Stock Market Today: Indian Hotels Company, EIH Ltd, Lemon Tree Hotels and Chalet Hotels shares have surged 54-112% in a year as higher occupancy and average room rates have boosted revenue per room (RevPar). The tailwinds are strong even after the easing of the COVID-19 pandemic, with travel demand continuing to rise sustainably and India remaining a popular travel destination. Important events such as the G20 meeting, Cricket World Cup etc. have been held since October, followed by the holiday and wedding season, improving the revenue outlook for Indian Hotels Company, EIH Ltd, Lemon Tree Hotels and Chalet Hotels etc. According to analysts, the same has translated into the performance of Indian Hotels Company, EIH Ltd, Lemon Tree Hotels and Chalet Hotels etc. in the January-March quarter, with the likes of EIH and Indian Hotels outperforming by a large margin.
Strong fourth quarter performance
According to analysts at Jefferies India, the Indian hotel industry delivered a robust EBITDA (earnings before interest, tax, depreciation and amortisation) growth of over 25% in the fourth quarter, with companies achieving record profit margins and healthy RevPAR (average revenue per room) growth of 7-17% year-on-year, according to analysts at Jefferies India. Industry average room revenue grew 8-9% on average year-on-year in the fiscal year ending March 2024, but at a deceleration compared to the nine-month FY24 period, Jefferies noted.
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Average room rent growth may be normalising and while most companies are optimistic about the growth prospects, Q1FY25 may be a bit softer.
Heatwave and election dampen Q1 expectations
The April-June 2024 quarter is likely to see a slowdown in hotel performance due to severe heatwaves in the north and the impact of the 2024 Lok Sabha elections.
Analysts at Motilal Oswal Financial Services said major listed hotel companies posted strong performance in the fourth quarter, with EIH outperforming its peers. Looking ahead, they expect a relatively weak first quarter of FY25 due to elections and scorching heat in north India.
Even analysts at Jefferies India Ltd said that while industry RevPAR growth has maintained a robust trend over the past eight quarters, Q1FY25 may be relatively slower owing to the impact of elections on occupancy and RevPAR.
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Recovery is expected from the first quarter onwards
Demand support continues to come from a strong macroeconomic and tourism outlook, with Jefferies analysts believing that annual average revenue per room growth is likely to stabilize at mid-to-high single digits. They maintain a buy recommendation on IHCL given its robust room pipeline and expected 17% annual EBITDA growth.
Analysts at Motilal Oswal Financial Services said the secular growth story remains strong and they expect the hotel industry to continue its upward trend as demand for branded rooms is expected to grow at a CAGR of 10.6% over FY24-27, outpacing supply (CAGR of 8%), driven by multiple industry tailwinds.
MOFSL analysts said brand owners (Indian Hotels, Lemon Tree, EIH and The Park) are focusing on hotel management and revenue diversification in addition to adding owned hotels, adding that asset owners (Chalet, Samhi and Juniper) are focusing on driving growth by adding owned hotels.
Disclaimer: The views and recommendations expressed above are those of the individual analysts or brokerage firms and not those of Mint. We recommend that you check with a qualified professional before making any investment decisions.
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Published date: June 21, 2024, 10:58 AM
