Indians have been bitten by the travel bug. ‘Netflix and chill’ is out, ‘going on a vacation’ is in. The hotels sector has seen a resurgence over the past year, fueled by robust demand for leisure travel, corporate trips, and events. The momentum seen after travel restrictions were lifted in Q1FY23 has continued, with occupancy rates surpassing pre-Covid levels across all four key hotels under focus.
The favourable market has allowed the industry to raise room rates without sacrificing occupancies, driving revenue growth and profitability.
According to Puneet Chhatwal, the CEO and Managing Director of Indian Hotels Co, "A major reason for the sector's success, including Indian Hotels, is the faster growth of demand compared to supply." Chhatwal highlights that domestic demand has been the main driver of growth, as international arrivals have not recovered to pre-covid levels yet. And prices have remained high, he notes, as “Not many hotels were built in the past three years.”
Flagship events in India this year have kept expectations up. The management of these companies anticipate the ICC Men’s Cricket World Cup and G20 summit to boost inbound travel and overall demand in FY24. Major hotels have begun to increase their room count and are opening new properties at breakneck speed to capture a portion of a growing market.
Industry tailwinds help hotels beat analyst estimates
Thanks to strong industry tailwinds and operational efficiencies, organised hotel chains have boosted their revenue and profit growth. They have also seen a significant improvement in their operating metrics over the past year.

All the hotel giants in focus have beat Trendlyne Forecaster’s revenue and profit estimates for FY23 by substantial margins.
Hotel stocks outperform the Nifty 50 index
The health of the industry in Q4FY23 is reflected in the strong stock performance.

The hotels industry has also comfortably outperformed the Nifty 50, with EIH and Lemon Tree Hotels beating it over the past three months. According to Trendlyne’s durability, valuation and momentum scores, all the hotels in focus have good durability scores, indicating strong financial health.

While Indian Hotels and Chalet Hotels have strong momentum scores, EIH and Lemon Tree hotels have medium momentum scores, suggesting average to low bullishness in the market. They all report weak valuation scores, indicating that they are trading at relatively expensive levels.
Rising room rates and occupancies drive revenue growth
Rising revenue growth for hotels was driven by increasing occupancies and higher room rates. Among them, Chalet Hotels led the pack in YoY revenue growth, with a jump of 128.3% YoY.

Compared to the pre-Covid quarter of Q4FY20, all the firms posted higher revenues. Chalet Hotels again stood out in revenue growth.
These hotel chains expect occupancy and room tariffs to rise further in the coming quarters on the back of the demand-supply gap. Also, the recovery in international tourists visiting India will boost their top lines.
Massive surge in profit for hotel stocks
All the companies in focus saw large jumps in net profit, with Chalet Hotels and Lemon Tree Hotels turning profitable on a YoY basis. Cost reduction measures, operational efficiencies and higher room rates drove profits up. Indian Hotel Co and EIH’s net profit also surged 342.5% and 470.3% YoY respectively.

Compared to Q4FY20, Indian Hotel Co and EIH’s profit rose multifold, while Lemon Tree Hotels turned profitable. However, Chalet Hotel’s profit declined 8.2% as it incurred an exceptional expense from the write-down of its real estate inventory worth Rs 18.4 crore due to the revision in project cost.
Cost efficiencies drive EBITDA margin expansion
All the hotels’ EBITDA margins grew in Q4, with EIH’s leading the pack with margins expanding 32.1 percentage points YoY. Chalet Hotels closely followed with an increase of 22 percentage points YoY.

Cost efficiencies and increasing room rates have boosted margins across the industry.
Forecaster estimates healthy growth for hoteliers
Trendlyne’s Forecaster estimates healthy annual revenue growth for all four firms in FY24. Chalet Hotels’ revenue is expected to rise 30.6% YoY in FY24, the highest among its peers, followed by Lemon Tree Hotels at 16.7%. Indian Hotels is expected to grow by 12.2%, while EIH’s revenue is projected to decline by 0.7%.

Given the industry tailwinds, hotels are expected to push room rates further up to capitalise on the robust demand. ICICI Securities predicts industry demand will grow at a CAGR of 10% over FY23-27 but that supply will increase less quickly, at a CAGR of 4-5%.
Companies push up average room rates as demand continues to grow
After the lifting of Covid-19 restrictions in March 2022, there has been a surge in travel demand in India. This has allowed hotel chains to keep room rates high. Over the past 10 years, average room rates (ARRs) in the industry have been stagnant, with growth mainly driven by occupancy rates. However this has changed since Q1FY23 – ARRs have been rising across the industry.

All the companies saw robust growth in their ARRs on a YoY basis, with Chalet Hotels outperforming its peers with a growth rate of 108.2% YoY. Compared to Q4FY20, all the firms saw double-digit growth, with Indian Hotels in the lead.
To improve revenue potential, these hotels are focusing on renovations and improving services. This will boost consumer satisfaction and justify higher room rates.
Occupancy rates in Q4FY23 recover to pre-Covid levels
Q4FY23 is the first quarter when hotel occupancy rates surpassed pre-pandemic levels since Covid-19 restrictions were lifted. EIH saw the highest jump here, rising 18 percentage points compared to Q4FY20, followed by Chalet Hotels with a 13 percentage point increase.

On a YoY basis, Lemon Tree Hotels has led its peers in occupancy rate growth, followed by EIH. While many hotels focused on ARRs and revenue per available rooms (RevPAR) in recent quarters, these companies are now trying to improve occupancy rates.
Revenue per available room jumps as hotels command premium rates
The rise in ARRs and occupancy has improved RevPAR across the board. Hotels have seen YoY growth in RevPAR, surpassing the pre-Covid levels in Q4FY20. ICICI Securities expects the hotel industry’s RevPAR to grow at a CAGR of 15.8% over 2022-25.

The four hotel giants saw massive RevPAR growth in Q4FY23, with three of them seeing triple-digit growth on a YoY basis. Chalet Hotels’ RevPAR surged by 173.9% YoY, while EIH and Lemon Tree’s jumped by 122.2% and 127.1% YoY respectively. Indian Hotels’ RevPAR growth came in at 81.8% YoY, lower than its competitors.
Compared to Q4FY20, all the firms witnessed double-digit growth in RevPAR, with EIH leading the pack, followed by Indian Hotels Co. This outperformance comes on the back of hotels across the industry keeping their room rates at least 8-10% higher than pre-Covid levels.
Favourable market dynamics to drive industry growth
The hotel industry is poised for continued growth, thanks to a strong economy, India’s expanding airport network, and a growing travel habit among Indians. The demand surge allows hoteliers to command premium prices and expand their market presence in the medium term.
These companies also plan to ramp up room count by penetrating deeper into the market and increasing the number of hotels to meet the growing demand.
Hoteliers are also focusing on renovating their assets, which will allow them to charge higher rates. Patanjali Keswani, Chairman & MD of Lemon Tree Hotels, stated that in FY24, the management plans to invest significant funds for renovations, as this “will position our hotels to capture better pricing and demand in H2FY24 and in the following years”.
This analysis by Trendlyne is meant for investor education - to help understand companies and make informed investment decisions on their own. It should not be considered an investment recommendation.