CHALET - Chalet Hotels Limited Share Price

The management of Chalet Hotels Limited provided a robust outlook for the upcoming fiscal year in the earnings call held on August 1, 2025. Key forward-looking points included:

1. Growth Projections: Management expects to exceed 5,000 operational keys by the end of the current financial year, aiming to grow from approximately 4,500 keys, which includes 3,300 current operational rooms and 1,200 under various stages of development.

2. Revenue Growth: For the ongoing fiscal year, Chalet anticipates maintaining a double-digit growth in Revenue per Available Room (RevPAR), expecting solid demand driven by strong leisure and business travel dynamics. Historical data suggests management aims for a 10% or more RevPAR growth for the next 3-4 years.

3. Strong Financials: The company noted a significant increase in total revenue, which surged 146% year-on-year to INR9.1 billion, while consolidated EBITDA rose 150% to INR3.7 billion. The hospitality revenue itself was reported at INR3.9 billion, up 18% year-on-year.

4. Operational Enhancements: The management stated that they plan to continue diversifying their asset portfolio with a blend of high-quality hospitality and commercial real estate, aiming for greater operational efficiencies. The annual capital expenditure planned is INR20 billion by FY '27, primarily funded through internal accruals.

5. Market Performance: Specific mention was made regarding the marginal decline in occupancy rates due to new supply in markets like Mumbai and Bengaluru but highlighted that average daily rates (ADR) showed resilience with a 17% year-on-year improvement.

6. ESG Commitment: The company continues to focus on its Environmental, Social, and Governance (ESG) targets, reinforcing its commitment to a net-zero target while enhancing employee well-being, as reflected by its sixth consecutive year as a "Great Place to Work."

This strategic direction demonstrates Chalet Hotels' commitment to growth, resilience in a volatile environment, and confidence in their operational model.

1. Question: "Would it be possible to share some colour on growth and the pipeline? Currently, we have around 600 rooms under construction in addition to the CIGNUS 2, which is expected to come in the next 2, 3 years overall. In addition, we have another 600, which is in the planning stage. It would be helpful if you can just provide some medium-term outlook over and above these additions would be great."

   Answer: "We have about 3,300 rooms currently operational and 1,200 in the pipeline. By year-end, we expect our total to exceed 4,500 rooms, aiming to cross 5,000 with ongoing developments. We're actively pursuing opportunities in both greenfield and shell leases."

2. Question: "Is the drop in occupancy in the MMR region mainly due to the fully operational Fairmont, or are there other factors contributing to that? How should we look at the southern markets, Bangalore and Hyderabad?"

   Answer: "The drop in MMR occupancy is partly due to new supply like Fairmont but also because we were coming off a high base. In Bengaluru, we added rooms, affecting occupancy but not rates, which continue to perform well. Hyderabad has moderated, reflecting the cyclical nature of growth."

3. Question: "In terms of the acquisition strategy, how prepared are we to pursue large opportunities, and what about funding?"

   Answer: "We're well-capitalized and always looking for acquisition opportunities. Our debt levels remain below 3.5x EBITDA, giving us a healthy financial footing to seize potential assets when they arise."

4. Question: "How do you see the business versus leisure mix evolving, and how will it change the P&L?"

   Answer: "We're focusing on a balance between leisure and business properties, aiming for 20% leisure in our portfolio. Leisure properties will have higher staff-to-room ratios, but we excel at operational efficiencies, maintaining a low overall ratio in our portfolio."

5. Question: "With the impact of new supply on occupancy, how do you plan to balance ARR and occupancy moving forward?"

   Answer: "While new hotels can strain occupancy, our strategy revolves around maximizing RevPAR. We aim to uphold our rates and ensure revenue growth, particularly as seasonal business improves in the second half of the year."

6. Question: "Given delays in projects like Airoli and Bambolim, will the Trivandrum Hotel's timeline be advanced?"

   Answer: "We cannot advance Trivandrum until we finalize lease agreements with the government. We're actively monitoring market changes and will act once ready."

7. Question: "On the interest cost reduction, how will occupancy increase influence that in the future?"

   Answer: "With current exit rentals around INR25 crores and expectancies to reach INR30 crores, while occupancies increase, we anticipate continued discussions for refinancing, which could yield further reductions in costs."

8. Question: "In light of competing hotels, how will occupancy at JW Sahar be managed?"

   Answer: "We won't cut rates but instead focus on maximizing revenues through a strategic RevPAR approach, adjusting our marketing and segments as needed. Loyalty programs with Marriott will help maintain our competitive edge."

9. Question: "What is the cash flow trajectory for the Koramangala project?"

   Answer: "We expect around INR500 crores from the residential project over the next two years, with INR345 crores expected from current and future sales," ensuring profitability after expenses."

10. Question: "What occupancy rates do you expect for the CRE portfolio by year-end?"

Answer: "We anticipate reaching around 90% occupancy in our commercial portfolio in the coming quarters, reflecting positive lead generation and demand growth."