Hotel stocks book a stay in the gains suite as room rates rise

Stocks of leading hotel companies have been hitting their all-time highs this month, driven by expectations of a strong performance in the October-December quarter (Q3) of 2024-25 (FY25) and continued growth in 2025-26 (FY26), supported by a higher base.

- RAM PRASAD SAHU

After a slow first quarter in FY25, the sector, led by branded hotels, is benefiting from rising demand and limited supply, resulting in healthy occupancy rates and increasing average room rates. The average returns of the top five players by market capitalization are 5x those of the Nifty 50 over the past year.

Analysts will focus on the performance in the seasonally strong Q3FY25 and the guidance for FY25. Analysts at Motilal Oswal Research expect the sector to see growth in Q3, driven by activity in MICE, supported by a strong wedding season (33 per cent more auspicious dates year-on-year/Y-o-Y in Q3).

The brokerage expects key hospitality players to see revenue per available room (RevPAR) growth of 10-12 per cent Y-o-Y in Q3, primarily due to increases in average room rates, which are projected to rise by 8-10 per cent Y-o-Y. This follows a recovery, as RevPAR increased in the low single digits during the first half (H1) of FY25.