Hotel firms set for strong FY24 boosted by marquee events, rising room rates

These hotel firms are poised to capitalize on favourable market conditions and high-profile events like the G20 summit and the ICC Cricket Men’s World Cup. Revenue per available room (RevPAR), a key industry performance metric, was 23% higher this April than pre-pandemic levels of April 2019, according to a 3 June ICICI Securities report referencing HVS Anarock data. The report also noted a year-on-year RevPAR growth of 19%.

As such, hotel companies have set targets to benefit from the favourable demand dynamics. For instance, Lemon Tree Hotels plans to boost its room count from around 11,700 as of 31 March to over 20,000 by the end of 2028. This expansion will include both operational and pipeline rooms.

Meanwhile, IHCL expects its domestic business RevPAR to record a double-digit growth in FY24, despite an already high FY23 base. In FY23, IHCL’s RevPAR stood at ₹7,750 per night, a significant increase from ₹5,600 in FY22. Furthermore, April witnessed an 11% year-on-year rise in RevPAR.

Against this backdrop, room rates are likely to surpass pre-pandemic levels. “Our channel checks for forward hotel room rates for June-August 2023 compared to the June-August 2022 period (previous year) indicate that hotels continue to follow a strategy of keeping rates at least 8-10% higher than pre-covid levels," said ICICI Securities.

However, investors should note potential risks, such as slowdowns in discretionary consumption and adverse macroeconomic events, which could inhibit momentum. Nonetheless, the market’s optimism seems to be reflected in the strong performance of shares of IHCL, Lemon Tree Hotels and Chalet Hotels, which are currently trading near their 52-week highs.