Byke Hospitality Q4 Update
Con Call Updates
There is strong pick up in occupancy rates across industry with 65% occupancy rate.
Owned and Leased Business
As the presentation mentions, company has 9 properties with total room capacity of 733 rooms. The company has exited operations at hotels listed below -
The Byke Sunflower, Goa - This is a small property with 22 rooms. The property is owned by company and company has leased it out. The Bike brand would be discontinued.
The Byke Hidden Paradise, North Goa - This was a leased property with 40 rooms and the company has exited the lease.
The reason for exiting above properties given by management is as follows -
The company wants to focus on big properties (60+ rooms) which has potential for revenue from multiple streams like - F&B, Weddings, Conferences etc. Above properties did not fit that bill and hence management decided to exit. Another reason given by management is that - they want to position The Byke brand as mid budget hotel brand and these properties did not fit the bill as they were lower budget.
The company had to exit The Byke Vijoya, Puri property as well. This was apparently due to some issue with owner. The company has filed FIR against the owner and the matter is now sub-judice.
The company said they will update their checklist so that such thing does not happen in future again. They learn new things every time they exit some property. When they exited The Byke Paawana, Mandawa property, they learned not to have properties at places where destination itself can not generate tourism demand.
The company is waiting to receive OC for Borivali property. The property is ready and they can commence operation within a week of receipt of OC. The company has projected to add 300 rooms in FY18. They are looking at 4-6 properties with size of 60+ rooms. The company usually spends 6-7L per room for renovation when hotel is taken on lease.
Room Chartering Business
The company had projected that entire bookings of this business would be moved online. Such an online portal is in soft launch. The company has 312 agents at the end of FY17.
The company is thinking of entering into franchisee business with The Byke brand. The rationale given by management is that if they wanted to expand rapidly (like 30-40 hotels in a year), they can not do that with O&L. This model allows them to expand without significant investments. The possible model would be management contract with some revenue sharing arrangement. The ompany will study various models for next 2 quarters and expects to franchise first hotel in Q3 or Q4 of FY18. The company is looking for hotel owners who are well capitalized and where The Byke brand can help the hotel with added revenue/profits. The company aspires to do 500 rooms in this model by FY19. Since The Byke brand will be used, the hotels would be pure vegetarian and company will provide training to the franchise employees. I feel that these some of these hotels might get converted into O&L business once management has better feel of supply-demand etc.
The management claims that GST is overall good for business in terms of ease of doing business. The company operates in 5-6 states and the tax rates are different for F&B, room revenue, banquet halls, restaurants etc. and they have to compute 3-4 taxes in bill which are different for different states. Under GST the proposed rates are as follows -
The industry wants 28% rate to be kicked in from price of Rs. 7500 per night onwards and they are making representations to finance ministry.
Disc - I hold tracking quantity