Strong prospects, valuations to drive gains for hotel stocks

The hospitality industry has around 212,000 rooms, with an industry size of about ₹82,000 crore.

- DEVANGSHU DATTA

The industry could grow at an annual rate of 10.5 per cent for the next three financial years, despite a quiet Q1FY25.

The demand will be driven by domestic travellers, who will contribute roughly 50 per cent of the growth, while foreign tourists will account for 30 per cent. The meeting and conference circuit will generate the remaining 20 per cent.

Occupancy may improve by up to 5 per cent, with the average room rate growing at 7-8 per cent over three years.

Notably, foreign tourist arrivals remain below the preCovid levels (10.56 million in 2019 versus 9.24 million in FY24) and the pickup will accelerate ARR growth.

Apart from the long-term narrative, a strong Q2FY25 seems likely.

Key players will witness RevPAR (Revenue/per available room) growth of 9-11 per cent year-on-year (Y-o-Y) in Q2FY25, driven by the rising ARR (+7-9 per cent Y-o-Y).