The peak tourism season is currently underway and hotel stocks are in the limelight amongst investors. Domestic travellers’ spending on luxury hotels is strong and foreign tourist arrivals have seen a rebound from the lows witnessed following the cross-border tensions in May 2025.
Media reports have indicated that foreign tourist arrivals in the country could reach 10 to 10.5 million in the current calendar year, broadly similar to the levels witnessed pre-pandemic in 2019.
Akin to the IT sector, mid-cap hotel chains, which are much smaller than industry leaders like The Indian Hotels Company (IHCL), are seeing strong investor interest on Dalal Street. That’s because these smaller hotel chains are nimbler, and a smaller revenue base has enabled them to show a stronger growth in revenues and net profit in the September 2025 quarter vis-a-vis their larger peers.
Performance in the September 2025 quarter
Leela Palaces Hotels & Resorts benefited from its occupancy levels that rose 4% points on a y-o-y basis to 69% in Q2FY26 and its ADR that increased by 7% in the quarter to Rs 19,290. ADR, or Average Daily Rate, is a key performance indicator in the hotel industry that measures the average revenue earned per occupied room over a specified period.
As a result, its consolidated revenue from operations rose nearly 12% y-o-y to Rs 310.6 crore in the September 2025 quarter, and it reported a net profit of Rs 74.7 crore in the quarter under review vis-a-vis a loss of Rs 51.1 crore a year earlier. Leela Palaces Hotels & Resorts at the end of Q2FY26 operated 13 properties with 3,544 keys across 11 cities in the country.
Meanwhile, Mumbai-based Chalet Hotels saw its hospitality (hotels) segment rise 13.4% y-o-y to Rs 380.2 crore in Q2 FY26, and the company has highlighted average daily rates of Rs 12,170, a rise of 15.8% on a y-o-y basis. However, its occupancy was 66.7% in Q2FY26 vis-à-vis 73.6 % a year earlier. This is also due to the addition of 166 rooms in its portfolio in the first half of FY26. The company expects occupancy levels to ‘stabilise’ in the current peak season.
Segment profit of the hospitality division was Rs 108.3 crore in the September 2025 quarter vis-a-vis Rs 105.3 crore a year earlier. Its hospitality portfolio comprises of 11 operating hotels and resorts with 3,359 keys across globally recognized hospitality brands including JW Marriott, The Westin, and Novotel. The company also has a presence in real estate and rental / annuity business.
And Mumbai-based Juniper Hotels reported consolidated revenue from operations of Rs 230.3 crore in the September 2025 quarter, highest ever recorded in second quarter of a financial year, a growth of 7.5% on a y-o-y basis, and that was thanks to a 7% growth in average room rates (ARR) to Rs 10,599 in the quarter under review. Its consolidated net profit of Rs 16.4 crore in Q2 FY26 vis-a-vis a loss of Rs 27.4 crore a year earlier.
The company’s portfolio comprises seven hotels with 2,130 keys at the end of FY25 across Mumbai, Delhi, Ahmedabad, Lucknow, Hampi and Raipur. And all its properties in the portfolio are branded and managed by the global hotel chain, Hyatt.
Meanwhile, industry leader, The Indian Hotels Company, which operates the iconic Taj group of hotels, has highlighted in its hotel segment revenues increased by 7% y-o-y to Rs 1,839 crore in Q2 FY26, and its air-catering division revenues rose 13% to Rs 287 crore.
As a result, its consolidated revenue from operations grew 11.7% y-o-y to Rs 2,040.9 crore in the September 2025 quarter. This company’s ARR grew 8% y-o-y to Rs 13,600 in the first half of FY26. However, it also faced higher operational costs, like food and beverage consumed. As a result its net profit fell nearly 45 % y-o-y to Rs 318.3 crore in the September 2025 quarter.
Note: In the September 2024 quarter, Indian Hotels Company had a one-time notional gain of nearly Rs 307.4 crore, on account of Taj SATS Air Catering Limited becoming a subsidiary of the Company. As a result, its profits declined nearly 45% y-o-y to Rs 318.3 crore in the September 2025 quarter. However, its profit before exceptional items and tax was Rs 452.7 crore in the September 2025 quarter, a growth of 16.5 % on a y-o-y basis.
Growth and expansion plans of hotel chains
Leela Palaces Hotels & Resorts has received board approval to sign binding agreements to acquire a 25% stake in a luxury beachfront resort in Dubai’s iconic Palm Jumeirah, and it requires an investment of nearly $ 49 million (nearly ₹ 437 crore). The Dubai hotel will be the first international foray for this group.
The hotel chain also has 9 hotels in the pipeline, and it will expand to 22 properties over the next three years.
Meanwhile, Chalet Hotels has nearly 1,200 rooms under development at different locations including New Delhi and Goa.
And Juniper Hotels is ramping up its hotel portfolio from 2,130 hotel room keys at the end of FY25 to 4,091 hotel room keys by FY 29, and it includes hotels at Guwahati and Kaziranga.
Indian Hotels’ portfolio, both operating and in the works, included 570 hotels at the end of the September 2025 quarter, and it expects to add 18 more hotels in the second half of FY26.
Efficiency kings – Return on capital employed (ROCE)
Indian Hotels Company has a ROCE of 17.2 % on a consolidated basis for FY26, according to Screener.in, while it is 11.1% for Chalet Hotels, 12 % for Leela Palaces Hotels & Resorts and 6.3% for Juniper Hotels.
Shadows on tourism industry
Any terrorist act, like that witnessed overnight in Delhi, or an economic slowdown in India or globally, could affect consumer spending patterns and its impact on the hotel sector can be quite profound. For instance, in May, 2025, foreign tourist arrivals dropped off, given terror attack in Kashmir, and hotels had to focus on aggressive marketing amongst domestic travellers to maintain occupancy levels.
Share price movement
Leela Palaces Hotels & Resorts was 2% lower in Tuesday trade to Rs 431 and not too far from its 52-week high of Rs 475 that was reached on 14 October 2025.
Meanwhile, Chalet Hotels fell 1.3% to Rs 892, and its 52-week high of Rs 1,080 was reached on 1 August 2025.
And Indian Hotels was 0.8% lower at Rs 697.6 and had reached its 52-week high of Rs 894 on 30 December 2024.
Valuations and investors on Dalal Street
Indian Hotels Company trades at a P/E of more than 55 times, according to Screener.in, while it is 33.8 for Chalet Hotels, more than 80 times for Leela Palaces Hotels & Resorts, and more than 40 times for Juniper Hotels.
Akin to mid-cap IT stocks, mid-cap hotel stocks are richly valued and reflect the high growth investors are expecting from these hotel chains.
Disclaimer:
Note: We have relied on data from www.Screener.in throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information.
The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only.
Amriteshwar Mathur is a financial journalist with over 20 years of experience.
Disclosure: The writer and his family do not hold the stocks discussed in this article.
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