Chalet Hotels plans to take margins to 45 pc on luxury expansion

Chalet Hotels, the hospitality arm of leading realtor R Raheja Corp, is targeting to increase its margin, which is already the highest in the industry, to around 45 per cent on the back of expansion and rising room prices.

The company currently has margins of about 41 per cent.

Chalet operates close to 2,780 keys spanning six properties in Mumbai/Navi Mumbai, Bengaluru, Hyderabad and Pune, and is adding around 600 more rooms in three greenfield properties by 2022 at an investment of Rs 1,300 crore.

Chalet will be opening the city's first super-luxury brand 'W' from the Marriot stable with 150 keys in Powai by 2022.

It will also add a 260-room Hyatt Regency in Navi Mumbai through its maiden association with the Hyatt group, apart from adding over 80 keys to the just acquired Novotel in Pune towards the end of the year.

That apart, it is investing around Rs 600 crore to upgrade the 600-keys Renaissance Convention Centre & Hotel into The Westin later this year.

The company is also keen to enter Chennai and Goa, and "doesn't mind buying out an operational property in Delhi", taking into account the "considerable developmental risks" in the national capital, according to its Managing Director and Chief Executive Sanjay Sethi.

According to publicly disclosed numbers and also those collated by industry tracker Horwath STR India Hotel Review 2019, Chalet's margin is almost double of its peers and also the highest by a wide margin at 41.4 per cent as of the December 2019 quarter as also in the first nine months of the fiscal.

As against this, Taj (Indian Hotels from the Tatas) has a margin of 24.4 per cent, East India Hotels that operates the Oberori/Trident brands has the lowest at 21 per cent and the mid-sized Lemon Tree stands at 32 per cent (in the first three quarters).

"Our target is to take margins to the mid-40s, as taking it to 50 per cent will be tough," Sethi told PTI when asked whether margins can improve with expansion of its portfolio.

Explaining how it maintains high margins, Sethi said, "We've the lowest salary cost in the industry even though our salaries are much higher than the industry average. Our employee-room ratio is 1.2 against the industry's 2 per room."