LEMONTREE Q1 FY26 earnings call.

Guidance to track

• Originally targeted for 2028, the company now expects to reach 20,000 rooms (including pipeline) within 6 months, with potential to scale to 30,000-40,000 rooms in the longer term.
• Current catch-up renovation spending of ~100 crore (6% of revenue) will drop to 20-30 crore annually (2-2.25% of revenue) post H1 FY27 when the entire owned portfolio is renovated.
• Post full renovation, Keys hotels (930 rooms) expected to achieve 120-160 crore revenue with 50% EBITDA margins, up from current ~24 crore in Q1 (annualized). Keys Whitefield already achieving 4,500+ ARR post-renovation.
• Power and fuel costs reduced from 8.7% of revenue to 6.9% in Q1. Targeting 50% renewable energy (up from 40%) over next 12-18 months through continued solar investments.

Risks flagged

• As Ora Mumbai and other stabilized hotels focus on rate increases, the 50% increase in corporate business (negotiated) limits near-term ADR upside. Management admitted retail/non-negotiated channels used to fill weekend valleys at lower prices, potentially capping overall rate growth.
• Management acknowledged 'delays in scheduled openings of managed and franchise hotels due to factors beyond our control.' While expressing confidence in accelerated growth, specific timelines and pipeline conversion risks were not quantified.
• Management explicitly discussed deferring renovations when demand spikes occur—'when we released 30 rooms, there was a spike in demand for Red Fox, so we deferred for 2 weeks.' This balancing act may delay portfolio upgrades and cause short-term revenue displacement.
• The proposed demerger of Flur Hotels (asset-heavy entity) and potential listing is under evaluation by committees of directors. Management deflected specific questions on shareholding ratios and demerger structure, stating 'clarity will come in a few months.'

Key quotes

• The majority of which were in Delhi, Hyderabad and Bangalore. And we shall continue to spend on renovation into FY27 until the entire portfolio of owned hotels has been fully renovated and refreshed. Once these incremental investments are done with over the next 15 months, the renovation and tech costs will also drop significantly down to about 2 to 2.25% of total revenue from 6% currently.
• Nilendra has been in this specific area of branding franchising, he was earlier the senior vice president franchise globally for Adidas in Germany. He's run owned stores, he's run franchise stores, he has a very structured way of looking at managing scale. So if Lemon Tree is to scale up in an area which is currently totally unstructured, which is about 1.2 million rooms which are completely unbranded, we need somebody with that kind of a mindset and experience.
• We have 2.1 million members already in the loyalty program. Our repeat usage is about 43-44%. So that's very encouraging for us because what it really means is that if you open a new hotel, we are very rapidly able to move customers there who are repeat members and make that hotel break even very quickly and that I think is an attractive proposition for any hotel owner from the asset light side.