economic meltdown, impact and actions taken by the indian hospitality industry

Economic Melt Down

Impact and actions taken by the hotel industry

December 17, 2008IHM Pusa, New Delhi

www.lemontreehotels.com

The Lemon Tree Hotel Company

• Lemon Tree Hotels: India’s fastest growing, upscale, full service, moderately priced hotel chain

• Red Fox Hotels: Economy hotel brand, under development

Global Economic & Financial Indicators

GDP 2007

GDP forecast

2008

GDP forecast

2009

Interest rates

Budget balance

% of GDP 2008

% change in market Nov ’08

vs. Dec ’08

USA 3.2 1.4 -0.2 1.28 -4.6 -34.2

Japan 2.3 0.5 -0.1 0.77 4.0 -46.3

China 9.8 9.6 8.0 3.47 8.9 -72.8

Europe 2.2 1.1 -0.1 3.90 -0.4 -47.6

Russia 5.2 7.0 3.7 12.00 6.2 -67.9

India 8.2 6.3 6.1 7.29 -3.2 -55.5

Source: Economist intelligence unit, Swivel

Source: HVS

0%

10%

20%

30%

40%

50%

60%

70%

80%

0

2,000

4,000

6,000

8,000

10,000

Occ% '08 53.90% 57.20% 51.60% 57.20% 64.80% 69.00% 71.50% 71.40% 69.50% 64.20%

ARR '08 3,505 3,731 3,467 3,269 3,569 4,299 5,444 7,071 7,915 8,469

'99- '00 '00- '01 '01- '02 '02- '03 '03- '04 '04- '05 '05- '06 '06- '07 '07- '08 '08- '09

PokharanNuclear Tests

Economic Sanctions

Gujarat Earthquake

9/11

Afghanistan war

Kargil War

Iraq War

Global EconomicMelt-Down

Mumbai Terror Attacks

Occupancy & ARR Over The Past Decade

Stock Price: International Hotel Companies

Source: Google finance

Source: HDFC

Stock Price: Indian Hotel Companies

Effective Management

Strategic Cash Management

Aggressive Cost Control

Innovative Distribution

Strategy

Controlling Costs Is Critical To Bottom Line Success

Balancing Distribution

Budget

Economy

Mid Market

Upscale

Upper Upscale

Luxury

Low engagement

High engagement

En

gag

em

en

t w

ith

th

e p

rod

uct

Online channels Legacy channels

Purchase Influencers

Location

Brand/Flag

Services

Facilities/Amenities

Price

Static

Dynamic

Determinant(can’t be changed)

Static (can be changed)

Incremental

Filter/Stimulant

Major Drivers: Indian Travel Market

Source: 11th Five Year Plan of the Indian Government

  2006 2010

Railways Passengers 6.60 billion 8.00 billion

AirlinesDomestic 25.50 million 60.00 million

International 22.50 million 40.00 million

HotelsOutbound 7.50 million 60.00 million

Inbound 4.00 million 10.00 million

Source: WTO

Tourist Arrivals (Million)

2005 2006 2007Change 06-07

World 806 846 898 6.10%

Europe 441 461 480 4.20%

Asia & Pacific 155 167 185 10.70%

America 134 136 142 4.30%

Middle East 39 41 46 13.20%

Africa 37 40 44 9.70%

Tourist Arrivals

Infrastructure:Economic Growth Driver

Source: Swivel

  China India RussiaMiddle East

Brazil US Japan EU

Airports 467 346 1,260 1,200 4,263 14,947 176 3,393

Railways (Km.) 75,438 63,221 87,157 23,198 29,295 226,612 23,474 236,436

Roadways (Km.) 1,870,661 3,383,344 871,000 1,068,480 1,751,868 6,430,366 1,183,000 5,269,163

Source: Goldman Sachs

GDP Projections: 2050

US$ Billion

Y Factor

Source: Indexmundi

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25

30

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40

45

50

2007 2008 2009 2010 2012 2013 2014

Pre Economic Melt Down Post Economic Melt Down

Forecasted Shift in REVPAR Trending

www.lemontreehotels.comrahul.pandit@lemontreehotels.com

Thank You