Brokerage firms across the board continue to remain positive on Indian hotel sector after o HVS Anarock’s latest report for January 2025, which stated that average room rent (ARR) grew 10-12 per cent on a year-on-year (YoY) basis, while overall occupancy also surged 200–400 bps YoY, leading to YoY RevPAR growth of over 15 per cent.
Travel, tourism and hospitality sector is likely to remain in demand even as the 'Mahakumbh' 2025 ended last month, with summer vacations across the nation lined up in April-June 2025, along with Indian Premier League (IPL) kicking off later this month, boosting the demand.
Industry reports suggest the average room rates should continue to grow in double digits in the fourth quarter following the strong growth in 3QFY25. The quarter started on a positive note with hotel companies witnessing ADR growth driven by strong demand across all key markets, said Antique Stock Broking.
With various estimates pegging industry supply CAGR at 5-6 per cent over FY24–28 versus demand CAGR at 10 per cent, ICICI Securities expects a high single-digit ARR CAGR of 6-8 per cent across hotels over FY24–26E with occupancies rising 100–200bps each in FY25E and FY26E.
Going forward, new asset additions/completions remain key for companies to deliver EBITDA CAGR of 15-20 per cent over FY24–27E. We expect management contracts to remain the preferred choice of expansion for most hotel companies with pure asset owners looking to either acquire operational hotels or utilise their existing land banks to drive growth," ICICI Securities said.
The Indian hospitality sector continues to witness strong demand trends and is expected to grow at 9-11 per cent over medium term driven by the general economic growth, strong propensity for travel and potential recovery in FTA. Some increased activity in new signings, the planned supply should take anywhere between 3-4 years to be commissioned, said JM Financial.
"We build in high single digit ARR growth and 100bps improvement in occupancy each year over FY25-27E for our coverage companies. Aided by growth in room inventory, robust MICE revenues and growth in fee business, we are building 12-15 per cent growth in revenue over FY25-FY27E and 18-22 per cent EBITDA growth, as margins should improve led by increasing contribution of higher margin/asset light business and positive operating leverage," JM added.
During their 3Q earnings commentary, large hotel companies also highlighted strong demand visibility for Q4, driven by large scale events such as the Mahakumbh, concerts, conferences, and weddings. Post the recent correction, the valuation of most hotel companies looks favorable, Antique added. It has a 'buy' rating on Chalet Hotels with a target price of Rs 1,150, while it suggested to 'hold' Indian Hotels with a target price of Rs 750.
Amid the prospects of rising demand, ICICI Securities has reiterated its 'buy' rating on Indian Hotels Co Ltd, Chalet Hotels and Lemon Tree Hotels Ltd. JM Financial has a 'buy' rating on Chalet Hotels Ltd (Target Price: Rs 960), Lemon Tree Hotels (Target Price: Rs 170), SAMHI Hotels Ltd (Target Price: Rs 245) and Juniper Hotels Ltd (Target Price: Rs 410) It has suggested to 'hold' Indian Hotels (Target Price: Rs 760).