A SEBI Analyst Called The Hotels Rally ‘Structural, Not Cyclical’ — Here’s Why
The analyst expects the sector to sustain its momentum, but warns of supply-led risks ahead.
Indian hotel stocks have seen a good run over the past few months. Most listed players including Lemon Tree Hotels, Chalet Hotels, Indian Hotels (Taj) and EIH (Oberoi) have seen a multi-year rally as travel demand, pricing power, and investor confidence surged.
Lemon Tree shares have surged nearly 30% in past six months, followed by 20% in Chalet Hotels and 10% in EIH. SEBI-registered analyst Pradeep Carpenter has called it ‘one of the strongest structural growth trends’ on the street.
He explained the drivers behind this tremendous rally and the road ahead for the Indian hospitality industry on Stocktwits.
What’s Driving This Rally?
More people are travelling: Reports show that the number of annual domestic trips – both leisure and business – have both outpaced pre-COVID levels. With concepts such as staycations, spiritual tourism, and weekend getaways gaining ground, hotel occupancy across segments has seen consistent growth.
More pricing power: Carpenter noted that hotels have regained their ability to charge premium rates. Average Daily Rates (ADR) and Revenue per Available Room (RevPAR) are at record highs, thanks to strong demand and limited new supply.
Policy booster: Government schemes like Swadesh Darshan, new airport projects, and improved highways are opening new tourism corridors. Eased visa norms and state-level incentives for hospitality projects are helping the sector expand beyond metros, he added.
Corporate revival: There has been a rebound in the number of corporate meetings, incentives, conferences, and exhibitions being held across the board, giving a new leg to premium hotel demand.
Rerating on the cards: Carpenter said that investors are now looking at the sector as cyclical-to-structural growth stories rather than short-term recovery plays. This is supported by stronger balance sheets for these hotel companies, better margins, and improved cash flow.
The Road Ahead
Analysts expect high single to low double-digit growth in revenues over the next few years. Tier-2 city expansion, premium experiential stays, and sustained domestic tourism are expected to drive growth, according to Carpenter.
However, he did flag a few risks for the sector. Carpenter believes that new supply in select pockets could pressure occupancy and test their execution discipline. The next challenge for Indian hotel chains will be striking a balance between rapid expansion and profitability.
What Is The Retail Mood?
Data on Stocktwits, however, shows that retail sentiment has been ‘neutral’ for Lemon Tree, Chalet, and EIH.
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