Resurgent Growth Driven by Business Travel and Expansion

Lemon Tree Hotels, one of India’s leading mid-priced hospitality chains, is forecasting strong revenue growth for the current fiscal year, spurred by a confluence of positive factors. A resurgence in business travel, combined with strategic expansion across multiple hotel segments and improved room occupancy rates, is setting the stage for another milestone year. Chairman and Managing Director Patanjali G. Keswani, in an exclusive conversation with Mint, underscored the company’s remarkable achievements, notably crossing ₹100 crore in quarterly net profits for the first time in January-March 2025. This growth was primarily fueled by robust occupancies in core business hubs like Hyderabad, Mumbai, Bengaluru, and Delhi—all cities experiencing a significant rebound in business travel demand. The company’s 670-room Aurika Mumbai hotel, a key asset, has stabilized, contributing to the surge in revenue. Occupancy levels across the chain rose to an impressive 77–78%, a 6–7% increase year-on-year, reflecting strong market recovery.

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Solid Financial Performance in FY25

For the fiscal year ended March 31, 2025, Lemon Tree Hotels reported:

• Revenue from operations: ₹1,286 crore, a 20% jump from FY24’s ₹1,071 crore.
• Net profit: ₹243.1 crore, marking a 34% increase year-on-year.

The impressive financial trajectory has been driven by a blend of occupancy gains and average room rate (ARR) improvements across all brand segments. Particularly noteworthy is the fact that most of Lemon Tree’s key markets—centered on business travel—have outperformed expectations, with Hyderabad maintaining over 80% occupancy.

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Aggressive Expansion and Asset Light Strategy

The company’s growth ambitions remain undeterred, with a massive pipeline of 100 new hotels in development, expected to add approximately 6,600 rooms to its existing portfolio. Lemon Tree currently operates:

• 116 hotels: Comprising 41 owned and 75 managed properties.
• Total rooms: Around 10,700, split almost evenly between owned and managed hotels.

Since April 2024, Lemon Tree has signed about 50 new hotels, bolstering its footprint across India’s burgeoning hospitality market. The company continues to target the growing demand for branded accommodations, particularly within India’s unorganized sub-40-room hotel segment, estimated at over 1.2 million rooms.

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Fleur Hotels: The Next Growth Engine

A key part of Lemon Tree’s future strategy involves the listing of its subsidiary, Fleur Hotels Pvt. Ltd, by December 2026. Converted into an unlisted public company in September, Fleur holds prime properties like Lemon Tree Premier, Delhi Aerocity, and Aurika Mumbai. Post-listing, Fleur is projected to:

• Generate ₹700 crore in annual EBITDA.
• Contribute ₹150–180 crore annually in management fees to the parent company.

Keswani emphasized that while listing remains a top priority, Fleur is well-positioned to become debt-free within three years, regardless of IPO outcomes—a move aimed at strengthening the group’s balance sheet and fueling further expansion.

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Navigating Challenges and Maintaining Margins

Despite challenges like the Pahalgam terror attack and a resurgence of COVID-19 affecting some hotel and retail demand in early FY26, Lemon Tree remains optimistic. The company anticipates mid-teen revenue growth in Q1 FY26 and for the full fiscal year, on a same-store, same-hotel basis. A disciplined focus on cost management and asset enhancement has been key. Lemon Tree has invested ₹100–130 crore annually over the last two years on refurbishing rooms and plans to continue this trend in FY26. Renovation efforts are particularly focused on the Keys portfolio—acquired in 2019—which includes three distinct brands:

• Keys Prima: Upscale.
• Keys Select: Midscale.
• Keys Lite: Budget.

These efforts, coupled with investments in technology upgrades, distribution, payroll, and marketing, have allowed Lemon Tree to maintain and even improve EBITDA margins despite rising costs.

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Looking Ahead: Tapping Untapped Markets

Keswani’s vision is clear: capture the massive under-penetrated hotel segment in India’s smaller cities. The company is poised to create a new brand specifically targeting sub-40-room properties, expanding Lemon Tree’s reach into towns and cities often overlooked by larger chains. Currently, India’s branded hotel room inventory stands at around 200,000 rooms and is expected to grow to 300,000 by FY30. With India’s rising domestic travel and a growing economy, Lemon Tree projects the number of households using branded hotels will soar from 5 million to 30 million by 2030, creating immense opportunities. In the last 12 years, Lemon Tree has added more rooms than any other hotel chain in India—a testament to its aggressive yet calculated growth strategy. With favorable industry dynamics, a diversified brand portfolio, and a commitment to continuous improvement, Lemon Tree Hotels is well-positioned to capitalize on India’s travel boom and solidify its status as a hospitality powerhouse.

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Tags: Lemon Tree Hotels, Business Travel, Hospitality Industry, India Tourism, Hotel Expansion, Fleur Hotels, Room Occupancy, Branded Hotels, Travel and Hospitality Trends 2025