Today on concall someone asked management’s view on share price which is apparently very cheap. Management categorically denied that they do not indulge in any activity to control the share price. May be he wanted to get a sense on whether promoter is looking to increase their stake.
I am just curious on the valuation part. Valuation has not been discussed in detail on this thread so request others to share their views.
What multiple should be assigned to managed hotels? Isn’t EVEBITDA more appropriate for owned hotels? Their owned hotel of 195 rooms in Bangalore alone may fetch value equal to current market cap at 1.5cr per room. How to value leased hotels? It may depend on term of lease period. Ofcourse these numbers will have to be adjusted for Debt and Operating efficiency and they have land parcels.
A good article, highlighting both the opportunity and challenges in the hotel sector today. Some excerpts which I found interesting are below.
Keshav Baljee, the Managing Director of Spree Hotels and owner of Royal Orchid hotels from his more than a decade’s experience in the hotel industry, points out that the situation was very different a few years back, especially when internet and smartphones were not in everyone’s hands. “ You couldn’t discover the non-hotels before. Earlier hospitality meant only hotels. But now it includes home stays, serviced apartments and guest houses. Staycations have also started.” he says.
Technology has been the biggest disruptor in the industry. Technology is powering all hotel bookings. With the emergence of smartphones and rise in the availability of the internet, online travel agents have come to the fore with their apps and websites. They are the actual disruptors of the industry. “Now, you just don’t enter a hotel and say, ‘Hi! I want to book a hotel room,’ ”states Baljee.
The second factor that has also assisted in the enhancement of the sector is that the customers now are very price sensitive as they can now easily check and compare prices online. 10-12 years before discounts were not much of an option, but now it has become widely prevalent everywhere. There are now so many non-hotels competing with the actual hotels that price competition has also increased. It has been a boon for the tourists and has eroded a lot of the profit margins for the hotel industry.
Below articles are interesting and highlights issues of deep discounting and arm-twisting by online aggregators (specially OYO). Eventually better sense will prevail and everyone will agree to more reasonable terms which helps every participant in the industry to grow. The present model is definitely not sustainable.
Patu Keswani of Lemon Tree in his Q2FY19 concall has explained this model very well and has interesting views on it within next couple of years.