a small market share in many of those parts where people travel to. So, we have chosen our space where we want to be, and we are wanting to stay relevant to that market, that’s point one.
Point number two, from a customer lifecycle or a customer journey point of view, typically, it could be acquired as a domestic customer, who then probably will take a short haul trip with us and then migrate to become a long haul traveler. Even if he comes to us as a long haul journey, he may probably start with a group tour around Europe, and then probably go to U.S. and Australia again on group tour. And in most cases, what we see is that people who actually have gone on a group tour either to Europe, then become an FIT customer and you want to do a little more deeper to understand the culture, experience the culture, food and others in those specific countries. So, that’s the journey typically customer follows.
Prior to the pandemic, we used to have about 2.5 times, I mean, that’s the kind of repeat ratio that we had for a customer. We have not been benchmarking that today. Obviously, we have to have two good seasons behind us to kind of start tracking that again. But probably, somewhere in FY ’25-’26, we should be able to start projecting those numbers again.
Dhaval Shah
Interesting. And lastly, sir, this Cox & Kings has been acquired by a PE. And so any comments you would like to give with regards to, what you expect in terms of competition, and they have acquired couple of Indian brands also, those packaging — holiday package brands? So, any thoughts on that? Because — so, while we — last two years, when we were discussing about the players in Indian market, there — as the two players, SOTC, we acquired, Cox & Kings was out, and now that old brand is coming back to the market. Maybe it will take some time, but any thoughts on it?
Madhavan Menon
Dhaval, it’s just an announcement of that having acquired the brand. I think it’s too early to make any pronunciations about how successful the brand will be at this stage. So, I think, we will refrain from commenting on it. Let’s wait and see. I mean, This market is big enough for another start-up. And I’m using the word specifically start-up, because the owners of the old brand are not the owners of the new brand. This is in a completely different environment, so we have to see how the start-up functions.
Dhaval Shah
Interesting. And any inflationary pressure do you see on your cost going forward?
Mahesh Iyer
So, Dhaval, not really. Actually, if you see, as I mentioned, if you look at our EBITDA and EBIT margins, we have been holding steady on our gross margins, or rather improved in some cases, like on forex, we have improved by about 10 basis points. If you look at the holiday or the B2C side of it, we improved by about 50 basis points. So, we are seeing some expansion on margin. No inflationary pressure at this point in time. And I think we have been fairly good in terms of managing our costs also, and discretionary cost, where it has to be. I think we have been very cautious about how we spend our money.
And as I said, our focus has been on the digital adoption. We have been spending money on the technology side of it, improving productivity. So, we are trying to fine-balance that, so that the inflationary pressure, it will come by some point in time. But, I think, we are managing it even better. I mean, just to give you a case in point, if I look at the H1 numbers, or rather the cost numbers, they still trend 15% below what we were in FY ’20. So, yeah, I think, to that extent, we are managing it fairly well.
Dhaval Shah
Yeah. So, also…
Madhavan Menon
Dhaval, I’ll also add that some of the input costs in our industry have been high for some time, especially air-fares and hotel rates. So, these are stabilized. So, any inflationary pressure in terms of the costs other than maybe salaries, in reality, may not be significant.
Dhaval Shah
Yeah. Sir, this you meant for domestic, hotel and air-fare, or overseas also?
Madhavan Menon
Internationally, as well as domestically, air-fares are fairly stable. If you look at the last couple of quarters, air-fares have been stable, hotel rates, while they are going up in certain markets, in reality, they are more seasonal, otherwise, they have been stable. So, I think, their contribution to inflationary pressures will be limited. I’m not saying they will disappear completely, but it will be limited, to say the least.
Dhaval Shah
Understood. So, in that context, generally, if we compare some domestic destinations, the air-fare plus the hotel is expensive than going to Southeast Asia, or going to Dubai, or somewhere in nearby on a short haul outbound. So, are you seeing a trend, more and more trend? We have been discussing this since couple of quarters on the call, but you see that trend continuing and increasing where customer is making a comparison and then taking an outbound package?
Mahesh Iyer
So, Dhaval, people do that comparison, they will compare a domestic versus a short haul to that extent. But please remember that when you look at the domestic in the price point that you see high, either whether it’s on the hotel or it’s on the air-fare, this is all more like the weekend, holiday, long breaks, kind of a period. There are the shoulder months, or the shoulder weeks or shoulder days, where you actually don’t find that kind of a high price.
I mean, the data point that Madhavan was also referring to is that, if you look at our corporate travel, and that’s a good barometer that we use, if you look at the average ticket price on the domestic side, they have remained flat compared ’23 to ’24. On the international side, actually, we have seen close to about a 1% dip, and this on our average price. There will be the separation that you will see on certain destination, on certain segments, but overall, I think, they have remained flat.
Dhaval Shah
Okay. Great. And sir, on MICE, how many — in terms of the corporate holidays, what we do for our — for corporates, that would — how many new customers you would have added in last one year, any data point you can share?
Mahesh Iyer
Not offhandedly, but I guess, if I have to just do a quick backup done, look, I guess, we would have added about 20, 25, 30 customers to our portfolio.
Dhaval Shah
Okay.
Mahesh Iyer
On an average, two customers a month. I think, that’s the kind of run rate we run.
Dhaval Shah
Got it. Okay. Thank you very much, sir. Good luck.
Operator
Thank you so much. The next question is from the line of Nirav Savai from Abakkus.
Nirav Savai
Hi, team. Thanks for the opportunity, and congratulations for a good set of numbers. So, my question is pertaining to this other income [Technical Issues]. Is it mainly related to the forex float which we have, or any breakup if you can provide?
Debasis Nandy
The — largely — hi, this is Debasis here. Okay. Largely, the increase in other income, which has gone up from INR27 crores to INR43 crores is contributed by the additional interest on the bank deposits. INR8 crores out of the INR16 crores comes from there. And there is some exchange gain on foreign currency transactions, which is contributes to the balance. There are some pluses and minus here and there. I’m not getting into the small numbers, but these are the two primary reasons.
Nirav Savai
So, generally, on every quarter basis, we see some fluctuations happening, because you put forex part separately, and then there is other income apart from the forex part. So, how do we see this going forward, at least for FY ’24, excluding the forex part, any number if you can help us out with?
Debasis Nandy
I can’t give you a number, but as a principle, again, it’s very easy to say that the interest and bank deposit will continue and actually will rise with the volumes, because the Company has a lot of cash, which it’s trying to deploy in safe deposits with banks and other places. And therefore, the returns of that will continue to increase the other income.
Of course, things like exchange gain is something that we can’t predict, that would obviously fluctuate quarter-on-quarter, but the bank interest and deposits will continue.
Nirav Savai
All right. And the second one was on the tax rate side. In the last call, you had alluded that you will continue with the previous regime for FY ’25, and how long would this continue, even for FY ’26, we’d be having higher tax rate, or how do we see that?
Debasis Nandy
So, you need to consider the fact that Thomas Cook is not one company. We are talking about multiple companies in the Group. In — for example, there are four companies in India, four large companies in India, or rather I can say five. All of them have shifted — except Thomas Cook, the others have shifted to a 25% tax regime. However, Thomas Cook is in old tax regime because of reasons which I have spoken, and you are also aware of it, because of carry-forward match benefits, etc. And it will take us another couple of years to sort of utilize that and move out of it.
Thomas Cook continues to as — on a standalone basis, continues to be the most profitable and, therefore, the tax rate, the Thomas Cook pay, plays a significant role in determining the overall effective tax rate. And, of course, the overseas entities have taxes at various rates, that also has a role to play in the overall ETR.
Nirav Savai
So, I understand the overseas would be relatively much lesser than 34% we are paying here, right?
Debasis Nandy
May not be, actually. I mean, we always think that taxes overseas are lower. It may be lower in places like U.S. for example, when the last President brought it down. But there could be higher in certain other destinations.
Nirav Savai
Okay. So, overall, at consolidated level…
Debasis Nandy
Finally, I think, one thing that — I started off with this, and let me also end with this. I think, one thing that we need to keep in mind is, what is the contribution of Thomas Cook as a standalone entity to the overall PBT. If I take the current half year, it’s easier to do it on a half year basis. If you look at the entire half year, the total PBT is about INR219 crores, out of which about INR125 crores has come from Thomas Cook. You can see that reflecting in our standalone and the consolidated results.
So, Thomas Cook effectively is more than 50% of the total, and Thomas Cook tax rate is about — effectively on about 35%. So, therefore, that has a bearing on the overall tax rate. And is that — does it make sense or should I…
Nirav Savai
So, I think, the subsidiary performance and international companies would have also become profitable now, which were not there, particularly last year.
Debasis Nandy
I think, there is also a seasonality matter, like, for example, seasonality matter, so, in some — in a given quarter, some units may be profitable, but other units may not be. So, even in a — like, for example, let’s talk about TCI, right? In — TCI will not be profitable in the first six months of the year because the season starts from October. Likewise, Desert Adventures in the Middle East will probably be profitable only in the last six months and not in the first six. So, there, always the fluctuations exist. So, what would finally matter is, actually, the overall tax rate for the year, rather than going quarter by quarter.
But for guidance, you can consider it to be in the range of 30%, 32%, 33%, because Thomas Cook will continue to have the highest weightage.
Nirav Savai
Right, sir. But 32% is something which you feel at consolidated level and annual basis, it should be?
Debasis Nandy
Yeah. There could be a percentage here and there fluctuation, but by and large, that’s the guidance.
Nirav Savai
Right. And lastly, what could be the total value of land which we are holding now?
Debasis Nandy
Vikram, would you like to answer that question. What is the total value of land held by Sterling?
Vikram Lalvani
This is what we have. It’s close to INR500 crores.
Nirav Savai
Okay. And Sterling would not be using it, as the asset light model is something which will continue going forward?
Vikram Lalvani
Yeah, we are using an asset right model right now. When we get into green fields, we will evaluate at the right time when to get into green fields. I think, the opportunity is there right now to ramp the portfolio using an asset right model, because that’s a faster way of ramping, number one.
Number two, even in our existing resorts, our own resorts, we have potential to sweat the asset. For example, in our Kodai Valley, we have 108 rooms, but we have actually built the entire back-end for 150 rooms. So, this incremental capex that’s required to expand even in some of the current assets. So, those are the priorities right now. As and when we get into a green field, a possibility or feasibility, we will certainly look into that. But right now, the focus is on the first two.
Nirav Savai
Right. Got it. All right, sir. That’s it from my side.
Operator
Thank you so much. The next question is from the line of Deepak Lalwani from Unifi Capital. Please go ahead.
Deepak Lalwani
Hello, sir. Thank you for the opportunity. Sir, my first question is on the B2C travel. We have recovered about 60% versus our pre-COVID levels in the first half. So, can you provide an outlook on this number going forward?
Mahesh Iyer
Deepak, hi, Mahesh here. I think, we have been talking about it in the last two calls again, and I will repeat this. Look, the patterns of travel have changed. Our guidance remains to the fact that we expect this to recover close to 85% to 90% for the full year. We are not changing that guidance at this point in time, unless something changes in the external environment. The mix of the business definitely will change. While it was driven by long haul in the pre-pandemic, it’s driven more by short haul and domestic now. I think, we remain committed to that range of 85% to 90% recovery to the pre-pandemic at this point in time.
Deepak Lalwani
Understood. And sir, we were earlier indicating a higher number. So, this 90% recovery, so, how should we read this number? Is there a challenge on our market share and relevance of a product, or…
Mahesh Iyer
No, it’s got nothing to do with market share. I think, you must realize that we have to sell what the customer buys. If there is no demand for the long haul, or if there are challenges around visa and others, we will not be trying to push that market, because we will be spending marketing dollars trying to create a demand for — which doesn’t exist in the marketplace. So, clearly, we have to go out with products that customers buy. I mean, today, if you look at the social media, people are talking about destinations like Baku, Azerbaijan, Georgia, Vietnam, and I think, that’s the flavor of the season. So, I’ll rather put my money where the mouth is, rather than try and splurge the money on destinations that are currently not seeing traction, that’s point number one.
Point number two, I think, Madhavan spoke when he was talking about the B2C business, because B2C also includes Hong-Kong. Now, in terms of recovery on Hong-Kong, because its dependency on the China traffic, we expect the recovery on Hong-Kong only to be at about 50% for the full year, or maybe 55%, 60%. So, there is some shortfall that’s coming out from there. But from an India business point of view, you actually see the recovery to be closer to that 85%, 90% that we have been consistently maintaining at.
Deepak Lalwani
Understood. And sir, your growth in DMS business is actually phenomenal. So, what is backing this growth? What is the company doing, the initiative if you can explain, that would be helpful. And what — and should this growth rate sort of continue basis your initiative that you have taken?
Debasis Nandy
So, I will take that question. Debasis here. So, we have executed a turnaround strategy for the DMS business, and we started this process soon after we acquired the units. But obviously our effort got delayed because of COVID. But now, post-COVID, we have been able to execute the strategy that we had in mind, which consists of several things actually.
Very, very briefly if I talk about the key initiatives, it was around rationalization of cost, which was about automating — rationalization of cost, automating the entire business, and also finding new customers from new source markets. So, this has been executed over a period of time, and we are now seeing the benefits of that. So, this is not something that will, it’s not a flash in the pan. This is going to be a sustainable thing. It’s an initiative that will sustain over a period of time. And therefore, we do not see any reason why the growth rate would dip.
Of course, if there is geopolitical disturbance like what we have seen in the Middle East, those sort of disturbances will happen. And honestly, we cannot do much about that. But at an overall level, I think, the growth will continue. This is what Madhavan also alluded in his opening remarks. This actually shows the benefit of having a diversified portfolio, a geographically diversified portfolio to be precise. So, even if one part of the — one region is affected by circumstances beyond our control, the other units will continue to flourish.
Deepak Lalwani
Sure. And thirdly, sir, my question is on the Sterling business. We have done well on the cost side. Sequentially, our costs are down, despite opening new resorts. So, how should one view the cost line item and the EBITDA margins for the segment?
Debasis Nandy
Vikram, you may like to answer the question?
Vikram Lalvani
No, I’m so sorry. Can you just repeat the question again please?
Deepak Lalwani
Yes, sir. So, our costs in the Sterling business are down sequentially despite opening new resorts. So, how should one view the cost line item and the EBITDA for this segment?
Vikram Lalvani
Okay. See, if — we open five hotels this quarter. But a lot of the investments in those five hotels actually were executed in quarter one, I would say, in the months of May and June, because lot of these hotels would open July, August and September. So, a lot of large portion of these costs are actually consumed in quarter one, which gets reflected in quarter one. So, as and when we open these hotels, we don’t incur that expense of pre-opening only on that day when you open it, we actually incur it at least 30, 60 days out.
So, therefore, when we opened five this quarter, we actually did see that impact in May and June. And as you are aware, in quarter one, April was a very bad month for various reasons. So, therefore, the — most of the investments have actually happened in May and June in terms of pre-opening. So, similarly, this quarter, we are looking at opening two or three hotels, which we have already taken that cost. In quarter four, we are looking at possibly five or six hotels to open, so which means that at least 30, 60 days out, the typical pre-opening cost starts kicking in until you open the resort, and then you are able to monetize that result. So, does that answer your question?
Deepak Lalwani
Sure, it does. And sir, what should one look at the EBITDAs for the segment? Because on the last year basis, in Q1, we were down. So, for the full year, what should one look at?
Vikram Lalvani
Yeah. Again, I’ll not give a particular guidance number, but let me tell you that while we saw the headwinds in Q1, we were still — while we may have been down even over the last year, we still maintain a healthy EBITDA of 33% despite the seasonality impacts even in Q2, we’re about 30%, 32%. And most of the hospitality industry that anything between 31% is a very, very healthy EBITDA.
So, even going forward, depending on seasonality, if you look at it from a hospitality point of view, we will be in the range of how the hospitality play is at this point in time. Obviously, we will try to have a premium over the rest. If you have to see Q3 and Q4, they are much better quarters overall compared to Q2. Q2 is always a dangerous quarter for leisure, and weather could also play the spoil sport. This year, thankfully, only it’s happened in one small region. It did not happen in most of the other regions as well. So, that’s how it’s panning out to be.
Deepak Lalwani
Got it. Thank you, sir.
Vikram Lalvani
But we will continue to invest in leadership and in this reopening that will happen, because these keep adding on to the revenue lines. And in most of these cases, it was mentioned, when I had opened most of these resorts in March and right up to Q1 and into Q2, we are — in those regions, like Rajasthan, where we needed to ramp, which was traditionally not the season at that time, but we had to open those hotels, other which ways, you would miss the season even this year. So, which is why we have seen the ramp in those hotels from October onwards.
Deepak Lalwani
Sure. Thank you, sir.
Operator
Thank you so much. The next question is from the line of Mithun Aswath from Kivah Advisors. Please go ahead.
Mithun Aswath
Yeah. Good afternoon, sir. Just wanted to get a sense on the travel related business. You have seen improvement in margins despite this quarter revenues being lower quarter-on-quarter, and not really being the season. What actually drives your margin? Because, obviously, last quarter was slightly disappointing in a more seasonal quarter, but this quarter, in a non-seasonal quarter, your margins are higher. I’m just trying to understand, for us, to judge how margin trajectory will move, what are the monitorables that we should follow?
Mahesh Iyer
Mithun, hi, this is Mahesh here. First, I’m not sure why you treat this as the last quarter not being a good quarter. I thought we had a strong set of numbers that we delivered in a traditionally strong seasonal quarter. So, I think, I would like to stand that corrected on that one.
On the point of saying what has worked in the current quarter, I think, we have spoken about it in the initial field also, and I think Debasis also spoke at length about it when we spoke about the DMS business. There are two or three trajectories that have helped the margin improve in the current quarter. And I’m specifically referring to the EBIT margins which has moved up from close to 3.9% to 4.9%, that’s 100 basis points improvement. The drivers for it is obviously the DMS business. And I’m talking in the order of priority. DMS business, because some of them were either loss making or break-even, they have all started to make profits. So, those are added to the profitability straight on. So, incremental revenue has gone into incremental profit also. Cost base remaining the same.
Also, if you look at the B2B and B2C businesses within India, I think, they have registered a strong growth. They have had 11%, 12% growth in some of the major markets, and they have also expanded their margins by about 30 basis points to 50 basis points, all of which has added to the increase in the EBITDA and the EBIT margins. Also, to mention here, we’re — our focus has been on productivity improvement, technology enhancements, all of this which helps in reducing or keeping on cost constant on an higher increasing revenue base.
Mithun Aswath
Right. I’m just trying to understand in the first quarter, we didn’t see as strong a EBIT margin. So, is it that the seasonality of the DMS businesses will actually kind of drive the quarterly differences in EBIT margin. That’s what I am just trying to understand, or is this structurally an improvement which we will see quarter-over-quarter now?
Mahesh Iyer
So, Mithun, the way we have said it, and you will recollect, and I will request that you look at the transcripts of our previous call, we have guided the market to a 5% range on the EBIT margin for the travel business as a whole. Now, you will appreciate that there is B2B, B2C in it and there is seasonality of business sits in within India and overseas DMSs. So, obviously, we will find a quarterly fluctuation that will happen in this. But overall, we will look at for the year, it should end up at closer to that 5% mark, which is what our guidance to the market is.
And clearly, as I said again, the drivers for it is, the margins previously did not stack up because some of this overseas DMS weren’t in the profitability, and now they have started to become profitable, and they will continue to add to our profitability going forward. There will be some seasonal impact that will come in, but our guidance to the 5% range remains good.
Mithun Aswath
Right. So, when you say 5% range, we are almost hit that or do you say the overall for the year will be 5%, so the next two quarters will be better?
Mahesh Iyer
We are not saying that it will be better, but we are saying that we will work towards a 5% range for the overall travel segment, I think, that’s the guidance. So, you will have a quarter where it will look like a 4.2%, 4.3% because of some markets not firing or some business not firing, but overall, I think, our endeavor is to push the margin towards a steady state of about 5%.
Mithun Aswath
Thank you so much. That’s very clear. Thank you.
Operator
Thank you so much. The next question is from the line of Sukant Garg from Equible Research Private Limited. Please go ahead.
Sukant Garg
Hi. My question is specifically from the app business. What kind of numbers do we have from Thomas Cook app? And given these times where people mostly go online to search for travel needs, what is our focus on this app business?
Mahesh Iyer
So, I think, there are two parts to this Sukant. One, while I mentioned about it, I think, I was giving a reference to the foreign exchange app, which we just launched. I think, it’s pretty young in that sense. We’ve seen some fairly decent traction. Am I quite pleased about how we’ve performed? No. Maybe there’s a lot more for us to do, and you will appreciate that a lot of GUI changes and customer experience that comes in will enhance the usage of the ad, and we’ve — app, and we have to create more use cases for the customer to keep coming back on the app, so that’s work in progress.
On the holiday side of it, to the reference that you made, people are going online. I think, we have always said we are an omni-channel operator, though we allow the customer the choice of choosing the channels that he wants to access us from. It could be a physical, digital, it could be a call center, or a combination of all. And I mean, that’s how we enable the customer to come. Are we focused on pushing the customer to an app? Yes, we are doing that to the extent that it’s a straight through processing, so somebody coming to book probably a holiday or a vacation to Goa, or looking only for a flight option to Goa, we will try and nudge him to go to the app, so that I don’t have to spend my expensive labor, precious and expensive labor to end up service that customer, I’ll rather pursue a straight-through processing.
So, yes, app has its own advantages and disadvantages. Advantages in the sense that, you could reduce your cost base lower. Disadvantage is that, that much more upselling opportunity is reduced. So, we will have to fine-balance that. It’s a journey. We are also upgrading our app, because we also believe that for it to become a self-serve customer, customer usable app, there are changes that we need to do. So, as you will see, we keep adding more features to the app. Currently, our focus has been on servicing customers who are booking our holiday, and that’s what we focus on it over the last six months or so. And now, we are trying to make it a sales app, where we will engage a lot more with the customer, along with the service options, so that he sees more compelling reasons to keep coming back on it.
Sukant Garg
So, I can say that share from the application business is going to increase in future for you or the competition, like, MakeMyTrip or Yatra have such high app downloads, and the customer accessing those apps will hamper your business in future?
Mahesh Iyer
The way I would look at it is that, our digital businesses will continue to grow, that’s our focus, that’s going to be. But it’s a choice that the customer makes how he wants to come across to us. We are — while we will nudge the customer to go digitally and transact with us, but please understand for an experience business that we are, for an higher ATV business that we are, a lot of customer choose to work with us offline or through a contact center. And that’s how this business is stacked up.
But yes, if you look at from a trajectory point of view, our online adoption, or rather our online penetration on the holiday business, in specific, was in single-digits prior to the pandemic. We are currently closer to about 15%, 16%. So, we kind of improved our journey there, and we will keep investing in growing that journey as we go along.
Sukant Garg
Another question of mine is from Sterling Resorts. I believe you said that you are pausing some new customer acquisitions for the resort. Have I heard it correctly?
Vikram Lalvani
I’m so sorry. I didn’t get your question again. Can you repeat it, please?
Sukant Garg
So, I just heard, while on the — on this call only that, you are pausing new customer acquisition for Sterling Resorts. Have I heard it correctly, or is there some…
Vikram Lalvani
That’s right. We had paused it for the long term membership last year in July, and we have not bought even the short term membership, which is a 10-year product.
Sukant Garg
So, just wanted to know that why we have done this in the light of where we have only 50% occupancy in those resorts, and there are lot more that needs to be covered. Is there any specific reasons for that?
Vikram Lalvani
See, the idea is actually to move towards the hospitality segment. We understand that there is a headroom in occupancy. And despite the fact that — imagine the headroom we are able to actually meet, actually, our growth will be far more phenomenal. We believe that the hospitality segment has room to grow, and that’s how we have been able to even scale and expand and add new revenue streams and new revenue lines. We do have headrooms and occupancies. To that extent, the upsides are there.
Also, number two is, this being the leanest quarter of — in those 90 days, we just had three days which are holiday dates, which are typically those Independence period. How leisure business works? Out of 365 days, 90 days to 95 days are the days where you actually maximize revenues through occupancy as well as average price [Phonetic]. And in the remaining 270 days, you are actually filling up a volume using other segments, like MICE, weddings and various other demand generators to induce people to travel even during a week day. That’s why you are attracting different market segments and etc. So, to that extent, the headroom is there. But we believe that the future growth in Sterling will be when we are in the hospitality sector.
And in fact, as we say that we have been recognized very much as part of a hospitality brand more and more today. In fact, we are even in the top 10 in the country as far as the number of hotels and locations are concerned, and we will continue to keep grow in that route.
Sukant Garg
So, are you saying that we will be — in spite of holding down new customer acquisitions, we will still be moderating or still be moving into the resorts on — like, the hotel business kind of a thing?
Vikram Lalvani
Yeah, that’s the idea. And only the member acquisitions have stopped. We are servicing the existing members that we have. And in fact, if you see, that is also an advantage for us, because fulfillment is happening even during week-days which is traditionally a low demand period. So, I think, we are well poised to — that’s how we have been able to transform and scale as well. If you have tracked us in the last 2.5 years to 3 years, and we believe that this is the route that will make us succeed.
Sukant Garg
Thank you for that. Just want to have one remark, kind of, a suggestion that, we have — I have asked a question on application, and my point with the application is that, because we have a very low kind of star ratings on applications of Thomas Cook with. Certainly, I’m not saying bad, but certainly not [Technical Issues]. And if we can monitor that, we can get away with that, that would be a nice thing, as I have heard with my own friends that using Thomas Cook, they first go to the application reviews and then might contact Thomas Cook for that. Sort of, use it as a suggestion and nothing else, so that’s all.
Mahesh Iyer
Sukant, thank you so much for that suggestion. We take that on board. And I will just like to reiterate here, look, our app journey is not fully developed. And one of my colleagues here in the room just reminded me that our website that we use is very mobile-friendly, so our journey has been more on the website at this point in time, and app is work in progress. So, we are not fully there. But your suggestion and recommendation from your friend is well noted. We will look at that. Thank you so much.
Sukant Garg
Thank you. Thank you very much.
Operator
Thank you so much. The next question is from the line of Akshat Bairathi from RSPN Ventures. Please go ahead.
Akshat Bairathi
Thanks for taking my question. So, I have just two questions. One is on the financial service margin guidance. So, we have been guiding the market for 45% and we have done around 50% in H1. So, would you like to reiterate the guidance, or are we seeing any — are we expecting any dip in the H2?
And my second question is a book-keeping question. So, in your segment results, there is a line item below, EBIT that is common expenditure. So, can you — for just understanding, can you tell us what are the expenses that are included in this? Thank you.
Mahesh Iyer
Akshat, I will take the first part of it, and then leave it to my CFO to come on the second part of it. This is Mahesh. Your question, yes, we have done well in the last two quarters in terms of our EBIT margins, and I think it’s stacking up really well, but our guidance to the market remains at about 45%, doesn’t mean that we are going to lose, or we’re going to give away the margins that we get on the business. But I think it’s more important that we give a steady state kind of a thing, rather than talk about one-offs and one-time, because you will come the next time around and say that your EBIT margins have dropped. So, I don’t want to be saying it. I’m talking from the lens of saying where the business is now it operates.
Obviously, if there are opportunities for us, there are these one-time things that come our way, and we take the benefit of that. Clearly, you will see a shift that may happen over a period in time when our portfolio on the prepaid card keeps growing, because that’s what the dependency on cash will go down. And when you look at the prepaid, you will not only make exchange margins, but you also make money on the float, which all adds up to the overall margins in this business. That’s the way it stacks up. But I think it’s a journey. We continue to be guiding the market to the 45%, but obviously, we are not going to leave away any opportunity that comes our way to grab that additional bids that come.
Debasis Nandy
On the second part of the question, which is on common expenditure, these are expenditure incurred which is not allocated to any of the businesses, any of the four segments, but kept at central level, those are the expenses, and those are regular. I really don’t see too much of movement in those expenses. So, you can consider whatever the current level expenditure that will continue, for guidance purpose.
Akshat Bairathi
Okay, sir. Thank you so much, and all the best.
Debasis Nandy
Thank you.
Operator
Thank you so much. The next question is from the line of Meet Shah from Finovate [Phonetic]. Please go ahead.
Meet Shah
Thank you for the opportunity and congratulations on great set of numbers. My question is on B2C side of the business. While we have given the new guidance of around 80% of the recovery of FY ’20 numbers, despite lowering our guidance, we still need to grow 70% in the second half of this year. And generally, the second half is kind of slow compared to the first half. So, do you really see that we would be able to meet this number?
Mahesh Iyer
So, Meet, as I said, look, you have to also look at the overall portfolio as to how it’s shaping up. The deficit that you see is coming out of the long haul, and not necessarily out of the short haul. Short haul and domestic is actually firing. So, for us, when we look at a holiday, we are holiday makers for our customers. We are experienced creators for customers. So, we look at it as an overall portfolio. Well, obviously, it’s important to look at as to how different parts within that portfolio also play out. But if the customer preferences are changing, we want to be staying relevant to that preference of that customer, that’s point number one.
Point number two, as I mentioned, we have not seen smart recovery as well as one of our B2C business, which is overseas in Hong-Kong. I think that recovery is sub par, and we don’t expect that to change dramatically over the next six months or so. So, I think that’s also a bit of a drag on the overall numbers. But from a growth perspective, and if I have to just look at some of those forward-looking trends that I am seeing, I feel very confident to the guidance that we have given in terms of the full year.
Meet Shah
Okay, sir. Got it. And my next question is on the MICE side of the business. While we are seeing the slowdown in the economy, there is a slowdown in paints and FMCG sector. What kind of growth outlook you would like to give for the second half for the MICE business?
Mahesh Iyer
So, again, Meet, the good part of the MICE is that we start getting to — get a feel of the book, the order book, a little ahead, because most of these events are planned well in advance. So, looking into that, I think, we have a decent good order book. But yes, I agree, and there is a bit of a slowdown that’s happening in that space. The profit earnings aren’t looking up very strongly. But I think you must also understand, a lot of these businesses that happen on MICE is dependent on the distribution network that they have. And when the competition intensifies, they have to do that much more to keep the distribution agile and active.
So, I think there wouldn’t be too much of sharp cuts that may happen in that. And when new competition, or new competitors come into the market, you have to do that much more to keep. It’s like running faster on the same treadmill to stay where you are. So, I think that’s the kind of syndrome that you will continue to see. So, I wouldn’t worry too much about it. We have said the business has the ability to go at about 12%, 15% on the top-line, and I think that will hold good for the current year, unless something dramatically changes in the economic environment.
Meet Shah
Okay. Sure. And what about the government business? Because, in H1, we have seen the slowdown on the accounts of election. And what kind of demand are we seeing in H2 from government portfolio?
Mahesh Iyer
So, Meet, we are in conversations. There are multiple bids that are at this point in time happening. Not that government has put up a lot of bids out there, specifically in the sports category which is what we did last year. There are some inquiries, there are some — that has happened. In fact, I’m happy to report that in the month of October, we did one such event, not specific government, it’s semi-government in that sense. But, yeah, there are some events that are happening, and we have started to participate in it.
But very early to kind of predict what the next six months will be, because some of these take a longer gestation to happen. And as you will appreciate, it’s a bidding process, so we will have to be very intensive, and then we also need to plan for how the money cycle works, because some of those government bids, money doesn’t come in so very easily. And since we have some learning curve coming out of the previous experience, we want to be very careful about how we plan for this.
Meet Shah
Okay. Sure. And my last question is on the Sterling Resorts. While we have seen a healthy growth in the numbers, the average room rate is at multi-quarter low. Is it only on the account of inventory, or is it — is there any another reason? And any guidance or any aspirational number which management would like to give on ARR and occupancy rate?
Vikram Lalvani
Okay. So, let me answer on the ARR. As mentioned, we see, Meet, the quarter two is the leanest quarter for leisure business, and we actually practically had only three or four long holidays out of the 90 days. But despite that, a INR5,400, INR5,500 is still a very respectable number to maintain and hold.
We operate in three different segments of hotels. One is the upper midscale, the upscale and the upper upscale. So, [Technical Issues] seasonality, so average rates also tend to start changing. Like, take for example, in Q3, the average rates are bound to go up over Q2 because of the number of holidays that we have and the number of weddings also that we have. So, it’s a lot of the seasonality factor that comes into play. So, the quarter three will have a stronger average rate realization when compared to quarter two.
As far as the occupancies are concerned, the occupancies, as I said, this — we have ramped up five hotels which is almost 250 rooms over a staggered period of 90 days. And out of a base of 3,000 that we have currently, that itself forms actually 80%, so — sorry, 8%. So, to that extent, the occupancy is actually slightly understated, because technically, if I have to remove these 250 rooms, I would have done 49% plus 8% [Phonetic]. That would have been my occupancy percent. But in terms of number of rooms that we sold, as I mentioned, the number of room nights that we sold is 124,000 room nights versus 130,000 room nights. So, the demand has gone up, the number of room nights sold has gone up, but just because there is a base increase in the 90 day period of opening, that’s why it got impacted by 8%.
Meet Shah
Okay. But sir, I was comparing average room rate on Y-on-Y basis, I feel that is comparable, if not Q-on-Q.
Vikram Lalvani
Yeah. Technically, if you see Y-o-Y, we — or the entire first half, it takes into account both a peak season and the leaner season, except for the fact that only this year April, where we had severe headwinds because of the elections. But technically, you see even in the month of May, I will just give you an example, we did an average rate of INR7,448. In [Technical Issues] September, it was INR5,166, and then it averaged out to what it is. So, it all — the rates on the seasonality [Technical Issues] the month, the average rates tend to fluctuate. This is because we have a dynamic rate system of management, number one.
The fungibility of the rate can go from a INR5,000 level, even up to a INR8,000, INR9,000 level depending on the demand and depending on the kind of season it is in. So, to that extent, the fungibility is huge, and that’s the advantage that we have. We have a high rate fungibility. The mix of results will keep changing as we keep ramping up. As I said that we ramped up the resorts in Rajasthan in the first half. Now, they will start producing far better ARRs even in winter, because that’s when the Rajasthan hotels work, and they don’t work in summers. So — but in the summers, you have to actually try to gather volume as much as possible to cover your fixed cost and to gain an incremental amount, so that you are able to get the EBITDA that you want.
So, we have to look at it in totality for both what an occupancy and an average rate can both in combine produce, and that’s what the entire effect is in terms of room revenue.
Meet Shah
Okay, sir. So, if I were to look at the two years perspective, what kind of aspirational numbers which [Technical Issues] on both ARR and resort occupancy?
Vikram Lalvani
See, as we all mentioned, I think the guidance and the aspiration [Technical Issues] that we will avoid mentioning. But let me tell you that, as I said that the current quarter is the leanest quarter. Most of our resorts have ramped. The idea is to actually sweat the asset, so that we are able to grow the revenue line. It’s a combination of volume and rate. We play very tactically, depending on demand, supply, depending on what happens. Someone was speaking about high airline rates, then we swivel the market into more drive to destinations, etc. We do this thing every day, so as to actually get tactically the highest deals.
Debasis Nandy
Thank you. I think, that concludes the session. Thank you so much.
Operator
Thank you so much. Yeah. Thank you so much. As there are no further questions from the participants, I now hand the conference over to the management for closing comments.
Madhavan Menon
I only have — I think we have said enough about the various aspects, and I think the questions were very interesting and enriching in terms of the information. So, I just want to mention one thing that based on some suggestions we received from you and queries, we have expanded the way we presented some of the numbers in our presentation. So, I would request you to sort of go through several of the additional slides that we have included. We believe that those will be of help to you, and we are as always open to suggestions of additional things that you want. Thank you. Thank you very much.
Operator
[Operator Closing Remarks]