CHALET - Chalet Hotels Limited Share Price

The management of Chalet Hotels Limited provided a positive outlook during the Q3 FY26 earnings call, emphasizing several key forward-looking points. The hotel industry is experiencing strong growth momentum, with the company seeing healthy double-digit growth in Average Daily Rate (ADR) and Revenue Per Available Room (RevPAR). For the current year, the hospitality sector is expected to benefit from a robust increase in domestic travel, aided by rising income levels and improved infrastructure.

The Q3 financial results reflected a consolidated revenue growth of 27% year-on-year to INR 5,892 million, and a 29% increase in EBITDA to INR 2,726 million, with an EBITDA margin of 46.3%. Excluding residential revenue, the growth was 23% year-on-year. RevPAR for the hospitality business grew nearly 12%, supported by a 16% rise in ADRs overall.

Management highlighted that occupancy challenges were primarily due to recent hotel openings and temporary setbacks from ongoing construction work at certain locations. However, they anticipate that these impacts will neutralize by FY27.

The company is also focused on expanding its portfolio with significant redevelopment projects underway. A capital expenditure of approximately INR 25 billion is planned from FY27 to FY29, mainly funded through internal accruals. Notably, they received environmental clearance for the Hyatt Regency Airoli project, which is expected to commence construction shortly.

Furthermore, the rebranding of the Aravali Resort has been successful, evidenced by strong guest feedback and high occupancy rates during the quarter. The management is optimistic about the performance of their new Athiva resort in Khandala, having observed sold-out days shortly after opening.

Overall, management remains committed to enhancing both operational efficiencies and guest experiences across their portfolio, leveraging both domestic travel trends and strategic capital investments to drive future growth.

1. Question: "Could you help us understand how we are looking at the gradual ramping up of the hotel in terms of the number of keys considering it is a big box hotel?"

   Answer: "We plan to open the hotel with about 150 rooms by the end of this year, with a gradual ramp-up to around 380 rooms within the next quarter. This phased approach allows us to complete interior and public area works while getting operational more efficiently."

2. Question: "Any additional drivers which are helping us on the demand side across geographies?"

   Answer: "This quarter, we see high demand not just for social events but also MICE events, supported by favorable weather. The ongoing recovery of international travel is also a major positive driver, especially with deals struck with the European Union and U.S."

3. Question: "How do you see the ARR progressing in the MMR region?"

   Answer: "MMR is experiencing early single-digit growth in RevPAR. We're outperforming the broader market, thanks to a strong premium positioning and proactive management of our competitive strategies, despite recent supply increases."

4. Question: "How do you see the impact of the recent rebranding of Aravali Resort on guest experience and ARR?"

   Answer: "Rebranding has introduced new facilities and upgraded services that enhance guest experience. We anticipate a potential upside in ADR as larger MICE and wedding events come into play in the next 2-3 quarters."

5. Question: "Can you speak about margins in the Hospitality business?"

   Answer: "We've incurred one-off expenses this quarter due to license fees, but these will not recur next year. We expect margins to stabilize and improve as our new inventories in Bangalore and Khandala ramp up."

6. Question: "What is the status of the Udaipur property?"

   Answer: "We are still in due diligence. It's a non-operational resort requiring significant refurbishment, and we will assess capex needs and room additions as we finalize our strategy."

7. Question: "Can you discuss the trends in FTA levels since the trade deals?"

   Answer: "Currently, about 40% of our business is from foreign travelers, maintaining pre-COVID levels. Positive sentiment from recent trade deals suggests future growth in international traveler numbers."

8. Question: "What are your expectations for the Goa market given its recent performance?"

   Answer: "We believe Goa is a strong market despite recent fluctuations. Our upcoming properties are still a few years away, and we expect demand to stabilize as the market recovers."

9. Question: "What is the timeline for the Airoli property construction?"

   Answer: "Following recent environmental clearances, excavation should commence in 2-3 months, with a projected completion of construction in about 36 months."

10. Question: "Will your influence in the banquet-related F&B side be affected by new competitors in the micro market?"

    Answer: "Increased venue options generally boost overall demand in the submarket. Despite competition, we have unique features that differentiate us, ensuring we can sustain and potentially grow our events business."