Industry
After a strong Q3, top hotels see room for further growth
Summary
Hotel chains are experiencing a surge in demand, leading to strong financial results for the quarter ending 31 December. Companies such as Lemon Tree Hotels reported notable revenue increases, supported by rising Average Room Rates and stable occupancy across major cities.
NEW DELHI : The hospitality sector is witnessing renewed momentum, with several hotel chains capitalising on a surge in travel demand to deliver strong financial performances for the quarter ended 31 December. Rising revenues and improving profitability were a shared narrative across the top listed players, with companies like Lemon Tree Hotels, IHCL and hotel ownership companies like Chalet Hotels and Samhi Hotels posting notable results.
Lemon Tree Hotels and IHCL showcased solid top-line growth. On 4 February, as reported on BSE, Lemon Tree Hotels' revenues climbed 22% to ₹355.7 crore in Q3 FY25 from ₹290.1 crore a year ago, while IHCL, buoyed by its Taj properties and diversified business lines like catering, saw revenues jump to ₹2,533 crore from ₹1,936 crore.
Both companies recorded healthy profit figures. Lemon Tree reported a net profit of ₹79.8 crore in the quarter, growing 82% over FY24's ₹43.8 crore, and IHCL’s profit after tax rose by 32% to ₹632.5 from ₹476 crore in the corresponding quarter a year ago.
Top-line growth dominates
In Q3 FY25, Chalet Hotels' revenue increased 22% to ₹457.7 crore from ₹373.6 crore last year, and it reported a net profit of ₹96.3 crore for Q3 FY25. The business was stronger than in the corresponding quarter in FY24 when net profit was ₹73.5 crore. But in Q2, Chalet reported deferred tax liability of ₹55.3 crore due to a change in capital gains rules—which reduced its FY25 profit and brought its 9-monthly net profit in FY25 down to ₹18.6 crore versus ₹195.7 crore in the 9-months ended December FY24.
Also Read: Chalet’s next 1,000: Acquisitions, new builds to fuel hotel chain’s aggressive expansion
"We recorded a robust 18% growth in the average room rates compared to the same quarter last year, with steady occupancy of 70%, resulting in a 16% increase in revenue per available room (RevPAR). Even on a like-for-like basis, across the portfolio, our RevPAR grew by 17%, driven by powerful performances in Pune, Bengaluru and the Mumbai metropolitan region," said Sanjay Sethi, managing director and CEO of Chalet Hotels, in the company's earnings call last week.
Samhi Hotels in Q3 FY25 increased its revenue from operations to ₹295 crore, growing over Q3 FY24's ₹267 crore, and also reported a profit of ₹22.7 crore, demonstrating improvements in operations and growing over last fiscal's Q3 loss of ₹77 crore. "Q4 is undoubtedly the best quarter for business. That's the way our company sees it. New hotel supply remains restricted in key cities," said Ashish Jakhanwala, chairman, managing director and CEO of Samhi Hotels.
"Most listed players have reported a strong quarter on the back of strong rates. Pan India occupancy is about 70%, a few percentage points short of the peak of 2007-08 when it stood at around 70-72%. Demand for hotel rooms is still fast outpacing supply, and Q4 is a strong business-heavy growth quarter. We expect that average room rate growth in business locations will outperform leisure locations, and demand will be strong for business hotels, especially branded chains," Prashant Biyani, vice president of institutional equity research at Elara Capital, toldMint.
Driving growth
While occupancy rates are similar to pre-covid levels, the hotel industry's growth is driven by factors beyond just occupancy. The key driver is the significant increase in Average Room Rates (ARR), which indicates that hotels are able to charge more for rooms, reflecting stronger demand and a higher willingness to pay from guests. This uptick in ARR is helping companies capitalise on the consistent travel demand.
Also Read: Weddings spark a bill shock, from venues to flowers
Occupancy rates in December showed steady year-on-year growth, closely aligning with pre-covid levels for the same period, according to data from hospitality consultancy HVS. The third quarter's ARR was better than the previous quarter's, even though pre-covid occupancy levels had yet to be surpassed.
December saw consistent demand growth, driving improvements in occupancy rates across key markets. Mumbai, Kolkata, Ahmedabad, and Kochi achieved occupancy levels above 80%. Mumbai recorded the highest occupancy at 81-83%, while Kochi led year-on-year growth with a significant increase of 5-7 percentage points. In contrast, Chandigarh and Hyderabad were the only markets to experience declines in occupancy rates, ranging from 2-5 percentage points.
As for ARR, average rates spiked across most key markets in December, with Goa being the exception, where rates saw slight growth compared to the previous year. Despite this, Goa continued to command the highest average rate in the country, above ₹14,000. Kochi was a standout performer, recording the highest year-on-year growth in average rates, driven by robust demand in the market.
Also Read: Thomas Cook eyes complete recovery of international biz
Jaipur saw the highest occupancy increase compared to Q2, while Bengaluru, Chennai, Pune, Gurugram, and Hyderabad saw declines, according to the data. However, Q3 showed a year-on-year rise in occupancy across all markets. In terms of average room rates, all major commercial markets, except Ahmedabad, recorded strong year-on-year growth in the third quarter.
