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Pipeline addition back-ended

Brigade Hotel Ventures (Brigade Hotels), promoted by one of India’s leading real estate developers, Brigade Group (Brigade), has 1,604 keys across nine own/ developed hospitality assets in South India. It is the second-largest owner of chain-affiliated hotels and rooms in South India, with an average occupancy of 73.3% in FY24, surpassing the industry average of 64% in FY24. The hotels are managed by renowned global hospitality companies such as Marriott (448 keys; two hotels), Accor (553 keys; four hotels), and InterContinental Hotels Group (603 keys; three hotels) and cater to the upper upscale (230 keys; one hotel), upscale (641 keys; four hotels), upper-midscale (603 keys; three hotels), and midscale (130 keys; one hotel) market segments. In FY24, the average room rate (ARR) rose 7.5% to INR 6,388 compared with an ARR of INR 5,944 in FY23. Occupancy grew by ~370bps to 73.3% through FY23-24.

Pipeline robust – 996 keys across five hotels to be operationalized from FY28: Brigade Hotels has five greenfield hotels in its pipeline, which will take the total inventory to 2,600 keys from the current 1,604 keys. This growth will be led by the operationalization of two upper-midscale ‘Fairfield by Marriot’ branded hotels in Bengaluru and a 250-key Grand Hyatt branded luxury beach resort at ECR, Chennai in FY28. In FY29, a 300-key InterContinental branded luxury hotel in Hyderabad and a luxury wellness resort in Vaikom, Kerala will be opened. These pipeline hotels are coming up in high demand markets and also mark Brigade Hotels’ entry into the luxury segment. Room-wise break-down of pipeline hotels has not been mentioned in the DRHP.

Scale up of 130-key ibis Styles, Mysuru to drive growth in FY26: The 130-key ibis Styles, Mysuru, was opened in August 2024 in the midscale segment. The hotel is strategically located at KRS Road near Mysuru’s key industrial hubs. The hotel has two F&B outlets – (a) The Verandah and (b) Flamingo, a rooftop bar along with a large banquet space and seven meeting rooms, which could cater to Meetings-IncentiveConference-Exhibition (MICE) demand. With its strategic location, we expect quick ramp-up in occupancy at ibis Styles Mysuru, which will drive growth for Brigade in FY26-27.

Concentrated portfolio in a growing ARR market: Brigade Hotels’ hospitality assets are geographically concentrated in Bengaluru, with four out of its nine hotels in the city. About 63% of its FY24 revenue was generated from the hotels in Bengaluru. Although, this poses significant risk as regards lopsided geographical concentration, ARRs in the city are seeing a rising trend, which could bolster profitability.

Prefer SAMHI due to consistent room additions: Brigade Hotels’ business recovery post Covid has been commendable. This has been despite the fact that the IT industry has been among the slowest to embrace ‘return to office’, thus impacting hotel occupancies in Brigade’s home market of Bengaluru (forming 63% of revenue). Opening of 130-key Ibis Styles hotel (at Mysuru) will drive growth in FY26 but is unlikely to be meaningful as it is in the mid-market segment. Brigade’s return to high growth trajectory is unlikely to happen before FY28, when most of its pipeline hotels (996 keys) will start to operationalize. Business-wise, we prefer SAMHI Hotels (SAMHI IN, CMP INR 199, Not Rated) versus Brigade as SAMHI’s room addition is happening annually. SAMHI’s growth will also be led by an upward rebranding of some of its assets.

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