Hotel stocks book an extended stay in investor portfolios

In an interaction with CNBC-TV18 on April 28, Puneet Chhatwal, MD & CEO of Indian Hotels said that the upcoming ICC Cricket World Cup, scheduled to be held in the Indian subcontinent, the G20 summit and return of foreign tourist arrivals are some of the key triggers for the company.

Jefferies has a buy rating on Indian Hotels with a price target of Rs 405. It expects new room addition to grow at a compounded annual growth rate (CAGR) of 10 percent over financial year 2023-2026. The brokerage also upgraded its operating profit or EBITDA estimate for Indian Hotels by nearly 7 percent for financial year 2024-2025.

CNBC-TV18 highlighted in its dealing room chatter on May 8 that foreign investors have been active buyers in shares of Indian Hotels.

Lemon Tree Hotels CMD Patanjali Keswani told CNBC-TV18 on May 2 that they are likely to open 20 hotels and 2,000 rooms in financial year 2024. Keswani sees a 15 percent CAGR in room rates over the next 5-10 years.

Shares of Lemon Tree are up 50 percent over the last 12 months.

Not only homegrown brands, but overseas hotel chains are also bullish on the India travel story. Marriott International President and CEO Anthony Capuano told CNBC-TV18 on April 12 that he does not see an end to this upcycle of recovery in the hotel industry. Marriott plans on opening 250 hotels in India and reach 50 cities in the country by 2025.

Similarly, Hilton Hotels President & CEO Chris Nassseta told CNBC-TV18 that the India business has already surpassed pre-Covid levels. Mentioning that the industry is still releasing pent-up demand, Nasseta said that 2023 will be a better year compared to 2022.

Brokerage firm Nuvama had initiated coverage on Royal Orchid Hotels in March, projecting a potential upside of 92 percent. It expects Royal Orchid's revenue grow at a 45.9 percent CAGR between financial year 2022-2025.

Mahindra Holidays MD & CEO Kavinder Singh expects occupancy levels above 85 percent for the April-June period. He is also bullish on the company's Finland business.

"The assets will actually become free of any holiday liability and I think this is going to be a big trigger going ahead over the next couple of years. I have a price target over Rs 450, which is about a decent 50 percent returns from here," Market expert Ambareesh Baliga told CNBC-TV18 on May 5.

Shares of Mahindra Holidays are up nearly 10 percent for the year and are trading close to their 52-week high.