Leela Hotels gains from ADR growth, luxury travel demand and expanding hotel pipeline

Investment View and Q2FY27 Highlights

In its October 15, 2026 result update, Elara Securities retained its Buy rating on Leela Palaces Hotels & Resorts after Q2FY27 results exceeded the broker’s expectations across metrics. Elara attributed the performance to a 30 per cent year-on-year increase in average room rate (ARR), supported by robust demand from corporate travel, leisure and meetings, incentives, conferences and exhibitions.

The broker reported topline growth of 18 per cent, with both room and non-room revenue increasing by more than 20 per cent year-on-year. Reported occupancy was flat, although blended occupancy increased by more than 100 basis points to above 70 per cent after adjusting for the Coorg hotel acquisition.

Operating Performance

Leela’s Q2FY27 ARR was Rs 25,046 and RevPAR was Rs 17,225, both up about 30 per cent year-on-year. Overall occupancy was 69 per cent.

City-hotel RevPAR grew 36 per cent in Q2FY27, supported by the BRICS Summit in Delhi and other events. These factors drove a 400-basis-point increase in occupancy and 29 per cent ADR growth. Resort-hotel ADR increased 31 per cent as the company repositioned its palace properties, improved their family appeal and expanded experiences at Jaipur and Udaipur. The acquisition of the higher-ADR Coorg asset also improved the resort portfolio mix.

Non-Room Revenue and Management Commentary

Non-room revenue rose 27 per cent year-on-year in Q2FY27, led by 35 per cent F&B growth and 77 per cent growth in management fees. Room income accounted for 49.6 per cent of quarterly operating revenue, while F&B contributed 35.4 per cent.

• Growth in non-resident guests supported the performance.
• Eight new F&B outlets were opened over the prior year.
• Banqueting demand strengthened on the back of conferences and events.

Restaurants represented 56 per cent of F&B revenue and banqueting represented 44 per cent. Management commentary cited in the report indicates that Leela is seeking double-digit growth in corporate travel rates in the next negotiation cycle.

At Leela Forest Sanctuary in Coorg, ADR has doubled versus the pre-acquisition level following rebranding. Management is now focused on lifting occupancy above 60 per cent through wellness packages aimed at domestic and European wellness-oriented customers.

Growth Outlook and Expansion Pipeline

Elara’s positive thesis rests on constrained supply in ultra-luxury hotels, rising high-net-worth individual demand for experiential luxury travel, healthy same-store growth and an expansion pipeline. The company expects approximately 1,038 additional keys by CY30 across managed and owned hotels.

The planned additions include Mumbai Waterstone, Jaisalmer, Srinagar, Agra, Ayodhya and Mumbai BKC. Elara expects EBITDA to grow at a 20 per cent CAGR over FY26 to FY30E.

Estimates, Target Price and Valuation

Following the stronger RevPAR outlook, Elara raised its FY27E, FY28E and FY29E revenue estimates by 4.4 per cent, 10.1 per cent and 9.3 per cent, respectively. EBITDA estimates were increased by 8.6 per cent, 10.1 per cent and 9.2 per cent, respectively.

Elara raised its target price to Rs 798 from Rs 669, based on 22 times H1FY29E EV/EBITDA after rolling the valuation forward from Q1FY29E. At the CMP of Rs 591, the broker calculated 35 per cent upside and an implied target P/E of 36 times.

Risks and Key Assumptions

The report does not set out a separate quantified risk section. However, its higher forecasts and valuation are explicitly based on stronger RevPAR assumptions and sustained demand.