India’s Mahindra Holidays and Resorts on Monday reported a 47.8% drop in second-quarter profit, driven by its European operations and higher costs.

The hotel chain, which runs the Club Mahindra brand, said its consolidated net profit fell to 213.4 million rupees ($2.57 million) for the quarter ended Sept. 30, from 408.6 million rupees a year earlier.

The European segment – ​​called Holiday Club Resorts Oy (HCR), which accounts for almost half of turnover – posted a pre-tax loss of rupees 23.1 million, compared with a profit of rupees 10.2 million in the previous year.

This compares to a pre-tax loss of 365.2 million rupees for its European operations during the first quarter.

Business in Europe took a hit in the September quarter as people cut back on leisure travel due to rising living costs and rising inflation.

Total expenditure increased by 10.7 per cent, outstripping the 9.5 per cent increase in revenue to Rs6.55 billion. The company also reported extraordinary expenses of Rs 68 million.

Additionally, heavy rains and landslides in the states of Himachal Pradesh and Uttarakhand affected the resort’s occupancy rate, which fell to 77% from 79% a year earlier, the company said.

The hotel company’s shares fell 10.8% after the results were released. Its shares rose 32% in the September quarter. ($1 = 83.1380 Indian rupees) (Reporting by Anisha Ajith in Bengaluru; Editing by Sonia Cheema)