Chalet Hotels Projects Strong 2-3 Year Growth Run

Introduction

Chalet Hotels, a prominent entity in the K Raheja Corp group, is poised for a significant growth phase over the next two to three years. The company's leadership attributes this positive outlook to a sustained demand-supply imbalance within the Indian hospitality sector, which is expected to fuel earnings and drive profitability. According to Shwetank Singh, the Managing Director & CEO, strong travel demand is creating a favorable environment, allowing for robust growth in key performance metrics, particularly revenue per available room (RevPAR).

Stellar Q3 Financial Performance

Chalet Hotels demonstrated a strong financial performance in the third quarter of fiscal year 2026. The company reported a consolidated revenue of ₹589.2 crore, marking a 27% increase year-on-year. Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) grew by 29% to ₹272.6 crore, with the EBITDA margin expanding by 76 basis points to 46.3%. Profit after tax for the quarter stood at ₹124 crore. For the first nine months of the fiscal year, consolidated revenue grew by 24%, while EBITDA saw a 28% year-on-year increase, underscoring a period of consistent and excellent growth.

Hospitality Sector Dynamics

The broader hospitality industry is experiencing a healthy upswing. Pan-India figures for the calendar year show an average occupancy rate of 67% with an average daily rate (ADR) of approximately ₹8,800. This combination has resulted in a RevPAR of around ₹5,500. Management at Chalet Hotels anticipates this trend to continue, forecasting double-digit RevPAR growth for the next few years. This growth is expected to be led more by rising room rates than by increases in occupancy, signaling strong pricing power for hotel operators.

Strategic Initiatives: The Athiva Brand

A key strategic move for Chalet Hotels is the launch of its own premium lifestyle brand, Athiva. The company has made a significant investment of over ₹170 crore to redevelop its Khandala property into the flagship Athiva Resort & Spa. This new brand is central to the company's strategy of strengthening its portfolio. Chalet Hotels has announced plans to operate 900 keys under the Athiva brand. However, the company clarified that this initiative does not mark a shift away from third-party operations. Instead, Athiva will be one of several brands in its portfolio, and each property will be assessed agnostically to determine the best brand fit.

Financial Health and Debt Position

Chalet Hotels maintains a comfortable and stable balance sheet. The company's total debt remains steady at approximately ₹2,000 crore. Management has expressed confidence in its financial position, highlighting that internal accruals and available headroom for additional debt are sufficient to fund all planned future expansions and potential acquisitions. This financial stability provides a solid foundation for executing its growth strategy without undue financial strain.

Commercial Real Estate Portfolio

Beyond its core hospitality business, Chalet Hotels benefits from a stable and growing commercial real estate (CRE) segment. This division provides a consistent stream of annuity income, acting as a hedge against the cyclical nature of the hospitality industry. In Q3 FY26, the CRE segment's revenue increased by 29% year-on-year to ₹74.4 crore, with EBITDA growing 37% to ₹62.1 crore. The company expects occupancy in its Powai commercial property to exceed 90% in the near term, further strengthening this revenue stream.

Management's Outlook

The outlook from the company's leadership remains decidedly optimistic. While January was a relatively slow month, demand picked up significantly in February and remained steady through March, setting the stage for a strong close to the financial year. Shwetank Singh expects the favorable market conditions, characterized by strong economic macros and the demand-supply arbitrage, to persist for the next two to three years. This confidence is supported by the robust performance of both the hospitality and commercial real estate segments.

Analysis and Future Prospects

The confluence of factors—a widening gap between hotel room demand and supply, rising consumer disposable income, and improved infrastructure—creates a powerful tailwind for Chalet Hotels. The company's strategy to launch its own brand, Athiva, allows it to capture more value and build brand equity. Simultaneously, its stable CRE portfolio provides financial resilience. With major projects like The Taj at Delhi Airport on track for completion by Q4 FY27, the company is well-positioned to capitalize on the ongoing travel boom and solidify its market position.

Conclusion

Chalet Hotels is navigating a period of exceptional opportunity in the Indian hospitality market. Its strong Q3 FY26 results, strategic brand initiatives, and prudent financial management underscore its readiness for sustained growth. With a clear runway for the next few years, the company is focused on expanding its portfolio and enhancing shareholder value, supported by favorable industry dynamics and a clear strategic vision.