While leasing generally brings lower margins than outright ownership, Royal Orchid’s model generates healthy cash flows and requires lower investment. Not to mention, it is only 20% of the company’s overall pie of total revenue.
“80% of our growth will come from management, 20% from the revenue share model. There will be investment there, but it will be very minimal,” he said.
Royal Orchid Hotels is also expecting strong impact from the recent GST revision, where GST rates on hotel rooms priced lower than Rs 7,500 has been reduced from 12% to 5%, effective September 22.
Talking about the impact of the GST rejig, Jaiswal admitted that the company has a lot of exposure to the below Rs 7,500-priced segment.
“We are averaging an average room rate (ARR) of Rs 6,000, and almost 85% of the company’s rooms are being sold below Rs 7,500. Only a fraction of the rooms are being sold at over Rs 7,500. The new GST rates, therefore, will certainly give us a competitive edge,” Jaiswal concluded.
