The hospitality industry was one of the most impacted sector, when the Covid19 pandemic enveloped the whole world. The pandemic lasted nearly 3 years, the hospitality sectors, especially hotels suffered dearly. In many cases the companies/hotel chains, unable to pay their employees, either curtailed their businesses or laid off their workforce.
The pandemic years
Now, nearly 2 years on, the pandemic and its impact still continues to have an impact and effect on many aspects of our world, the supply chain, that was severely hit, continue to be on the recovery path, many economies are still finding their route back to fiscal normalcy, despite undoing lockdowns and quarantines. In the meanwhile, the Indian hotels industry appears to be on course to undo the damage done in the pandemic years.
Resurgence of the worst-hit
Hotel stocks have experienced a resurgence post-pandemic, with the rally in the sector intensifying due to robust demand driving increased occupancies across various segments. In the third quarter of FY24, nearly all companies in the sector reported healthy operating margins, supported by this strong demand.
1 lakh crore market capitalisation
The resilient performance is exhibited through the strong numbers, as custom index of 12 hotel stocks has added as much as Rs 1 lakh crore to its market capitalisation since the beginning of 2022.
In this, the major players including Hotels Indian Hotels Co (IHCL), which runs the famous Taj hotels, increased the most, with an uptick of Rs 54,212 crore, just over the last two years. Amongst the others, companies like EIH and Chalet Hotels saw their market valuation surge by Rs 16,453 crore and Rs 12,794 crore, respectively during the same period.
In additional good news, in a report from Crisil Ratings, the hospitality industry is expected to clock 11-13 per cent revenue growth in 2024-25 on steady domestic demand and a rise in foreign travellers.
This revenue growth will follow a likely 15-17 per cent growth in the current financial year, backed by steady domestic demand and ramp-up in foreign travellers.
Going past benchmarks
Coming to the performance of these companies in the markets, they have outperformed benchmark Nifty50 over the past two years, since 2021. For comparison, while the Nifty50 has gained 2.2 per cent so far in 2024, the index of hotel stocks has gained nearly 30 per cent. The operating margin of all hotel firms improved on sequential basis in Q3, reflecting seasonality on stronger pricing and positive outlook. IHCL, the largest hotel by market capitalisation has maintained its outlook to open 20 hotels in FY24.
The other companies in the sector on the stock include APEEJAY SURRENDRA PARK HOTELS LTD, BARBEQUE NATION HOSPITALITY, HLV, the government owned, INDIA TOURISM DEVELOPMENT CORP, LEMON TREE HOTELS, MAHINDRA HOLIDAYS, ORIENTAL HOTELS, SAMHI HOTELS LTD. and TAJ GVK.
These companies appear to be on the horizon of a full recovery, but there are multitude of factors that influence this industry, that are micro and macro in nature, that are national, local and international in nature, what happens in the near future, is something that remains to be seen.
