2023 in review- Indian Hotels, EIH, Lemon tree share price see gains of up to 41.5%, Chalet share price doubles.

Share prices of Indian Hotels Company ,  EIH , Lemon Tree Hotels while have risen to 40.5% during 2023 till date while Chalet Hotels has seen its stocks price almost grow two times. Indian Hotels and Chalets Hotels are trading near 52 week highs scaled during December. ITC too has recorded gains of up to 37.5% during 2023. Overall Hotels stocks have given stellar returns to investors during 2023.and momnetu

The gains in share prices for hotels have been driven by strong recovery in their earnings during the last one-year post easing of Covid concerns and pick up in the economic activities. Further after a seasonally weak second quarter, the events such as G20 Summit, Men’s Cricket ODI World Cup, wedding season and the festive season improved earnings outlook and pushed up investor sentiments.

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The Industrywide data for Hotel Industry in India suggests Average Room rate growth remained in double-digit year on year (YoY) in November-2023 at 16% YoY, similar to October-2023, said analysts at Jefferies India Pvt Ltd. The YoY growth in RevPAR (revenue generated per available room), though, sharply slowed to 8% YoY in November-23 versus 28% YoY growth seen in October-23, on YoY decline in occupancy by 460bps in November, which analysts at Jefferies said is likely attributable to a difference in the timing of festivals year on year.

However the data suggests that RevPAR growth for the month of October-November combined would be upwards of mid teens growth year-on-year, inline with the guidance of most major Hotel peers in India (including Indian Hotels), also near the growth seen in first half FY24 period, said analysts. 

The ongoing holiday season and the international tourist arrivals recovering to pre-Covid levels are expected to keep demand firm for hotels. Also Corporate rate negotiations are also likely to be favorable and help earnings growth in new year and FY25 too.

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Our checks suggest rates can grow in double digits in FY25 as well, post the strong growth in FY24, said analysts at Antique Stock Broking. The current corporate rate negotiations are going well, as most large hotel chains are able to negotiate an 8%-12% hike on an already elevated double-digit growth in rates negotiated last year. During first half FY24, the industry witnessed a rate growth of 20% for large hotel chains such as Indian Hotel Company, Marriott and, EIH in India, while the momentum is expected to remain solid on the rates front in second half as well, said analysts at Antique. Overall, they build in 20% and 12% ADR (average daily rate) growth in FY24 and FY25.

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