Leela Palaces Profit Rises 27% on Record Room Rates, But Margins Narrow
The luxury hotel chain posted a 33% revenue surge in Q2 FY27, driven by a record 30% jump in room rates, but higher costs squeezed its net profit margin.
Leela Palaces Hotels & Resorts reported robust revenue growth of 33% in Q2 FY27, powered by strong pricing power. However, net profit margin contracted slightly as operational costs rose alongside the expansion.
Leela Palaces Hotels & Resorts rode a wave of premium domestic demand to another quarter of strong top-line growth. Revenue for the September quarter jumped 33% year-on-year to ₹412 crore, while profit rose 27% to ₹95 crore. The story, however, lies in the tension between stellar pricing power and the costs of running a growing luxury empire.
The numbers show broad-based strength. Revenue per available room (RevPAR) grew 30%, entirely driven by a record 30% increase in average daily rate to ₹25,046, as reported by CNBCTV18. Occupancy held steady near 69%. Sequentially, profit nearly doubled from a seasonally soft Q1.
Revenue (₹ Cr)
Profit (₹ Cr)
Net Profit Margin (%)
| Metric | CurrentQ2 FY27 | PreviousQ1 FY27 | Same quarter LYQ2 FY26 |
|---|---|---|---|
| Period | Sep 2026 | Jun 2026 | Sep 2025 |
| Revenue (₹ Cr) | 412.0YoY +33% | 352.0 | 310.7 |
| Profit (₹ Cr) | 95.0YoY +27% | 48.8 | 74.7 |
| Net Profit Margin (%) | 23.1YoY -4.1% | 13.9 | 24.1 |
Why the margin squeeze?
The net profit margin contracted by 100 basis points compared to the same quarter last year, landing at 23.1%. This happened despite a 36% surge in operating EBITDA, according to the company's earnings call. The gap points to higher operational overheads.
Reports from outlets like SAHI note margin normalization due to cost inflation and expenses tied to portfolio expansion. Management fees from new properties soared 76%, but these come with ramp-up costs. Employee and input costs also rose as the company invested in service and new projects.
A demand story with domestic roots
The quarter’s engine was unmissable: affluent Indians spending on luxury. CEO Anuraag Bhatnagar told the Economic Times that demand was broad-based across retail, corporate, and leisure segments. Marquee events like the BRICS Summit in Delhi allowed Leela to command a premium.
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· THELEELA
(BSE)
ISIN: INE0AQ201015
This domestic pivot is a strategic cushion. While international travel is recovering, over 80% of sector revenues now come from domestic travellers, as noted in a GRI Institute report. This insulates Leela from global volatility and fuels its expansion into new destinations.
The expansion balancing act
Growth is continuing, but it requires capital. The company has a committed capex of over ₹1,400 crore for five pipeline projects, per the Investing.com earnings transcript. While net debt to EBITDA has improved sharply to 1.4x, this spending will pressure near-term cash flow before new assets open.
Management expects high teens EBITDA growth for the second half of FY27, a deceleration from H1’s 38% but still above initial guidance. The outlook hinges on sustaining premium pricing in a supply-constrained luxury market while managing the costs of its own growth.
Key Points
- Revenue grew 33% YoY to ₹412 crore, driven by a record 30% increase in average daily room rates.
- Net profit rose 27% to ₹95 crore, but the net profit margin contracted by 100 basis points YoY to 23.1% due to higher operational costs.
- Demand was broad-based and domestically driven, bolstered by premium events like the BRICS Summit.
- The company is executing an aggressive expansion pipeline but faces near-term cash flow pressure from over ₹1,400 crore in committed capital expenditure.
- Net debt to EBITDA improved to 1.4x, providing financial flexibility for funded growth.
Hexa Perspective
Leela Palaces is capturing a powerful wave of domestic luxury consumption, evidenced by its unmatched pricing power. The margin contraction this quarter is not alarming but indicative of the investment phase it's in—scaling managed properties and building new assets.
The key question is duration. Can the brand's pricing premium outrun the cost inflation and capex drag long enough for new properties to contribute meaningfully? The guidance for high teens EBITDA growth in H2 suggests management believes it can, but the stock's muted reaction post-results shows investors are weighing that confidence against the valuation of already-strong execution.
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