BTTV Exclusive | Chalet Hotels sees stronger FY27 H2; expects stronger second half of FY27

Chalet Hotels expects its commercial real estate business to become a much larger contributor to earnings over the next few years, while the company also sees a stronger second half of FY27 as hospitality demand improves and temporary disruptions in Mumbai ease.

Speaking after the company’s June quarter earnings, Managing Director and CEO Shwetank Singh said the reported decline in revenue and profit was largely due to the absence of one-off residential income recorded in the base quarter. Excluding that impact, he said, Chalet Hotels Ltd core hospitality and commercial businesses continued to post healthy growth, supported by operational execution, improving leasing activity and resilient travel demand.

Commercial portfolio gains scale
Singh said Chalet Hotels’ commercial real estate portfolio is steadily emerging as a meaningful annuity income stream. The company currently operates about 2.3 million square feet of office space, with occupancy at around 91 per cent. Management is not targeting full occupancy, and instead sees a sustainable occupancy level of 95-96 per cent as more realistic, while leaving room for rental growth in the coming quarters.

The company is generating nearly Rs 29 crore in monthly commercial rental income, which it expects to rise to around Rs 34-35 crore as leasing improves. That would imply an annualised commercial revenue run-rate of nearly Rs 350-400 crore from the existing portfolio. Singh said commercial real estate remains one of Chalet Hotels’ most attractive businesses because incremental rental income largely flows to the bottom line, offering higher operating leverage and stable recurring cash flows.

New projects to drive the next phase
The next phase of expansion is expected to come from about 0.9 million square feet of commercial space under development. The project is slated for completion by the end of the current financial year and, once fully leased, could add another Rs 150 crore in annual revenue.

Management said this expansion is being supported by ongoing commercial developments in Powai and leasing activity in Bengaluru. Once these projects are operational, the commercial portfolio alone has the potential to become a Rs 450-500 crore annual revenue business, strengthening the company’s recurring earnings profile.

Reported numbers and core performance
The company said the weak reported quarterly numbers did not accurately reflect the performance of its recurring businesses. Singh said the year-ago quarter had included significant revenue and profit recognition from a one-time residential project, creating a high base for comparison.

He said Chalet Hotels should not be viewed as a residential developer, describing the residential business as a one-off transaction rather than a recurring earnings driver. Excluding this accounting impact, management said recurring revenue rose about 10 per cent year-on-year, while EBITDA increased around 15 per cent, led by commercial real estate and supported by hospitality. Within hospitality alone, revenue grew nearly 9 per cent and EBITDA rose around 11 per cent.

Hospitality demand stays firm
On the hospitality side, Chalet Hotels reported 6.5 per cent growth in revenue per available room during the quarter. Singh said leisure travel remained the biggest growth driver, with the company’s leisure portfolio posting 19 per cent RevPAR growth. Hotels outside the Mumbai Metropolitan Region also performed well, with RevPAR rising around 10 per cent, indicating demand across the portfolio.

Mumbai, however, remained a temporary drag on overall performance. The company’s Powai hotel saw lower occupancy because of construction activity linked to the adjoining commercial development, while Four Points by Sheraton Mumbai underwent refurbishment during the quarter. Management expects both factors to normalise over the next few quarters, with the renovated Four Points property reopening this quarter in a refreshed format.

Outlook for FY27
Among Chalet Hotels’ flagship assets, JW Marriott Mumbai Sahar continued to outperform. Singh said the property recorded strong room-rate growth while maintaining healthy occupancy levels, helping it outperform the broader Mumbai market.

Looking ahead, the company expects improving foreign tourist arrivals, a stronger events calendar and easing construction-related disruption in Mumbai to support better operating performance. Singh said near-term demand may remain volatile, but added that business sentiment has started improving and the company expects a steady second quarter followed by a significantly stronger second half of FY27.

Chalet Hotels said its growing commercial real estate portfolio and continued hospitality momentum should help drive sustainable earnings growth despite temporary fluctuations in reported quarterly results.

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