A close look at ITC’s hotels business – Revenue, capex and brands

The company has started reducing its capex and opting for more management orders.

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For all the hype and hoopla over ITC’s hotel business, it contributes barely four percent to the total revenues of ITC. The business though has seen good growth ever since COVID-related restrictions have begun easing, and the capex has seen a sharp drop in the last three years as the company is now pursuing an asset-light strategy.

In Q1FY23, the quarter when restrictions started easing and travel was back in place ITC’s hotel business rebounded. It is consistently growing after that.

ITC Hotels revenue over quarters

According to Jefferies, ITC’s hotel revenue has grown at a 12 percent CAGR from FY19 to FY23. CAGR or compounded annual growth rate is the rate at which revenue increases every year.

According to Jefferies, Earnings Before Income Tax Depreciation and Amortization (EBITDA) has increased almost eight times in FY23 as compared to the last financial year. EBITDA has grown at a CAGR of 23 percent between FY18 and FY23.

EBITDA over years for ITC Hotels, Source-Jefferies

Capex
ITC Hotels’ investment in capex has fallen over the years.  In the last few years, ITC has adopted an ‘asset-right’ strategy, with a greater focus on adding properties through management contracts rather than owned hotels. Around 50 percent of rooms added in the last 3 years in the standalone entity have been through management contracts, said Jefferies. A management contract is when one company hires another company to handle all the day-to-day operations and decision-making of their business for a fee.

Capex over years for ITC Hotels, Source-Jefferies

Hotels and brands
As of June 30, ITC operates 120 hotels across 70 different locations, totaling 11,500 rooms. The company manages six hotel brands catering to different price points: ITC Hotels, WelcomHotel, Fortune, WelcomHeritage, Mementos, and Storii. These brands cater to a diverse clientele and contribute to ITC’s growth in the hospitality sector.