This smallcap hotel stock is turning around. What’s next?

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Subscribe to enjoy similar stories. The hotel industry is an essential barometer for economic trends, reflecting consumer behaviour, disposable income, and overall market conditions. Its performance mirrors economic growth, with demand and supply tied to economic cycles.

A growing economy leads to increased consumer confidence, which boosts travel demand, allowing hotels to benefit from rising occupancy rates and average daily rates (ADRS). Conversely, during an economic downturn, travellers tend to cut back on their discretionary spending, which impacts the sector. In 2020, the pandemic affected the hotel industry in the worst possible way.

Demand had fallen to a level never seen before, leading to a massive drop in hotel companies' stock prices. The industry cut costs to survive the onslaught. However, the sector made a strong comeback as the economy reopened and restrictions eased.

The resurgence was driven by pent-up travel demand, revenge travel, and improving corporate travel. The kind of demand that the hotel sector has seen is something nobody had imagined, and it seems unstoppable. Hotel companies' share prices have multiplied shareholders' wealth.

Sharekhan suggests that one company, Samhi Hotels, still offers favourable risk-reward opportunities for investors. Here are the reasons behind this thesis: As per the 'Vision,’ 2047: Indian Hotel Industry' report by the Hotel Association of India (HAI) and Benori Knowledge, the hotel industry contributed $40 billion to India's GDP in 2022 and is expected to reach $68 billion by 2027 and $1 trillion by 2047. Hotel Sector's Increasing Role in India’s GDP The growth will be led by the growing number of domestic tourists, expected to grow to 1.5 billion by 2030 and 15