Q2 Review: Hotel sector fares well in July-Sept despite seasonality; TajGVK, Lemon Tree & Oriental Hotels close up to 9.5% higher

The hotel and hospitality sector fared well despite seasonality in the second quarter of the financial year 2022-23 (Q2FY23), besides, the Average Room Rent (ARR) inches higher, a domestic brokerage Motilal Oswal said in its report on the sector.

As per HVS Anarock, demand remained strong during the quarter with Occupancy Rate (OR) at 62 per cent in Q2FY23 with ARR higher by 13 per cent from pre-covid levels, Sumant Kumar - Research Analyst at Motilal Oswal said in its report.

The analyst said OR is expected to improve further from the pre-pandemic levels amid strong demand drivers such as wedding season, G20 summit meetings, and resumption in foreign inbound travel. ARR is expected continue inching higher, boosting Revenue per available room (RevPAR).

“We anticipate the robust growth across hotels to sustain in FY23/FY24 based on higher ARR across hotels amid improved occupancies; operating leverage along with cost rationalization across hotels to maintain higher margins, and strong demand drivers in place,” Kumar said in a report on sector.

The brokerage reiterates BUY rating on Indian Hotels and Lemon Tree Hotels with a target price of Rs 365 and Rs 110 per share, implying 14 and 9 per cent upside in the counters, respectively.

Shares of hotel and Hospitality companies were in focus on Wednesday, as select stocks rallied up to 9.5 per cent on the BSE at market close on the back of heavy volumes and healthy outlook. Among all, TajGVK Hotels & Resorts gained most by over 9.5 per cent to Rs 223 apiece on the BSE.

While shares of Lemon Tree Hotels and Oriental Hotels surged in the range of 7-9 per cent on the BSE at the market close. Similarly, Indian Hotels Company, EIH Hotel, Mahindra Holidays & Resorts India ended today’s session up between 2-3 per cent.

In comparison, the S&P BSE Sensex concluded around 0.7 per cent to touch lifetime high level of 63,099 fir the first time in history.