Royal Orchid Hotels: Navigating Growth and Accounting Shifts in Q3 FY26

Royal Orchid Hotels Ltd., a prominent player in India's hospitality sector, has unveiled its Q3 and 9M FY26 performance, showcasing robust operational growth alongside the complexities introduced by new accounting standards. The company, operating under a consolidated framework, reported a strong top-line expansion and significant improvements in key operational metrics, even as its reported profitability was influenced by non-cash adjustments.

For Q3 FY26, Royal Orchid Hotels demonstrated impressive financial health. Income from operations surged by 26.6% year-on-year, reflecting strong underlying business momentum. Room revenue, a critical indicator for the hospitality industry, witnessed an exceptional 45% year-on-year growth. This robust performance translated into a 13.8% year-on-year increase in EBITDA, underscoring the company's focus on cost efficiency and premium market positioning. The nine-month period also mirrored this positive trend, with consolidated total income reaching INR 287.5 crore, up 14.6% from the previous year, and EBITDA growing by 11.3% to INR 79.3 crore.

Operational Highlights and Strategic Initiatives

A significant highlight of the quarter was the exceptional performance of ICONIQA Mumbai, an upscale lifestyle hotel. Within just four months of its operation, ICONIQA Mumbai generated INR 17.4 crore in income for Q3 FY26 and achieved the distinction of being ranked as the No. 1 hotel on Trip Advisor in Mumbai. This rapid success is a testament to the company's execution capabilities and the strength of its brand architecture. Management projects ICONIQA Mumbai to contribute INR 23-24 crore in Q4 FY26 and potentially peak at INR 28 crore in FY27.

Royal Orchid Hotels continues its aggressive expansion, crossing a significant milestone of 10,700 keys across 168+ hotels, with an additional 47+ hotels in the pipeline. In Q3 FY26 alone, four new hotels with 263 keys were added, including Regenta Resort Khatu Shyam (120 keys), Regenta Science Centre Bhuj (59 keys), Regenta Place Candolim Goa (36 keys), and Regenta Place Ahmedabad (48 keys). This expansion aligns with the company's asset-light philosophy, which emphasizes management contracts and franchising to drive scalable growth and higher returns while minimizing capital expenditure.

Consolidated Financial Summary (INR Crore)

The Impact of IndAS 116 and Future Outlook

Despite the strong operational performance, the company's reported PAT and EPS experienced a significant year-on-year drop, primarily due to the notional impact of IndAS 116. This accounting standard led to a notional increase in depreciation and finance costs of INR 19.48 crore for Q3 FY26 and INR 38.27 crore for 9M FY26 at the consolidated level. Management transparently explained that this is largely a non-cash adjustment related to fixed leases, particularly for ICONIQA, and that without this notional impact, the financial results would appear much stronger. They anticipate ICONIQA to be profitable in Q4 FY26 as pre-operating expenses are now absorbed.

The company's Vision 2030 outlines an ambitious target of reaching 345+ hotels and 22,000+ keys, significantly expanding its footprint. This growth will be fueled by a clear brand architecture, including ICONIQA, Crestoria, Regenta, Regenta Place, and Regenta Z, each catering to different market segments. Management also highlighted the development of a tech-driven loyalty program, Regenta Rewards, designed to boost guest engagement and drive repeat business through various redemption options, including stays, dining, and online shopping vouchers.

Revenue Mix and Management Commentary

The consolidated revenue break-up for Q3 FY26 shows that Room Night contributed 57.38% (INR 71.1 crore), Food and Beverages 31.56% (INR 39.1 crore), Other Services 3.39% (INR 4.2 crore), and Managed Hotels 7.67% (INR 9.5 crore). Management noted that historically, F&B revenue typically hovers around 30-32% of total revenue, as most of their hotels do not have extensive banqueting facilities to push this percentage higher. For ICONIQA, over 80% of the revenue currently comes from room nights.

Management also provided guidance for the future, projecting a total revenue of INR 500 crore for FY27-28. The managed business top line is expected to grow to INR 55-58 crore next year, with a healthy 47-48% flowing to EBITDA. They are actively evaluating the deployment of proceeds from a subsidiary sale, considering options for further growth or debt reduction, while maintaining their asset-light strategy. The appointment of Mr. Keshav Baljee as Executive Director is expected to further strengthen operational efficiency and accelerate the operationalization of pipeline hotels.

Royal Orchid Hotels is demonstrating strategic clarity and disciplined execution. Despite the accounting nuances of IndAS 116, the underlying operational performance and aggressive expansion plans paint a picture of a company poised for sustained growth in the dynamic Indian hospitality market. The focus on an asset-light model, brand diversification, and technology integration positions Royal Orchid Hotels to continue its journey towards its Vision 2030 targets, reinforcing investor confidence in its long-term value creation potential.