INSUBCONTINENT EXCLUSIVE:
ET Intelligence Group: Hotel stocks have not been able to earn meaningful returns over the past year
That, however, may change given the early signs of a turnaround in the form of rising occupancy and higher room rates, which may bring these
Occupancy rates improved by 65-70 per cent year-on-year in Q1 of the current financial year from levels of 58-65 per cent over the past
As a result, majority of the hotel companies recorded double-digit revenue growth in Q1.
In addition, demand looks upbeat
According to the research firm STR Global, demand for hotels grew by 4.8 per cent in the past six months year-onyear, faster than the 3 per
Hotels across sizes are reaping good business as demand cycle is improving
Today, we are seeing sustainable, well-negotiated and almost guaranteed business from the corporate sector, which is ensuring high revenue
In addition, with improved tourism measures by the government, we expect the sector to see a better growth trajectory and healthy pricing in
regime where tax will be charged on actual rates rather than the tariff rate range set by the GST Council.
It is estimated that every 1 per
cent rise in room rates translates into 5 per cent rise in operating profit before depreciation (EBITDA
To capture this early phase of improving demand cycle, it makes sense for investors to look at hotel companies that are focused on Mumbai
and Delhi as these two cities capture the improving demand situation better
These are Indian Hotels, EIH, and Asian Hotels (West).
