Saturday, August 10, 2024 Lemon Tree Hotels plans to list Fleur Hotels to become debt-free within six years, targeting financial stability while addressing significant debt. Lemon Tree Hotels, a leading player in India’s mid-priced hospitality sector, is setting its sights on listing its subsidiary, Fleur Hotels, as part of its strategic plan to become debt-free within the next six years. The move aligns with the company’s long-term vision of financial stability and growth, with a significant portion of its debt currently concentrated in Fleur Hotels.
As of March 2024, Lemon Tree’s consolidated debt amounted to Rs 2,336 crore. During a recent conference call with investors, Lemon Tree’s management revealed that approximately 90 percent of the company’s total debt is tied to Fleur Hotels. This financial burden has prompted the company to take decisive action, including exploring listing opportunities for the subsidiary.
By doing so, Lemon Tree aims to alleviate its debt load and strengthen its financial position in the competitive hospitality industry. In addition to its focus on debt reduction, Lemon Tree has been actively investing in several key areas to enhance its overall business operations. The company has prioritized renovations across its properties, initiated a digital transformation program, expanded its business development and sales teams, and implemented an annual payroll increase.
These investments, while necessary for long-term growth, have impacted the company’s Ebitda (earnings before interest, tax, depreciation, and amortization) margins on a year-on-year basis. The impact of these investments was particularly evident in the performance of the Keys hotel portfolio, a chain operated by Lemon Tree. The Ebitda margin for this segment saw a year-on-year decline of approximately 10 percent.
This decrease was primarily attributed to a substantial increase in renovation expenses during the first quarter of FY24, with costs rising by 100 percent compared to the previous year. Looking ahead, Lemon Tree’s management anticipates that the elevated level of investment will continue into the financial year 2026. The ongoing focus on renovations, digital upgrades, and team expansion is expected to further strain Ebitda margins in the short term.
However, these strategic moves are seen as essential for ensuring the company’s competitiveness and long-term success in the evolving hospitality landscape. By pursuing the listing of Fleur Hotels and maintaining its commitment to strategic investments, Lemon Tree Hotels is positioning itself for a future of sustainable growth and financial health. The company’s proactive approach to managing debt and enhancing its operational capabilities underscores its determination to navigate challenges and emerge as a stronger player in the mid-priced hotel sector.
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