Chalet Hotels expects real estate to contribute to a quarter of its revenue

Mumbai-based hospitality and real estate player Chalet Hotels is planning to increase its revenue contribution from real estate segment from the current 9 percent to at least 20 percent of the total revenue.

Sanjay Sethi, Managing Director and CEO of Chalet Hotels, in an interview outlined the company's plans to increase its revenue contribution from the real estate segment significantly. Sethi said, presently, approximately 9 percent of the company's revenue comes from real estate, while 90 percent is derived from hospitality and the remaining 1 percent from other income sources.

“The real estate play may increase to maybe about 20-25 percent of the total revenue, but primarily will be a hospitality revenue driven company.”

Chalet Hotels experienced a decline in occupancy to 70 percent compared to the previous year's 78 percent.

Sethi said, “70 percent occupancy for Q1 is fairly standard along the years. It's just that last year, we had this exceptional business of occupancy coming through the Indian Premier League (IPL) which is concentrated in Mumbai. So all of that together had pumped up the overall occupancy for the portfolio.”

The company implemented a rate growth strategy that has led to an impressive 30 percent increase in overall revenue. “Our revenue management exercise has led us to a situation where we have 38 percent rate growth, 30 percent growth in room revenue and overall 23 percent growth in the revenue for the hospitality segment. Overall a very satisfying result,” he said.

Looking ahead, Chalet Hotels is optimistic about its future prospects. The company aims to achieve double-digit growth in room rates over the next two years. He said, “From our perspective, we believe that there is still a lot of headroom for growth rates. Last time we spoke that I see a double-digit rate growth for at least a couple of years more before they come back to normal inflationary increases year-on-year.”

Addressing concerns about profit margins, Sethi asserts that he sees no immediate cause for worry. In fact, he expects margins to improve as room rates continue to climb.

Additionally, the company foresees enhanced profitability through the introduction of additional inventory into existing hotels. These additions are expected to improve flow-throughs, resulting in better margins for Chalet Hotels.