1 min read.Updated: 21 Sep 2021, 02:39 PM ISTLivemint
The brokerage firm expects recovery for the hospitality industry to be aided by demand from domestic and international travelers
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Hotel and travel-related stocks have been buzzing since the past few sessions on the back of reopening momentum in India furthermore reports suggest that the government is in talks to reopening the borders to foreign tourists, in a bid to revive Tourism, Hospitality, and Aviation sectors in the country amid a steady decline in covid cases.
The second covid wave delayed the recovery in the hospitality sector by a couple of quarters. However, “the impact this time around was less severe and the recovery has been quicker as compared to the last time," Motilal Oswal said in a note adding that the recovery will be further aided by foreign tourists arrivals (FTAs).
With a lot of large corporates having asked employees, who have completed their vaccinations, to return to office, domestic corporate travel is likely to return in a couple of quarters. With the government opening up travel, FTAs would provide an additional leg of demand, the brokerage added.
Motilal Oswal has a ‘Buy’ rating on Indian Hotels Company and Lemon Tree from the hotel industry space. It expects recovery for the hospitality industry to be aided by demand from domestic and international travelers.
“We expect pent up demand for business travel (domestic and international) since that has not happened for ~1.5 years. All of the above would lead to a demand revival, which would push up occupancies, leading to ARR growth," the note stated.
While earnings were weak in FY21, the brokerage firm expects a gradual/sharp recovery in FY22E/FY23E on a low base, improvement in ARRs once things normalize, improved occupancies, positivity in cost rationalization efforts in FY21, an increase in F&B income as banqueting/conferences resume, and higher income from management contracts.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.