Chalet Hotels is forecasting a significantly stronger second half for the financial year 2027, propelled by the scaling up of its commercial real estate operations and a rebound in hospitality demand. Managing Director and CEO Shwetank Singh highlighted these factors following the company's June quarter earnings report.
Commercial Real Estate Portfolio Gains Momentum
Singh emphasized that Chalet Hotels' commercial real estate segment is rapidly evolving into a crucial source of annuity income. The company currently manages approximately 2.3 million square feet of office space, boasting an occupancy rate of around 91 percent. While full occupancy isn't the target, management aims for a sustainable 95-96 percent, allowing for future rental growth.
This portfolio is generating nearly Rs 29 crore in monthly rental income, a figure expected to climb to Rs 34-35 crore as leasing activities intensify. This would translate to an annualised commercial revenue run-rate of approximately Rs 350-400 crore from existing assets. Singh underscored commercial real estate's attractiveness due to its high operating leverage and stable, recurring cash flows.
New Projects to Fuel Future Expansion
The next phase of growth will be driven by about 0.9 million square feet of commercial space currently under development, slated for completion by the end of the current financial year. Once fully leased, this expansion could add an estimated Rs 150 crore in annual revenue. This development is supported by ongoing projects in Powai and active leasing in Bengaluru. With these new ventures, the commercial portfolio alone has the potential to generate Rs 450-500 crore in annual revenue, further solidifying the company's recurring earnings profile.
Core Business Performance Outshines Reported Numbers
Singh clarified that the reported decline in June quarter revenue and profit was largely due to the absence of one-off residential income recorded in the previous year's base quarter. He stressed that Chalet Hotels should not be viewed as a residential developer, as such transactions are non-recurring.
Excluding this one-time impact, the company's core hospitality and commercial businesses demonstrated healthy growth. Recurring revenue increased by about 10 percent year-on-year, while EBITDA rose approximately 15 percent, primarily driven by commercial real estate and supported by hospitality. Within hospitality alone, revenue grew nearly 9 percent, and EBITDA saw an 11 percent increase.
Resilient Hospitality Demand Despite Localized Drags
The hospitality segment reported a 6.5 percent growth in revenue per available room (RevPAR) during the quarter. Leisure travel emerged as the strongest growth driver, with the company's leisure portfolio achieving a 19 percent RevPAR increase. Hotels outside the Mumbai Metropolitan Region also performed well, seeing around 10 percent RevPAR growth.
However, Mumbai experienced temporary disruptions, including lower occupancy at the Powai hotel due to adjoining commercial construction and refurbishment at the Four Points by Sheraton Mumbai. Management anticipates both issues to normalize in the coming quarters, with the renovated Four Points property reopening soon.
Positive Outlook for FY27
Looking ahead, Chalet Hotels expects improving foreign tourist arrivals, a robust events calendar, and the easing of construction-related disruptions in Mumbai to bolster operating performance. While near-term demand may show some volatility, Singh noted an improving business sentiment, predicting a steady second quarter followed by a significantly stronger second half of FY27. The company's growing commercial real estate portfolio and sustained hospitality momentum are expected to drive sustainable earnings growth despite temporary quarterly fluctuations.