Indian Hotels To Lemon Tree — Why Investors Are Checking Into Hospitality Stocks

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Stock market investors are checking into hotel stocks after strong upside movement shown by shares like Indian Hotels, Taj GVK, EIH, Lemon Tree, etc. in last one month. According to secondary market experts, this rise in hotel stock price can be attributed mainly to unlock theme, which is going to dictate hotel stock prices in medium to long-term. They went on to add that ongoing IPL 2022 season, destination wedding and destination corporate meetings have fueled hotel prices by 15 to 25 per cent against pre-Covid levels that may lead to higher quarterly numbers of the hotel companies in short to medium term. Experts said that outlook for hotel stocks is looking good for all kinds of investors and this could be the possible reason for stock market investors checking into hospitality stocks.

Speaking on the short to medium term sentiments that are fueling hospitality stocks’ rally these days at Dalal Street; Anuj Gupta, Vice President — Research at IIFL Securities said, “First and foremost reason for rise in hospitality stocks’ price is unlock theme. Now, wedding season has begun and destination wedding is in full swing in domestic hospitality market. Destination meetings has also started in the wake of unlock theme. Apart from this, long IPL season is also underway that is giving good traction to the hotel business. If we look at occupancy, leading hotels in India are reporting 85 to 95 per cent occupancy whereas north east hotels are 100 per cent booked till May 2022.” The IIFL market expert went on to add that all these factors are expected to attracted attention of Dalal Street bulls, which is reflecting in spurt of quality hotel stocks.

Rahul Sharma, Research Head, Equity 99 said, “The hotel industry has seen huge beating in recent times amid pandemic. The October-December (Q3FY22) quarter saw the hospitality segment demonstrating strong recovery. The Covid restrictions have eased off and reopening of offices and business travel is set to see a strong leg up. Also in the Q1FY23, market is expecting good jump in profits of hotels with vacations, business travels, IPL 2022 to contribute to their earnings.”

Parth Nyati, Founder at Tradingo said, “Hospitality stocks were amongst the hardest hit stocks due to the coronavirus pandemic. During the pandemic, the hospitality stocks witnessed consecutive quarters of losses as the occupancy remained all-time low due to the negative operating leverage effect. Post the omicron wave, which witnessed lower hospitalization and deaths, we can expect the end game for the Covid pandemic. We can observe that most of the population has been vaccinated, the era of work from home is subsiding, revenge tourism is becoming a major trend, business trips, conferences have commenced, thus we can expect a good recovery in both business and leisure related hospitality business.” 

Parth Nyati went on to add that hospitality industry is witnessing major turnaround in the wake of unlock theme adding, “Management commentary of most of the hospitality companies have been positive and now they are focusing on capex.”

Asked about the top hotel stocks to buy in stock market today, Rahul Sharma of Equity 99 said, “Our top picks for good returns are Indian Hotels Company, Taj GVK Hotels and Resorts and Lemon Tree Hotels.”

Advising positional investors to look beyond hotel stocks, Anuj Gupta of IIFL Securities said that one can look at Delta Corp and EIH as well.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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