Should you buy hotel stocks? Analysts are betting on them due to several reasons
It’s not all gloom and doom in the equity markets. If you are looking for a sector to invest in the current market conditions, the hotel industry looks promising. The good times for hotel stocks are expected to continue. Analysts say that beyond cricket events like the IPL and Asia Cup, factors such as a weaker rupee attracting more international tourists, rising domestic leisure travel, and increased MICE (meetings, incentives, conferences, and exhibitions) activity will support growth in the hotel sector.#sr_widget.onDemand p, #stock_pro.onDemand p{font-size: 14px;line-height: 1.28;} .onDemand .live_stock{left:17px;padding:1px 3px 1px 5px;font-size:12px;font-weight:600;line-height:18px;top:9px} #sr_widget.onDemand .sr_desc{margin:0 auto 0;} #sr_widget.onDemand .sr_desc{color: #024d99;margin-top:10px;} #sr_widget.onDemand .crypto .live_stock .lb-icon{8px 6px 5px 3px !important} #sr_widget.crypto.onDemand a.text{border-bottom:1px solid #ccc;padding-bottom:5px;display:block;width:100%} #sr_widget.onDemand .sr_desc .text p, #stock_pro.onDemand .sr_desc .text p{font-size:12px;font-weight:400;}
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The March 2025 quarter-end results are expected to be good, on the back of Coldplay’s India tour and Kumbh Mela, as per reports by brokerage houses such as ICICI Securities, IDBI Capital, Antique Stock Broking, Motilal Oswal and JM Financial. An increase in corporate rates will result in a notable improvement in ARR (average room rates). ICRA, one of India’s largest credit rating agencies, predicts the hotel industry to grow by 7-9% in 2024-25 and 6-8% in 2025-26 on a year-on-year basis. This, it adds, will help hotels better service their debt as well.
The 13 biggest hotel companies (with a market cap of over Rs.1,000 crore) reported an 18.4% year-on-year growth in revenue in the December quarter compared to 18.1% in the September quarter.
The road ahead
Although rooms are being added, the pace would be slower, says ICICI Securities. Supply (rooms available) will lag demand, and this, it says, will help hotel companies show higher profits. Brokerage reports add that the hotel companies are also set to improve margins due to the benefits from cost-cutting initiatives undertaken during the Covid-19 pandemic.The government’s announcement in the Union Budget to boost the tourism sector, such as the development of 50 tourist spots, streamlining the e-visa process, enhanced connectivity through the modified UDAN scheme and the promotion of Global Capability Centres in Tier 2 cities will boost the travel ecosystem, including the hotel sector overall.
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HOTEL STOCKS ON THE UPWARD CURVE
Sector valuations
The valuations have improved for most hotel companies after the market correction, according to JM Financial and Antique Stock Broking reports. Ten out of 13 biggest hotel companies have delivered negative returns year-to-date in 2025 with eight companies’ share prices declining by over 15%.Chalet Hotels
The story so farReported strong performance in the December quarter with 23% year-on-year growth in revenue.EBITDA margins stood at 44.7% supported by a 16% year-on-year jump in RevPAR (revenue per available room).What lies ahead
Growth: Higher capex (Rs.2,000 crore over next three years); management expects double-digit growth in RevPAR in 2026.
Room expansion: The hotel plans to add 1,324 rooms over the next five years.
Location: Most of the new room additions are in metro cities where pricing and occupancy are relatively higher.
Analysts’ talk
Prabhudas Lilladher: Growth momentum will continue led by the operationalisation of new rooms in Bengaluru and Khandala over the next six months. The report lists growth in the annuity (rental space) segment as a key positive.
Antique Stock Broking: Attractive valuations. Expect a strong operating performance backed by a strong portfolio mix.
Lemon Tree Hotels
The story so far
Reported good performance in the December 2024 quarter with 23% year-onyear growth in revenue.Significant jump in occupancy, improvement in ARR and ramp up of Mumbai Aurika Hotel supported the performance.What lies ahead
Growth: Management aims to improve RevPAR by optimising its ARR and occupancy levels.
Premium segment: To tweak its bouquet of offering to include premium choices.
Lower debt: Debt is expected to go down as premiumisation will help improve ARR and cash flows.
Analysts’ talk
Elara Capital: Better occupancy and higher ARR. Listing of subsidiary (Fleur Hotels) will add value.
Motilal Oswal: Growth momentum to be healthy. Launch of Aurika hotel will help.
Indian Hotels Company
The story so far
Healthy performance in the December 2024 quarter with 29% year-on-year revenue growth.Operational efficiency, healthy growth in new businesses (Ginger, Qmin, amã Stays & Trails) and higher fee income supported the performance.What lies ahead
Growth: Management has indicated a strong performance in the March 2025 quarter; double-digit revenue growth in 2024-25, and strong growth in international business.
Expansion: To open 30 hotels in 2025-26.
Financials: Strong balance sheet with large cash reserves.
Analysts’ talk
Ambit Capital: Will benefit from increased domestic travel and international tourist influx.
Motilal Oswal: Firm hold of its core business. The reimagined businesses (The Chambers and TajSATS) under the company’s growth strategy ‘Accelerate 2030’ bodes well for the company.
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This story originally appeared on: India Times - Author:Faqs of Insurances
