Chalet Hotels room additions and commercial rentals support margin-led growth

Investment View

ICICI Direct Research’s July 31, 2026 report retains a Buy recommendation on Chalet Hotels Ltd. and identifies room additions, resort stabilisation, operating efficiencies and expansion of the commercial-rental portfolio as the principal drivers of medium-term growth and margin expansion.

Chalet Hotels is an owner, developer and operator of premium hotels, commercial office spaces and residential properties. It operates 11 hotels with 3,389 keys and has around 2.4 million sq. ft. of commercial space adjacent to its hospitality assets.

Q1FY27 Financial Performance

Core performance, excluding the residential business, remained strong in Q1FY27. Revenue grew 9.5% year-on-year to Rs 514 crore, while EBITDA increased 15.1% to Rs 240 crore. Core EBITDA margin expanded by 229 basis points year-on-year to 46.7%, supported by the annuity business and improved resort performance.

Including residential income, consolidated revenue was Rs 512.3 crore, EBITDA was Rs 234 crore, adjusted PAT was Rs 93.5 crore and reported PAT was Rs 86.1 crore. The broker notes that reported year-on-year comparisons including residential are not comparable because of the one-off impact of the residential business in the previous year.

Hospitality Performance and Operating Trends

Hospitality revenue increased 8.5% year-on-year to Rs 418.5 crore. Room revenue rose 10.5% to Rs 260.3 crore, while food and beverage revenue increased 8.6% to Rs 127.8 crore.

RevPAR increased 6.5% to Rs 8,582 per night, driven by an 8.5% rise in ADR to Rs 13,247 per night. However, occupancy declined by 120 basis points to 64.8%. Lower foreign tourist arrivals, refurbishment at Four Points by Sheraton, Vashi, and operational disruption at Westin Powai affected occupancy. Hospitality EBITDA margin improved by 93 basis points to 42.6%.

Business-hotel RevPAR grew 4.7%, while resort RevPAR increased 19%. Resort performance benefited from domestic leisure demand, a 540 basis-point expansion in occupancy and 6.5% ADR growth.

Demand Outlook and Property Updates

Management said domestic leisure demand, MICE activity, rising affluence and discretionary spending remained supportive despite geopolitical disruption to inbound foreign tourist arrivals. Q2FY27 began steadily, with airline traffic recovering and August bookings improving.

• Refurbishment at Four Points by Sheraton, Vashi, is largely complete, with rebranding expected shortly.
• Westin Powai has regained access to wedding and banquet facilities. Porch and banquet connectivity is expected by the end of Q2FY27.
• Westin Rishikesh is ramping up ahead of plan.
• Athiva, Khandala maintained ADR above Rs 15,000 per night and is seeing improving occupancy and wedding demand through its Vivaah by Athiva proposition.

Annuity Business and Commercial Portfolio

The annuity business reported 18.2% year-on-year revenue growth to Rs 86.5 crore and 20.9% EBITDA growth to Rs 73.5 crore. EBITDA margin expanded by 191 basis points to 85%. Monthly rentals were Rs 29 crore in Q1FY27, with management guiding for Rs 30-32 crore during FY27.

A letter of intent for 66,000 sq. ft. in Bengaluru raised commercial-portfolio occupancy to 91%, with 2.2 million sq. ft. occupied out of 2.4 million sq. ft. available. CIGNUS II at Powai is expected to be substantially completed during FY27 and to increase rental income from FY28. The 1.6 lakh sq. ft. Koramangala commercial development is expected to be leased by FY28.

Expansion Plans and Room Additions

Management plans Rs 3,000 crore of capex during FY27-FY29, primarily funded through internal accruals. Chalet Hotels is targeting 1,655 additional rooms, taking total inventory to 5,044 keys by FY30.

• The Taj Delhi Airport project is expected to open an initial 70 rooms in Q4FY27.
• The remaining 310 rooms at Taj Delhi Airport are expected to launch in phases from Q1FY28.
• Hyatt Airoli, the Hyderabad Ritz-Carlton and the South Goa projects are progressing.

Estimates, Valuation and Target Price

ICICI Direct reduced its FY27E revenue, EBITDA and PAT estimates by 1.7%, 2.1% and 2.2%, respectively. FY28E revenue, EBITDA and PAT estimates were cut by 1.0%, 1.3% and 1.8%, respectively, while the broker continues to monitor geopolitical volatility.

The target price of Rs 980 is based on a sum-of-the-parts valuation comprising 19 times FY28E hotel EBITDA, an 8% capitalisation rate for commercial assets and Rs 293 crore of residential-property NAV.

Key Risks

• Adverse events or geopolitical tensions could affect near-term demand.
• New-hotel operationalisation could be delayed.
• Debt repayment could be delayed.