Hotel stocks surge on hopes of rise in holiday-season demand

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Mumbai | Published: October 4, 2017 3:32:20 AM

Shares of hotel firms gained at least 4% on Tuesday amid expectations of the holiday season bringing in robust demand that will result in higher room rates and increased occupancy.

hotel stocks, hotel firms market performance, market hotel companiesWhile shares of Taj GVK hotels rose as much as 14.7% on BSE to hit its highest level in nearly ten years, Indian Hotels gained 5% — the biggest single-day gain in the last five months.

Shares of hotel firms gained at least 4% on Tuesday amid expectations of the holiday season bringing in robust demand that will result in higher room rates and increased occupancy.

While shares of Taj GVK hotels rose as much as 14.7% on BSE to hit its highest level in nearly ten years, Indian Hotels gained 5% — the biggest single-day gain in the last five months. Hotel Leelaventure and Tulip Star Hotels climbed 4.3% and 5% respectively.

Senior Group VP of corporate sector ratings at ICRA, Subrata Ray, observed that going by the recent trends in foreign tourist arrivals into the country and forex earnings growth, improving domestic macro-economic data (barring the transitory dip in economic activities due to demonetisation), and expected ease of business post implementation of GST (barring the initial hick ups post the roll out), ICRA expects 5%-6% growth in RevPARs during FY18.

“Revenue per available room (RevPAR) growth is estimated to accelerate to 7%-8% during FY2019 and FY2020, driven largely by anticipated traction in ARRs.” Ray said in a recent note.

A significant chunk of the hotel industry’s annual revenues and consequently profits being reported in the December quarter. For instance, Indian Hotels reported a net profit of `92.9 crore in Q3FY17 against the losses in the first two quarters of the financial year. Since 2011, Indian Hotels have never posted losses in any December quarter.

According to JP Morgan, a five-year bear market in the hotel sector is coming to an end with peak supply now behind and expectations of a demand improvement ahead on the back of improved macro sentiment. The brokerage which has an overweight rating on the Indian Hotels said “RevPARs could see meaningful improvements over the next two years.”

The benchmark Sensex gained 213.66 points or 0.68% to end the session at 31497.38.

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