Room additions to narrate growth ahead…
About the stock : Chalet Hotels Ltd (Chalet) is an owner, developer and operator of premium hotels, commercial office spaces and residential properties in India. The Company’s portfolio comprises 11 fully operational hotels representing 3389 keys, and commercial spaces of~2.4 mn sq.ft. in close vicinity to its hospitality assets.
Q 1F Y2 7 performance : Chalet’s core business (ex-residential) reported 9.5% YoY growth in revenues to Rs.514cr with hotel segment growing by 8.5% YoY and annuity business reporting 18.2% YoY growth. EBITDA margins reported 229bps YoY expansion to 46.7% driven by annuity business (+191bps YoY) and better performance in resort business in hotel segment. EBITDA grew by 15.1% YoY to Rs.240cr. Adjusted PAT (incl. residential income) stood at Rs.93.5cr in Q1FY27.
Investment Rationale:
Domestic leisure demand leads performance; Q2FY27 witnesses steady start : Hospitality segment revenues grew 10% YoY to Rs.418.5 crore in Q1FY27. RevPAR increased 6.5% YoY to Rs.8,582/night, driven by 8.5% YoY growth in ADR, while occupancy declined 120bps YoY. Management highlighted that domestic hospitality demand remained healthy despite geopolitical disruptions impacting inbound FTAs, supported by robust domestic leisure demand, reflected in the 19% YoY growth in resort RevPAR, aided by 540bps occupancy expansion and 6.5% YoY ADR growth. Q2FY27 has started on a steady note, with airline traffic recovering and booking trends for August improving gradually. The refurbishment at Four Points by Sheraton, Vashi is largely complete, with rebranding to be announced shortly, while Westin, Powai has regained access to its wedding and banquet facilities, which is expected to improve occupancies and ADRs. Among the resort portfolio, Westin Rishikesh continued to deliver strong growth through higher occupancies while maintaining stable ADRs, whereas Athiva, Khandala continued to witness healthy traction, with ADRs sustaining above Rs.15,000/night alongside an encouraging response to its wedding proposition, ‘Vivaah by Athiva’. Management believes that completion of ongoing refurbishments, continued ramp-up of leisure assets and sustained domestic leisure demand should mitigate temporary weakness in FTAs and support RevPAR growth ahead.
Resort stabilisation and operating efficiencies to support margin expansion : Chalet’s hospitality EBITDA margin expanded 92bps YoY to 42.6% in Q1FY27, supported by a favourable pricing mix led by higher contribution from the resort portfolio and continued operating efficiencies. Management highlighted that the drag from newer assets is receding, with Westin Rishikesh ramping up ahead of plan and Athiva, Khandala witnessing improving occupancies while sustaining premium ADRs. Going forward, hospitality margins are expected to benefit from the completion of rebranding at Four Points by Sheraton, Vashi, normalisation of operations at Westin, Powai, higher operating leverage as occupancies improve, continued cost optimisation initiatives and an increasing contribution from the resort portfolio. Additionally, monthly commercial rental run-rate is expected to increase to Rs.30–32 crore from the current Rs.29 crore, providing further support to the high- margin commercial business. We believe improving hospitality margins, along with the increasing contribution from the commercial portfolio, should support sustained consolidated EBITDA margin expansion over the medium term.
Rating and Target Price : We recommend Buy with a SOTP based price target of Rs.980.
