Chalet Hotels will continue to invest in large inventory hotels
Chalet Hotels will continue to invest in large inventory hotels


Chalet Hotels will continue to invest in large inventory hotels

Chalet Hotels, a part of K Raheja Corp group, has set ambitious plans to expand its portfolio of "big-box", or large inventory, hotels, aiming to add approximately 800 rooms to its offerings. Having earmarked ₹2,000 crore as current capital work-in-progress, the expansion will increase its total room count to 5,000 in the next three to four years.

Capital work-in-progress represents expenditure on fixed assets like buildings that are under construction.

Sanjay Sethi, the company's managing director and chief executive, told Mint that Chalet Hotels' strategy aims to capitalize on demand generated by office spaces in proximity to its properties, ensuring a robust and continuous customer base.

In an industry trend moving towards reduced asset ownership and a focus on hotel management, Sethi said that Chalet Hotels stands out by pursuing growth in both its balance sheet and Ebitda (earnings before income, tax, depreciation, and amortization). "We delivered high Ebitda margins purely because of strategies like having different hotel operators to work with," he said.

For the first nine months of the current fiscal year (April-December), the company reported a net profit of ₹195 crore, an increase of 33% year-on-year.

“Hotels make money, and especially in good cycles like the one that is currently going on. In fact, they make a lot of money, if the location and operator is right," Sethi said. 

He attributed the company's success over two decades to its investment in asset-intensive, large-scale hotels located in prime markets of tier-one and emerging cities. 

Chalet Hotels boasts collaborations with operators such as Accor, Marriott, Hyatt, and Taj, managing properties including the JW Marriott Mumbai Sahar, Four Points by Sheraton Navi Mumbai, The Westin Hyderabad Mindspace, and Bengaluru Marriott Hotel Whitefield, among others.

While the possibility of launching its own hotel brand remains under consideration, Sethi values the flexibility that comes with operating without a proprietary brand. This strategy allows the company to select the most suitable brand for each location based on comprehensive feasibility studies and market dynamics, avoiding the constraints of having to deploy its brand regardless of fit.

Managing hotels involves costs, including management fees and reimbursable expenses, which for a large hotel can amount to approximately ₹10,000 per month per room, or about ₹1.2 lakh per year per room. So, for a hotel with about 200 rooms, the company would pay about ₹2.4 crore per annum on the entire hotel’s management fee.

Chalet Hotels, which plans to explore expansion opportunities in cities like Delhi and Lucknow, is transitioning to franchise contracts, Sethi said. This move will enable the company to operate hotels under various brands, further enhancing its adaptability and growth prospects.

Crisil had forecast a slight increase in occupancy rates for top hotel companies, reaching 74% for 2023, surpassing the pre-pandemic levels of 66%. Additionally, average room rates were expected to climb to ₹8,000 per night, marking an 8-10% increase.

Source: mint