Kamat Hotels Navigates Monsoon Headwinds and Strategic Expansion in Q2 FY26

Kamat Hotels (India) Limited, a prominent player in the Indian hospitality sector, recently announced its financial results for the second quarter and first half of the financial year 2026. The period proved to be challenging, marked by a confluence of external factors and strategic internal initiatives. The company reported a consolidated revenue of INR 75 crore for Q2 FY26, reflecting a 12% year-on-year decline. Consolidated EBITDA for the quarter stood at INR 8 crore, a significant 63% drop compared to the previous year, with the company posting a net loss of INR 30 lakh. For the first half of FY26, consolidated revenue was broadly flat at INR 158 crore, while EBITDA declined by 28% to INR 26 crore.

Management attributed the subdued performance to several factors. Heavy monsoons severely impacted operations, particularly affecting the Envotel hotels in Shimla and Manali due to road damage, effectively washing out their quarter. Additionally, the company incurred substantial pre-opening expenses for five new hotels launched in Q2 FY26, which are expensed immediately rather than capitalized, thereby impacting short-term profitability. These new additions include The Orchid Panchgani (70 keys), The Orchid Rishivan (54 keys), IRA by Orchid Hyderabad (63 keys), IRA by Orchid Dwarka (50 keys), and IRA by Orchid Porvorim (43 keys), collectively adding approximately 280 rooms. Furthermore, ongoing renovation work at the Orchid Pune property also contributed to the revenue dip.

Financial Performance Snapshot

Strategic Vision and Future Outlook

Despite the challenging quarter, Kamat Hotels' management expressed strong confidence in achieving its full-year FY26 targets. The company reiterated its guidance of INR 400 crore in revenue for FY26, anticipating a significant rebound in Q3 and Q4. This optimism is fueled by the upcoming wedding season, the stabilization and improved performance of the newly opened hotels, and the positive impact of completed renovations. The company expects new markets like Hyderabad to quickly contribute to the top and bottom line due to their buoyant nature.

Kamat Hotels is actively pursuing an asset-light expansion model, focusing on lease agreements, revenue-sharing arrangements, and management contracts. This strategy aims to expand its footprint without significant capital expenditure. The company is also working on monetizing non-core assets, such as a land parcel in Pune, to further strengthen its financial position. The long-term strategy, KHIL 3.0, targets 2,500+ keys, an Average Room Rate (ARR) of INR 7,500, and a reduction in debt to INR 50 crore by FY26.

Operational Metrics and Brand Performance

Operational metrics for Q2 FY26 showed varied performance across brands. The Orchid brand recorded an ARR of INR 5,979, a 7% increase year-on-year, but its occupancy rate fell to 47% from 66% in Q2 FY25. IRA saw its ARR decline by 4% to INR 4,749, with occupancy dropping to 65% from 77%. Lotus Resorts experienced a 4% increase in ARR to INR 5,331, but its occupancy decreased to 38% from 44%. Fort JadhavGADH maintained a stable ARR of INR 8,286, with occupancy at 20%, down from 28%.

Management clarified that the drastic fall in occupancy for brands like Orchid was largely due to the zero occupancy in Shimla and Manali hotels for extended periods, which significantly skewed the overall brand averages. Excluding these severely impacted properties, other hotels generally performed closer to previous quarters. The company is also focusing on enhancing unit-level operational efficiency through digitisation and strengthening digital media sales and online marketing to drive future growth.

Conclusion: Navigating Towards Growth

Kamat Hotels is navigating a complex period, balancing the immediate impacts of external challenges and strategic investments with a clear long-term growth vision. The Q2 FY26 results reflect these short-term pressures, but management's confidence in a strong H2 FY26, driven by new properties, renovations, and seasonal demand, underscores its commitment to sustained growth and improved profitability. The focus on an asset-light model, debt reduction, and digital transformation positions the company to capitalize on the recovering hospitality market and achieve its ambitious KHIL 3.0 targets.