Budget 2023: Tourism stocks spurt as government announces special focus on sector

Travel- and hospitality-related stocks spurted on Wednesday after Finance Minister Nirmala Sitharaman announced a special focus on the tourism space in her Union Budget for 2023-24. 

"There is large potential to be tapped in tourism," the finance minister said in her Budget speech. Catch LIVE Budget 2023 updates here

The stock of Tata group company Indian Hotels surged as much as 8.5 per cent per cent after the Budget announcements. Other tourism-related scrips, such as EIH and Lemon Tree jumped 6-8 per cent in intraday trade.

Shares in Easy Trip Planners – an online travel planning company – gained nearly one per cent.

"The country offers immense attraction for domestic as well as foreign tourists... The sector holds huge opportunities for jobs and entrepreneurship for youth in particular," the finance minister said. 

India’s hotel industry has witnessed a robust recovery in demand from the depths of the pandemic, led by the rising discretionary spending on tours and travels, the improving economic environment fuelling corporate travels and the revival of wedding season, according to HDFC Securities.

The brokerage expects both average room rates (ARRs) and occupancies to remain strong in the sector, leading to higher revenue per available room for the industry with demand outpacing supply.

The current trend is very similar to the last upcycle the sector witnessed from 2004 to 2008, which commanded improved margins and multiples for listed entities, it added.

 The brokerage initiated coverage on Indian Hotels with an 'add' rating and a target price of Rs 345 apiece. It has a 'buy' call on Lemon Tree with a target of Rs 108 per share.