Now, as we step into 2024, India’s hospitality space is looking full of promises. Over the years, since dynamic travel trends and newly regained tourist enthusiasm, best hotel stocks have emerged as sound and secure investments.
Whether it’s those luxurious resorts along India’s coastline, bustling Indian city hotels, or these unique boutique stays, so many Indian hotel stocks have managed to outdo the benchmarks and are up and ready to grow.
If you are considering investment in the hospitality sector, here’s a look at the top hotel industry stocks to keep on your radar this year based on market capitalisation as of November 6, 2024.
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Best hotel industry stocks in India for 2024
Indian Hotels Company Ltd (IHCL)
Founded in 1903, IHCL is part of the Tata Group and is among the oldest and largest chains of hotels in India. This diversified hotel, resort, and palace operator operates under its various brands, including iconic Taj Hotels, Vivanta, and Ginger. With 232 properties in operation and 118 more under development, IHCL solidifies its leadership in the industry
IHCL has seen exponential growth, with the company now solidly present in both home and international markets. As of October 31st, IHCL reported a strong 28% year-on-year rise in Q2 revenue, with its hotel segment advancing by 16%.
IHCL has been targeting the luxury and business segments, as well as focusing on budget accommodations. Growth strategies for the company include improving digital services and sustainability initiatives.
To know more: Indian Hotels Company Ltd
EIH Ltd
EIH Ltd is one of the companies in the Oberoi Group and was actually founded in 1949. Since then, it became a public limited company in 1956. The company has always sought the highest quality in services and finest hospitality.
EIHL’s revenue surged 24% in FY24, reaching ₹2,511.46 crore, propelled by higher rates and steady occupancy. Profit margins improved significantly to 36.92%. However, in Q1FY25, margins eased to 30% due to flat rates and rising costs. A broad geographic footprint supports resilience against market-specific disruptions.
Being resilient over the difficulties the pandemic posed on the company, the continued journey of growth of EICH into prime locations in India and abroad speaks of the stability and growth potential of the company.
Chalet Hotels Ltd
Chalet Hotels was incorporated in the year 1986, and it came into existence under the name Kenwood Hotels Pvt. Ltd. The company operates in luxury hotel management, with brands JW Marriott and Westin, to name a few. As of Q2 FY25, the company manages 10 hotels with 3 additional projects underway.
It well enshrined itself in most urban marketplaces such as Mumbai and Bengaluru. Chalet Hotels primarily deals with the luxury hospitality segment, wherein the business is conducted through the development of the property.
Financially, margins rose to 43.8% in FY24 from 41.3% a year prior. Staffing is also streamlined, with an associate-to-room ratio of 0.93, outperforming the sector’s standard range of 1.1 to 2.1 in upscale categories as of September 30, 2024.
Lemon Tree Hotels Ltd
Lemon Tree Hotels began in 2002, and the first property occurred in 2004. The focus on mid-scale value-for-money accommodation, concentrating on service, has appealed to the business traveller as well as the bargain-conscious tourist. As of Q1 FY25, the company spans 168 locations with a total of 14,161 rooms, combining both active and upcoming projects.
The fast track expansion of Lemon Tree across India to varied customer segments speaks volumes for its growth prospects. Quarterly revenue rose 19% year-on-year to ₹268.4 crore, while net earnings dropped 27%, totaling ₹20.1 crore.
Oriental Hotels Ltd
Oriental Hotels is a group of IHCL that manages luxury hotels, primarily under the brand name Taj, in Southern India. In recent years, Oriental Hotels has experienced significant growth, with a 13.48% year-over-year (YoY) increase in revenue and a 30.66% YoY profit surge. This growth can be attributed to factors such as increased occupancy rates, higher average room rates, and strategic expansion into new markets.
Key things to check before investing in Indian hotel stocks
Here is a simplified guide of things to check before investing into hotel stocks in India:
- Location: Choose hotel brands which are well-placed in popular areas with a good track record for service. Hotels in prime locations attract more customers and thus return higher revenue, making the value generated by your investment much greater.
- Market trends: There are emergent trends of this Indian hospitality industry, especially concerning the hotel occupancy rate, daily rate, and revenue per available room. When you analyse these trends, you will understand its current health and future direction.
- Financial fitness: Analysing the financial health of hotel companies in terms of the revenue growth, profit margins, levels of debt, and cash flow. A healthy company with good financials often has the aptitude to provide solid returns to investors.
- Brand reputation: A good name for a brand attracts loyal customers who are prepared to pay higher prices. For investment purposes, ask yourself if the hotel chain has a brand name that is well-known as such. This could set your step above others competing for this market share.
- Growth in tourism: Tourism directly impacts the hotel industry. Review trends of both domestic and international tourism in India as well as other key factors, such as government initiatives and infrastructure development that can spur growth in hotel demand.
- Stock valuation: Compare the stock price with respect to earnings, sales and general value (like the P/E and P/S ratios). Comparing such ratios with peer companies and past averages give an idea whether or not a stock is priced attractively for investment.
Conclusion
This is the list of top hotel stocks in India, which displays some of the top players in the hospitality sector. These companies include companies with a variety of histories and market strategies but define their growth story together. As these trends will only intensify and increase travel at the domestic and global levels in this post-COVID world, these companies look all the more invested.
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FAQs
1. What are the key factors influencing hotel stock performance in India?
Hotel stock performance is shaped by several factors: location, market trends, financial stability, brand reputation, and tourism growth. Hotels in popular areas with high occupancy rates generally fare better. Financial health, like strong profit margins and low debt, is crucial for steady returns. A well-established brand can enhance customer loyalty, while tourism trends affect demand. Government initiatives, infrastructure improvements, and shifts in travel patterns also contribute to long-term growth potential.
2. How important is a hotel’s location when considering an investment in hotel stocks?
Location is critical when investing in hotel stocks. Hotels in prime areas or tourist hotspots typically experience higher occupancy and profitability due to greater guest demand. High-quality service at well-placed hotels can also boost customer loyalty and pricing power. By investing in hotels with strategic locations, investors are more likely to see stable growth as these properties attract business travellers, tourists, and repeat guests, enhancing the stock’s value over time.
3. What financial metrics should I look at before investing in hotel stocks?
When assessing hotel stocks, key financial metrics include revenue growth, profit margins, debt levels, and cash flow. A solid revenue and high profit margin indicate strong earnings potential, while manageable debt signals financial stability. Additionally, cash flow helps gauge the hotel’s ability to handle economic shifts or industry downturns. Evaluating these metrics provides a clearer view of a hotel company’s financial health, aiding informed decisions about the stock’s potential for returns.
4. Why is brand strength important in hotel stock investment?
A strong brand enhances a hotel’s pricing power and customer loyalty, impacting its financial performance positively. Established brands often command premium rates and attract repeat guests, ensuring steady revenue. When investing in hotel stocks, choosing brands with a trusted reputation can offer more stable returns, especially in competitive markets. A strong brand can also withstand economic fluctuations better and maintain market share, making it a key consideration in investment decisions.
5. How does tourism growth impact hotel stocks in India?
Tourism growth directly drives demand in the hotel industry, positively impacting hotel stock performance. Increased travel boosts occupancy rates and revenue for hotels, leading to better financial returns. Factors like rising domestic and international tourism, government initiatives, and improved infrastructure enhance tourism prospects. A surge in tourism helps hotels achieve higher occupancy and profitability, which can strengthen stock value. Keeping an eye on tourism trends aids in selecting stocks with long-term growth potential.
