The peak tourism season in the country is just a couple of weeks away and hotel stocks are increasingly on the radar of investors on Dalal Street. The hospitality sector has benefited from strong consumer spending patterns from the top-end of society for the past several quarters, despite the various challenges including tensions on the India-Pakistan border and the conflict in the Middle East.
And investors are increasingly looking at investment options beyond the well established players, given lower valuations and also the future growth opportunities.
It’s no surprise that mid-cap hotel stocks are doing well on the bourses — Lemon Tree Hotels was broadly flat at Rs 176.2 on Tuesday trade and not too far from its 52-week high of Rs 180.6 that was reached on 8 September 2025. Other mid-cap stocks in this sector, like Benares Hotels had gained 1.4 % to Rs 10,122 on Tuesday and its 52-week high was Rs 12,500 that was reached on 21 February 2025. Benares Hotels is a subsidiary of The Indian Hotels Company Limited.
Taj GVK Hotels & Resorts was broadly flat at Rs 432.7 on Tuesday, and it had reached its 52-week high of Rs 540 on 9 September 2025, while Advani Hotels & Resorts (India) was broadly flat at Rs 60.3. Sentiment for hotel stocks has also been aided by the government’s recent decision to reduce GST to 5% on room tariffs below Rs 7,500 per day.
And valuations of mid-cap hotel stocks are far lower than that of industry leaders, Indian Hotels Company and EIH. For instance, Lemon Tree Hotels trades at a P/E of about 35 times estimated consolidated FY 26 earnings while Taj GVK Hotels & Resorts trades at a P/E of 15 times estimated consolidated FY26 earnings. Advani Hotels & Resorts (India) trades at a P/E of about 30 times estimated FY 26 earnings.
Meanwhile, large and well established hotel chains, Indian Hotels Company, which runs the iconic Taj hotel chain, trades at a P/E of more than 50 times estimated consolidated FY26 earnings while EIH, which runs the Oberoi hotel chain, trades at a P/E of more than 55 times estimated consolidated FY 26 earnings.
## Tailwinds for the Entire Sector
The Union tourism minister recently highlighted the growth momentum in the Indian tourism and hospitality industry in the Lok Sabha — foreign exchange earnings of Rs 98,289 crore during the first four months of calendar year 2025 vis-a-vis Rs 2,93,033 crore during calendar year 2024.
Also, foreign tourist arrivals of 32.41 lakh during the first four months of CY 25 vis-a-vis 99.52 lakh during the previous calendar year.
A recent report by JLL’s Hotel Momentum India (HMI) Q2 2025 also highlighted that India’s hospitality industry witnessed a 12.9% year-on-year growth in revenue per available room (RevPAR) during the April-June quarter of this calendar year.
Also, Bangalore established itself as a market leader, achieving exceptional RevPAR growth of 29.4% in the second quarter with both average daily rate (ADR) and occupancy demonstrating consistent upward momentum throughout the year, highlighted the report.
## Mid-Caps on the Move: A Look at Expansion
For Lemon Tree Hotels at the end of the June 2025 quarter, its portfolio consisted of 18,431 rooms in 226 hotels of which 10,661 rooms in 116 hotels are operational and the rest are in the process of development.
In the case of Benares Hotels, at Taj Ganges,Varanasi, its new wing comprising of 100 additional rooms and a restaurant is in advanced stages of completion and is expected to open during the current fiscal.
## Strong Start to the Year: Q1 Performance
Lemon Tree Hotels’ consolidated revenue from operations grew 17.5 % y-o-y to Rs 315.7 crore in the June 2025 quarter and its net profit rose 139.3 % y-o-y to Rs 48.1 crore.
And in the case of Taj GVK, its consolidated revenue from operations grew 14.7 % y-o-y to Rs 106.4 crore in the June 2025 quarter while its net profit jumped 185 % y-o-y to Rs 36.2 crore in the quarter under review.
## Good Value or Value Trap?
Mid-cap hotel stocks trade at valuations lower than their larger and well established larger peers. However, even mid-cap stocks are quite expensive in the short-term and broadly factor in the growth opportunities over the next few quarters.
Investors can keep mid-cap hotel stocks on their radar and wait for price corrections before making any investments in this sector on a long-term basis.
Disclaimer
Amriteshwar Mathur is a financial journalist with over 20 years of experience.
Disclosure: The writer and his family have no shareholding in any of the stocks mentioned in the article.
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