Room to be upbeat about hotel cos?

Had India lifted the Cricket World Cup 2023 trophy, it would have been a cherry on the cake for investors in hotel stocks. After all, the sector was seen as among the potential beneficiaries of this event. Even so, investors have a lot to cherish. 

- Vineetha Sampath

The hotels sector continued its solid momentum in the September quarter (Q2FY24) and ticked many right boxes. The key operating metrics of average room rate (ARR) and revenue per available room (RevPAR) registered double-digit growth. Based on HVS Anarock data, Motilal Oswal Financial Services derived that the hotel industry's RevPAR in Q2 grew by 13%. This was led by a 15% year-on-year (y-o-y) growth in ARR to ₹6,767. The occupancy rate, however, was lower by 120 basis points at about 61% due to a high base, said the broking firm. One basis point is one-hundredth of a percentage point.

Here, the premiumization trend played out as companies such as The Indian Hotels Co. Ltd (IHCL), Chalet Hotels Ltd and EIH Ltd saw 11-21%y-o-y growth in ARR. On the other hand, this measure for Lemon Tree Hotels Ltd stood at 7% in Q2, given that its portfolio comprises relatively less premium hotels.