Hotel stocks maintain good momentum after strong Q1
G20 Summit, ICC Men’s Cricket World Cup, and the wedding season. The outlook for the stocks remains strong, despite a weak second quarter due to the monsoon. Analysts said the recovery in international tourist arrivals to pre-covid levels will boost demand.
The Indian Hotels stock scaled a 52-week high on Thursday, while EIH Ltd, Lemon Tree Hotels Ltd, and Chalet Hotels Ltd are also trading near their 52-week highs for the last one week. Most hotel stocks, including ITC Ltd, have gained 13-50% in the past six months. “As we move into the festive season, the demand outlook for chain-affiliated hotels looks strong on the back of buoyant domestic demand, significantly high foreign tourist arrivals due to one-time events (G20 Summit and ICC World Cup) and the forthcoming wedding season" said analysts at JM Financials Institutional Securities.
Hotels have continued to see strong recovery in their earnings in the past year after covid-19 concerns eased. They had seen a strong first quarter performance. The hospitality basket reported revenue and earnings before interest, taxes, depreciation and amortization growth of 16% and 17% from a year earlier, respectively, with EIH ( with 26% and 56% y-o-y growth respectively) leading the pack as per data by Motilal Oswal Financial Services Ltd.
The healthy financial performance was backed by 9-38% average room rate (ARR) growth over last year, with Chalet Hotels leading. Occupancy is likely to improve in the near term, led by favourable demand-supply dynamics and demand drivers, said analysts at Motilal Oswal. ARR will continue to inch up, boosting RevPAR (revenue per available room), they said.
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