Lemon Tree Hotels Limited Q3 FY26 Earnings Call Summary

Summary

Lemon Tree Hotels Limited - Q3 FY26 Earnings Call Summary Tuesday, February 10, 2026 4:00 PM

Event Participants

Executives 3 Kapil Sharma (Executive Director & CFO), Neelendra Singh (MD & CEO), Patanjali Keswani (Executive Chairman)

Analysts 8 Abhay Khaitan, Achal Kumar, Ashish Kumar, Karan Khanna, Nikhil Poptani, Prashant Biyani, Sameet Sinha, Vaibhav Muley

Financials & KPIs

Geographic & Segment Commentary

• Gurgaon Market: Underperformed significantly with negative RevPAR growth due to the non-materialization of large group blocks compared to previous years. Management is currently working on replacing these volume segments to stabilize the 150-room Red Fox and other properties in the micro-market.
• Mumbai (Aurika Skycity): Strategic focus remains on occupancy-led growth for the 670-room hotel, reaching 79% occupancy this quarter. Repricing is expected to commence in Q4 FY26 and FY27 as the airline crew base is gradually replaced by higher-paying segments.
• Keys Portfolio: High-growth segment with 25% RevPAR growth and 19% ARR growth following renovations. Management targets a ₹60 crore EBITDA for this portfolio by FY28, aiming to bring Keys’ pricing in line with the Red Fox brand.

Company-Specific & Strategic Commentary

• Demerger & Asset-Light Strategy: Post-demerger, Lemon Tree Standalone will become a debt-free, asset-light entity focused on technology, distribution, and brands. Fleur Hotels (the asset-heavy arm) is projected to reach ₹1,000 crore EBITDA by FY28 prior to its public listing.
• Renovation Cycle: Approximately 65% of the 4,100-room owned portfolio renovation is complete; 1,200 rooms were shut during the year. Management expects to return to a standard 1/6th refurbishment cycle by FY28, which will reduce OPEX and expand margins.
• Technology Investment: Lemon Tree is investing in a “digital-first” approach involving AI, chatbots, and data lakes to improve returns by an estimated 1%. These tech capabilities are intended to be monetized by offering them to third-party owners of the ~1.5 million unbranded rooms in India.
• Aurika Brand Expansion: Focused on the upper-upscale segment; recently signed a 47-room heritage Aurika in Varanasi (high ARR potential). Construction for the 550+ room Aurika Nehru Place is set to begin shortly with an estimated 3-3.5 year completion timeline.

Guidance & Outlook

Risks & Constraints

Q&A Highlights

RevPAR Performance vs. Industry

• Question: Why did RevPAR growth (9%) trail industry reports of 12%? (Karan Khanna)
• Answer: Lemon Tree lacks direct “luxury-heavy” listed peers who reprice higher in winter. Performance was weighed down by Gurgaon and Tier-2 markets, plus the impact of 1,200 shut rooms for renovation (Patanjali Keswani).

Fleur Demerger Rationale

• Question: What are the priorities until the Fleur listing? (Achal Kumar)
• Answer: Building a high-growth pipeline for Fleur to reach ₹1,000 crore EBITDA by FY28. Lemon Tree Standalone will transition into India’s first fully asset-light brand and distribution company (Patanjali Keswani).

International Expansion

• Question: What is the strategy for markets like Dubai? (Shashi Ranjan)
• Answer: The company plans to aggressively follow the “Indian wallet” internationally. Management believes the brand is now “exportable” due to high recognition and improved tech/loyalty backbone (Patanjali Keswani).

Debt and Cash Flow

• Question: When will the company become debt-free? (Vaibhav Muley)
• Answer: Post-demerger next year, Lemon Tree’s existing debt transfers to Fleur. Lemon Tree will be effectively debt-free, generating free cash flow for dividends or tech investments (Patanjali Keswani).

Key Takeaway

Lemon Tree Hotels delivered record revenue of ₹407.8 crore and EBITDA of ₹206.4 crore in Q3 FY26, though margins were temporarily squeezed by a 6.4% combined impact from renovation, technology investments, and GST changes. The company is undergoing a structural transformation, including an accelerated renovation of 4,100 rooms (65% complete) and a demerger to create a debt-free, asset-light brand management entity. Strategic focus remains on the upper-upscale Aurika brand, with a new 550+ room project in Nehru Place and a high-rate heritage hotel in Varanasi. While Gurgaon and Tier-2 markets saw soft demand, core markets like Hyderabad and Bangalore showed strong RevPAR growth post-renovation. Management remains bullish on a structural shift in Indian hospitality demand, guiding for 15% revenue growth in FY27 and a ₹1,000 crore EBITDA target for Fleur by FY28.