Following a relatively softer 1HFY25, the sector has bounced back with robust growth, driven by a vibrant wedding season and thriving MICE (Meetings, Incentives, Conferences, and Exhibitions) activities.
Key hospitality players are projected to report RevPAR (Revenue Per Available Room) growth of 10-12% YoY for the quarter, primarily led by an 8-10% increase in Average Room Rates (ARR).
Channel checks reveal a remarkable performance in November, buoyed by an unprecedented number of wedding muhurats and large-scale MICE events.
Luxury and upper-upscale hotels witnessed RevPAR growth of 15-17% in the month, aided by high occupancy and rising ARRs.
December is expected to sustain this momentum, driven by corporate gatherings, cultural events, and leisure tourism. However, demand typically tapers toward the year-end, which will remain a key monitorable.Key metros are leading the growth trajectory. Mumbai and Delhi NCR are likely to post low double-digit RevPAR growth in 3QFY25, supported by bustling convention centres like Jio World Centre and Bharat Mandapam.High-profile events and leisure activities in these cities are further boosting premium hotel bookings. Southern metros such as Bengaluru and Hyderabad are witnessing a stronger recovery, with RevPAR growth in the high teens, propelled by IT sector business activities and heightened MICE demand.
The broader demand recovery is evident from stable domestic air traffic (up 6% YoY in 1HFY25) and a steady resurgence in foreign tourist arrivals. Key players have strategically added inventory and leveraged acquisitions to enhance their offerings, enabling them to capitalize on rising demand.
The outlook for the sector remains optimistic. Favorable demand-supply dynamics, corporate rate hikes, and improving operating leverage are expected to drive sustained growth in ARR and occupancy. Long-term structural drivers, including rising economic activity, enhanced connectivity, and a shift toward experiential travel, will further bolster the industry.
With strong tailwinds in place, the Indian hospitality sector is well-positioned to deliver solid growth in 2HFY25 and beyond. High ARR, increasing foreign tourist arrivals, and robust domestic demand will continue to propel the industry, cementing its role as a key contributor to India’s economic growth and a standout performer in the broader services sector.
Indian Hotels: Buy| Target Rs 950| LTP Rs 880| Upside 8%
Indian Hotels (IH) unveiled its Accelerate 2030 roadmap, targeting 700+ hotels (current 350+), double revenue to ~Rs 150b+, & New businesses (Ginger, Qmin, Ama’s , Tree of Life) to clock a CAGR of over 30%. Healthy momentum in portfolio expansion & robust revenue growth will boost EBITDA margins.
The company targets to generate over 20% RoCE by FY30 vs. ~15% in FY24, supported by a capital light growth model and operational excellence.
IH has emerged as a compelling growth story in the Indian hospitality sector following its transformative journey over FY17-24, with notable financial turnaround, & expansions across businesses. We expect revenue/EBITDA/PAT CAGR of 18%/24%/26% over FY24-27.
Lemon Tree: Buy| Target Rs 190| LTP Rs 157| Upside 21%
The hospitality sector is set for growth in 3Q, driven by robust MICE (meetings, incentives, conferences, & exhibitions) activity & strong wedding season, with 33% higher muhurats YoY.
As per our recent channel checks, key hospitality players are likely to witness RevPAR growth of ~10-12% YoY in 3Q, primarily driven by growth in ARR (up 8-10% YoY).
Lemon Tree is poised for sustained growth in 2H, supported by the stabilization of Aurika Mumbai, strong wedding demand, and favorable demand-supply dynamics. We estimate a 33% PAT CAGR over FY24-27.
(The author is Head – Research, Wealth Management, Motilal Oswal Financial Services Ltd)
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
