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High entertainment, service tax hurting business:
September, 04th 2015

High service tax is impacting business as entertainment and service tax make ticket prices exceptionally high, says K Chittilappilly, MD, Wonderla Holidays.

Speaking to CNBC-TV18, Chittilappilly says he expects Wonderla's revenues to grow 15-20 percent this year with a 22-25 percent raise in ticket prices.

Wonderla’s resort occupancy is 45-50 percent and a 7-8 percent increase in footfalls will fulfill the company’s FY16 target, he says.

However, in case of lack of footfalls, a 15 percent growth in average room revenue per visitor will help the company achieve its growth target.

Below is the transcript of Arun K Chittilappilly’s interview with CNBC-TV18's Reema Tendulkar and Nigel D'Souza.

Reema: Your footfalls at least in April to June were down close to about 7.5 percent but they rebounded in the month of July to about 25 percent. How have the footfalls been in August and what do we expect in September?

A: Yes, the footfalls in the first quarter has been bit low. We were down by about seven percent and we are seeing a bit of rebound in Q2. So starting with July and even August, we are seeing some bump in our footfalls.

So, we should be able to make up some of that deficit this quarter is what we are hoping. It is too early to talk about September, we are not sure how it is going to pan out but the signs are good.

We hope that we can continue and erase some of that deficit this quarter. We maintain a top line growth of 15-20 percent the year and we are reasonably confident that we should be able to achieve that.

Nigel: July was good, August you are saying should be fairly decent as well and September no one can tell. But for the time being what about ticket price increases. You had increased it a couple of times by around 12 percent. One of them was to offset service tax increase. Any kind of price increases going ahead because you are saying you are looking at around 20 percent growth and footfalls as well are likely to make up. So you are not factoring in any price increases going ahead?

A: Like you rightly said we have already done pretty high price increase for this; once in April and then in June because of service tax. So we are looking at 22-25 percent increase in our prices for the end customer for this year. We are not going to increase prices any more for the remainder of the year.

We are just hoping that we should be able to maintain footfalls and see a growth for the year as a whole and that is what we are hoping for. So, this year is going to be a bit of an aberration in the sense we have pretty high increase in prices. So, we are hoping that it will lead to any loss or footfalls or anything.

Reema: Your FY16 footfall guidance stands at 3-4 percent. To meet that what are your targeting in the festive season, say, in Q3, what would you need to achieve by way of footfalls?

A: If we get 7-8 percent growth in our footfalls in the next one or two quarters we should be able to make up but we don't know how that is going to pan out. It just depends on so many factors. We are hoping that we should be able to do that and so far the signs are that we should be able to do that but every quarter is different so it is hard to say how it is going to pan out.

Nigel: Give us some numbers of your past quarter. What was the average revenue per customer. Give us another average also. The average occupancy I believe was at around 48 percent roughly, how have things panned out in these first couple of months. Has it gone up from around that 48-50 percent level?

A: Yes, our resort occupancy is roughly at around 45-50 percent but our revenue which is our average room revenue has gone up by about 15 percent. So, that is what is giving us growth in our resort segment.

If you look at our amusement park segment that has seen a growth of roughly, like you said, around 15 percent per visitor spend growth or we call it revenue per visitor growth.

So, that is good for us. If you see a 15 percent growth in our visitor spend even if we don't get footfall growth and that helps us to increase our turnover by about 15 percent.

So, we have a banking on that and then hopefully a little increase from our footfalls, like you said, about 3-4 percent should help us to clock between 15-20 percent revenue growth. That is the assumption on which we are working.

The big issue that we had this quarter is obviously service tax and it is affecting all amusement parks across the country and we are all trying to do something about it.

So the association of amusement parks has actually challenged this service tax order in the courts and in fact we have even been granted a stay in one state but the jury is out on whether that is going to be extended to the other states.

So, we don't know at this point how it is going to pan out in terms of service tax but we do feel that it is unfair to have service tax and entertainment tax on the same ticket because it just adds up too much to the cost.

Reema: The big trigger for the company will be the Hyderabad park which you are targeting an April launch. What will be the expected revenues and margins in the first year of operation for the Hyderabad park?

A: First full year of operation for Hyderabad should fetch us roughly between Rs 65-70 crore of revenue, that is what we are projecting and our operating margins for the first year will be roughly about 30-35 percent.

So, operating level we will be positive, even from year one and from year three it will be Profit After Tax (PAT) positive.

Year three to year four it could slightly vary depending on how the footfalls ramp up. For the first year, we are projecting a footfall of roughly about 7-7.5 lakh visitors which should ramp up to about 1 million by year four. So, that is what we are hoping.

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