CHALET - Chalet Hotels Limited Share Price

Management provided an optimistic outlook for Chalet Hotels Limited, emphasizing their successful navigation of a challenging geopolitical environment. They highlighted the robust demand-supply scenario in the Indian hospitality market, supported by strong business fundamentals. The management announced plans for a significant acquisition of a 15-acre beachfront property in North Goa to develop a luxury hotel, reflecting their confidence in the region's growth potential. FY '25 was marked as the strongest year in company history, with substantial gains in revenue and profitability.

Key forward-looking points included:

1. Strong Financial Performance:

   • The highest average room rate (ARR) of INR 14,345, up 21% YoY.
   • Record revenue in Q4 at INR 5.4 billion, with an EBITDA of INR 2.6 billion and a margin of 47.8%.
   • Full year hospitality revenue reached INR 15.2 billion and EBITDA climbed to INR 6.8 billion, with a margin of 44.7%.

2. Project Development and Expansion:

   • Accelerated progress in ongoing projects, including operationalizing 121 new rooms at Bengaluru Marriott and nearing completion of several strategic developments, including the Taj Delhi Airport.
   • Acquisition of The Westin Resort & Spa, Himalayas for INR 5.3 billion, strengthening their leisure segment.

3. Market Dynamics:

   • Projected continued strength in business travel and MICE, with expectations of a 12% growth in May despite recent geopolitical disruptions.
   • Management indicated confidence in achieving double-digit RevPAR growth amid a strong recovery in corporate travel.

4. Strategic Investments:

   • Planned capital expenditures of INR 23 billion over the next three years, largely funded through internal accruals, to support ongoing and future growth.

5. Sustainability Recognition:

   • Acknowledged inclusion in the Dow Jones Sustainability Index and high scores in climate assessments.

Overall, management expressed a strong commitment to operational excellence, continued growth, and strategic investments aligned with market dynamics to enhance shareholder value.

Question 1: What is Chalet's right to win given the increasing competition in the hospitality market, especially with many international players entering?

Answer: Chalet stands strong as an asset owner in a market where not many are investing in multiple hotel projects. We anticipate a favorable demand-supply gap for the next 3-4 years. Our efficient cost structure in terms of build and operation gives us an edge, allowing us to deliver high returns on capital, which supports our growth plans.

Question 2: How do you foresee managing finance costs with the expected interest rate cuts?

Answer: Currently, our cost of capital is at 8.4%. I'm hopeful that with expected rate resets, we can bring it down to approximately 8.32% by the end of May. We're closely monitoring rates and will adjust our financing strategy accordingly.

Question 3: Can you address the impact of recent geopolitical developments on occupancies and average room rates (ARR)?

Answer: We've observed a volatile situation impacting rates slightly but still achieved 12% growth in May year-on-year, albeit 9% below our targets. Leisure occupancy growth remains stable, while foreign travel may take longer to recover due to travel advisories.

Question 4: Given the recent geopolitical situation, have you seen cancellations in the MICE segment?

Answer: Yes, there have been some cancellations in MICE events over the past week. However, most clients are opting to postpone rather than cancel outright, which gives us hope for recovery in subsequent months if the current situation stabilizes.

Question 5: How do you view your growth trajectory in the context of your balance sheet and acquisition strategy?

Answer: Our balance sheet is solid, and we intend to grow rapidly. We foresee opportunities for both acquiring existing assets and pursuing greenfield projects, depending on market dynamics. We aim to reach approximately 5,000 rooms within the next year.

Question 6: In light of your recent resort acquisitions, what revenue contributions do you expect?

Answer: Our resorts are in the early ramp-up stages. We anticipate strong growth as wedding seasons peak and occupancy increases. We're optimistic about achieving double-digit RevPAR growth as these properties stabilize.

Question 7: Can you provide insights on your second hotel acquisition in Goa and projected room rates?

Answer: The expected average room rate for our new Goa hotel will be in the INR18,000 to INR21,000 range, with an anticipated completion timeline of three years post-approval, expected within 6 to 9 months.

Question 8: What progress can you share regarding the Koramangala project revenue recognition?

Answer: We expect to hand over possession starting in Q1 FY '26, with significant revenue recognition from those sales anticipated during this quarter, following our collection of 90% of the sold units.

Question 9: How are you tracking in terms of rental occupancy rates?

Answer: We believe that our rental occupancy will exceed 90% within the next 2 to 3 quarters. We're already observing higher rates than anticipated, which will help maintain stable long-term occupancy.

Question 10: Can you confirm the EBITDA margins and overall performance of the resort business since acquisitions?

Answer: While I can't disclose specific individual hotel numbers, we are experiencing around a 10% revenue growth from our recent resorts. The repositioning of our assets, like Courtyard by Marriott Aravali to Marriott, is expected to enhance performance significantly.