Part of the K. Raheja Corp, Chalet Hotels Limited (CHL) is an owner, developer and asset manager of high-end hotels in key metro cities in India. The Company’s hotel platform comprises six operating hotels including a hotel with a co-located serviced residence, located in the key Indian cities of Mumbai, Hyderabad, Bengaluru and Pune representing 2,554 keys. All the hotels are branded with globally recognized brands, such as JW Marriott, Westin, Marriott, Marriott Executive Apartments, Renaissance, Four Points by Sheraton and Novotel, which are held by Marriott Group and the Accor Group.
The six hotel properties and a serviced residence which are managed by third parties are JW Marriott Hotel, Mumbai Sahar, Bengaluru Marriott Hotel Whitefield, The Westin Hyderabad Mindspace, Novotel Pune Nagar Road, Renaissance Mumbai Convention Centre Hotel and Marriott Executive Apartments.
Recent Initiatives of the Company
Novotel was acquired in February 2020.
Apart from the above, the company has 2 residential projects at Madhapur (Hyderabad) and Koramangala (Bengaluru). The residential development project at Bengaluru is on hold as the matter is subjudice before the Hon’ble Karnataka High Court on account of a dispute on the permissible height of the structure.
Company has entered into a memorandum of understanding with Marriott Hotels India Private Limited for rebranding w.e.f. April 1, 2020, of the existing hotel viz. Renaissance Mumbai Convention Centre Hotel as ‘Westin Mumbai Powai’. The company has also signed a franchise contract of 250 rooms with Hyatt.
Company is in the process of developing 3 additional hotels and 2 commercial office spaces.
Company has a subsidiary Chalet Hotels & Properties (Kerala) Pvt. Ltd. Although there is insignificant business in this subsidiary.
Business Model
The Company follows an active asset management model for the hotels operated by third parties, pursuant to which it closely monitors, and exercise regular oversight over, the performance of the hotel properties.
Financials
The company has robust financials. If any one to Study the Financials go to https://www.chalethotels.com/wp-content/uploads/2020/07/Chalet-Hotels-Limited-Annual-Report-2019-20.pdf
Opportunity
Travel and tourism industry contributed 9.2% to India’s GDP and registered a growth of 6.7% in 2018 (Source: World Travel and Tourism Council, WTTC). The industry supported 43 million jobs in the country (8.1% of total employment). India offers a diverse portfolio of niche tourism products, including cruises; adventure medical; wellness; sports; meetings incentives, conventions and exhibitions (MICE) eco-tourism; films; rural and religious tourism. The country has been recognized as a destination for spiritual tourism for domestic and international tourists. Besides, the introduction of a new category of visa – the medical visa or M visa – is expected to encourage medical tourism in India. Total contribution by the travel and tourism sector to India’s GDP is expected to increase to `US$ 492.21 billion by 2028.
India was ranked 7th among 184 countries in terms of travel & tourism’s total contribution to GDP in 2017. Travel and tourism is the third largest foreign exchange earner for India. During 2018, FEEs from tourism increased 4.70 per cent year-on-year to US$ 28.59 billion. Foreign Tourist Arrivals (FTAs) increased 5.20 per cent year-on-year to 10.56 million in the same period. During January 2019, arrivals through e-tourist visas increased by 21.10 per cent year-on-year to 0.29 million. It is estimated that 81.1 million people are employed in the tourism sector in India which was 12.38 per cent of total employment in the country. The Government of India has set a target of 20 million foreign tourist arrivals (FTAs) by 2020 and double the foreign exchange earnings as well. The Government of India is working to achieve one per cent share in world’s international tourist arrivals by 2020 and two per cent share by 2025.
The Government has also been making serious efforts to boost investments in the tourism sector. In the hotel and tourism sector, 100 percent FDI is allowed through the automatic route. A five-year tax holiday has been offered for 2, 3 and 4 star category hotels located around UNESCO World Heritage sites (except Delhi and Mumbai).
India is a large market for travel and tourism. It offers a diverse portfolio of niche tourism products - cruises, adventure, medical, wellness, sports, MICE, ecotourism, film, rural and religious tourism. India has been recognized as a destination for spiritual tourism for domestic and international tourists.
Focus on improving infrastructure, including airports, roads and rail connectivity across the country.
Positive amendments to Coastal Regulation Zones Rules are expected to facilitate development of beach resorts across the coastline.
Digitization of services, including payment mechanisms.
E-visas offered to nationals of 166 countries are expected to increase foreign travellers.
New avenues of funding Real Estate and Hospitality assets through institutional equity by way of listing Real Estate Investment Trusts (REIT) and Initial Public Offers (IPOs) of certain hospitality companies.
Introduction of the Insolvency and Bankruptcy Code (IBC) to resolve insolvencies efficiently, which in turn gives rise to opportunities for expansion. The industry’s concern however, are high GST rates, which at 28% for room tariffs above `Rs 7,500 are amongst the highest in SouthEast Asia positioning the country as an expensive destination in comparison with regional peers. Further, the recent turmoil within the airline industry in India leading to a decline in flights has impacted travel, notwithstanding the high demand for air travel. INDUSTRY MEGATRENDS The hospitality industry has been undergoing tremendous changes and disruptions over the last two decades. The key trends that are reshaping the industry are listed here:
Virtual communities across social networks like TripAdvisor and Google, among others influence tourists and lead to more transparency.
Online Travel Agents (OTAs) have altered distribution channels, facilitated a shift towards large brands and have built enduring relations with travelers.
Digitalised guest experiences through apps are increasingly helping hoteliers manage many aspects of the guest cycle and experience.
Booming global tourism, owing to enablers like low-cost carriers and healthy GDP growth in emerging markets.
Rising trend of experience economy wherein customers request extreme personalisation, unique experiences, and so on.
Concerns
The Covid-19 slowdown will have a big impact on the economy and Chalet is not exempt from the same.
Chartered Accountants
Mansi Pardiwalla who has signed the Audit Report and Balance Sheet and Statement of Profit and Loss of the company for FY 2019-20 on behalf of BSR & CO., LLP, Chartered Accountants (Firm’s Registration No. 101248W/W-100022).
Technicals
The script of the company trading around Rs 128/share as on 30th July 2020. On the technical chart it has support around Rs 115 and more stronger support at Rs 100 level and on the higher side it can top around Rs 150 and then Rs 170. But technically it is not the best level to pick this stock. As this sector itself is facing long headwinds.
Recommendation
Pick Chalet of small quantities. Going forward when all the restrictions of COVID-19 will ease off it will pick momentum. It is the best hotel among listed ones in terms of profit margin and the good professional renowned management team who efficiently manage operations.
In the current Covid -19 Market Scenario there is an opportunity to pick this beaten down stock with minimum downside but with coveted upside.
But one has to wait a long period of time, say 1-2 years and more to get a handsome return from investing in this gem.
Conclusion
I am not an investment advisor as per SEBI guidelines. The opinions are personal. The above discussions are only meant for educating readers. The intention is to share knowledge to enrich potential investors and also get enriched by their feedback. My views are not biased.
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