The hospitality industry is emerging from a rather difficult operating environment with the Middle East conflict over the past three-and-a-half months having cast a shadow on its growth outlook.
For instance, media reports highlight that a key tourist segment – foreign tourist arrivals, declined 14.4% y-o-y to 534,000 in April 2026. This was the lowest monthly foreign arrivals since Operation Sindoor disruptions in May 2025.
However, with some signs of peace emerging in the Middle East, and expectations that the overall oukook for the sector will improve from here onwards, investors are once again looking at hotel stocks.
To help readers understand hotel stocks, we analysed the performance of two leading hotel chains.
To begin with, here’s a snapshot of the two companies:
Indian Hotels Company v/s Lemon Tree Hotels at a glance (end of FY26)
| Parameter | Indian Hotels Company Ltd | Lemon Tree Hotel |
| Operating hotels (end of FY26) | 375 hotels, 33,000 keys | 131 hotels – 11,811 keys |
| Capital light – existing hotels | 68% | 51.2% |
| FY27 additional hotels / rooms expected to be added in portfolio | 60+ hotels to open – 5,000+ owned / leased keys to open | 2,000+ keys |
| Pipeline of hotels | 255 hotels – 31,000 keys | 137 hotels – 10,770 keys |
| Pipeline of hotels – asset type | Capital light – 93% | Capital light – 76%* |
| Present in number of countries | 15 countries / 4 continents | 3 countries |
| Destinations | 250+ | 80+ |
* Owned pipeline being shifted to Fleur Hotels; Post that 100% capital light
On one side of the ring, is Indian Hotels Company Ltd, which houses the iconic Taj brand, the market leader in luxury / super luxury segment coupled with its expanding presence in the mid-market segment via Ginger.
On the other side is Lemon Tree Hotels, which is a leading player in the mid-market / value-for-money segment of the hospitality industry.
Both the hotel players occupy an important position in the respective segments they operate in. And both players are increasingly using the asset- light model of managing rooms to expand their hotel portfolio, within the country and overseas.
Indian Hotels Company v/s Lemon Tree Hotels – A deep dive
We analysed the performance of these two leading hotel chains on various operational parameters – RevPar (revenue per available room) a core hospitality industry metric that evaluates a property’s financial performance. It measures how effectively a hotel generates revenue from its total available room inventory by combining both occupancy rates and average daily rates (ADR) into a single figure.
In addition, we looked at other performance variables – occupancy levels, growth in revenues and net profit in March 2026 quarter and as well as on a compounded growth basis between FY23 to FY26. The goal is to see which hotel chain emerges as the better one, and consequently take a view on whether the large valuation gap between the two is justified.
Indian Hotels Company ended Friday trade 2.2% higher at Rs 724.7, and it had reached a 52-week low of Rs 565.3 on 2 April, 2026.
And Lemon Tree Hotels ended Friday trade 1% higher at 113, and the stock had reached a 52-week low of Rs 99.7 on 16 March, 2026.
Let’s look at the valuations of the two hotel chains.
| Hotel chain | Consolidated P/E |
| Indian Hotels Company Ltd | 59.8 |
| Lemon Tree Hotels | 36.1 |
For a perspective on the level of over valuation of Indian Hotels Company Ltd, we looked at the valuations of Marriott International, which is the largest hotel chain in the world by number of rooms and revenue, with over 9,300 properties and 1.7 million rooms across more than 130 countries.
According to global financial websites, Marriott International trades at a P/E of 41.6 times.
As it is evident from the above table, Lemon Tree Hotels trades at nearly 40% discount to the industry leader, Indian Hotels Company Ltd.
March 2026 quarter – Luxury v/s mid-market – which segment grows faster
While both the hotel chains had similar occupancy levels in Q4FY26 of 78% levels (view table below), Indian Hotels has performed much better than its rival in other operational parameters, like RevPar, growth in revenue from operations and net profit on a y-o-y basis.
Comparison of performance in the March 2026 quarter – Consolidated basis (y-o-y)
| Operational parameter | Indian Hotels Company Ltd | Lemon Tree Hotels |
| Revenue from operations | Rs 2,765.29 crore | Rs 416.4 crore |
| Growth in revenue from operations (% y-o-y) | 14% | 10% |
| Occupancy levels | 78% | 78.5% |
| RevPar (Revenue Per Available Room) | Rs 13,250 | Rs 5,855 |
| Growth inRevPar | 10% y-o-y | 7.2% |
| Operating profit margins (in %) | 35.2% | 52% |
| Net Profit | Rs 645.4 crore | Rs 116.5 crore |
| Growth in net profit (in %) | 14.8% | 7.4% |
Indian Hotels Company in its investor presentation has highlighted that while it was affected, like other players in the industry in Q4FY26, by last minute cancellations of meeting / conferences, airline route suspensions during the Gulf war. However, it was able to offset the above difficult operating environment via a large number of global leaders visiting the country prior to the commencement of the Middle East crisis.
Also demand from domestic tourism industry was strong in the March 2026 quarter and it helped the leading hotel chain to grow its food and beverage revenue along with room revenues.
However, Lemon Tree Hotels has industry leading-operating profit margins of 52% in the March 2026 quarter, and it reflects its operational philosophy – low-cost operational model. In addition, it benefited from a 7.2% y-o-y rise in RevPar along with 78.5% occupancy levels in the March 2026 quarter.
The 3-year Trajectory (FY23-FY26) – similar growth rates for both chains
On taking a longer-term view, FY23 to FY26, both the hotel chains have shown a broadly similar growth in consolidated revenues and net profit between FY23 and FY26 (view table below). However, it must be emphasized that Indian Hotel Company Ltd is significantly much bigger than its rival – for instance the industry leader ended FY26 with consolidated revenues from operations of Rs 9,689 crore and net profit of Rs 2,247 crore.
Meanwhile, Lemon Tree Hotels ended FY26 with revenues from operations of Rs 1,444.5 crore and net profit of Rs 288.3 crore.
Compounded growth of two hotel chains
| Indian Hotels Company Ltd 3-Yr CAGR (%) | Lemon Tree Hotels 3-Yr CAGR (%) | |
| Growth in consolidated revenue from operations (%) | 18.6% | 18.2% |
| Growth in operating profit (%) | 21% | 15.6% |
| Growth in consolidated net profit (%) | 28.8% | 27.2% |
The above table does highlight that both chains have benefited from an expansion in the domestic hospitality industry, which was valued at nearly $ 23.5 billion in FY23 to nearly $28 billion in FY26.
The domestic hospitality industry has also been one of the key beneficiaries of the ‘K-growth curve’- where the rich, typically top 5% of society, are increasing their spending on leisure and allied activities, even though the broad economy may show sluggish job and allied problems.
Expansion plans – greater focus on asset-light model
Both the hotel chains are increasingly relying on an asset- light model to expand their hotel portfolio and destinations over next few years. The above model typically involves managing property / hotel rooms for hotel owners, and in return the leading hotel chains earn management fees and allied income.
Indian Hotels Company expects to expand its portfolio with 60+ hotels across the country during FY27, and it would add 5,000 plus keys to its portfolio. Indian Hotels Company ended FY26 with a portfolio of 375 hotels and 33,000 keys.
Meanwhile, Lemon Tree Hotels is targeting 2,000+ additional room keys to its portfolio. At the end of FY26, Lemon Tree Hotels had 131 hotels and 11,811 keys.
Restructuring at Lemon Tree Hotels
Lemon Tree Hotels announced in early January 2026 a restructuring that involved 12 hotels (including one under construction) that would be transferred to Fleur Hotels, its subsidiary, and they are awaiting approvals for this scheme.
The key objective is that Lemon Tree Hotels would be an asset-light hotel management and brand platform. Fleur Hotels would carry on asset ownership and also be a development company. Fleur will lead the group’s all future hotel acquisitions and development plans.
An agreement with Warburg Pincus has also been entered, and it would invest Rs 960 crore in Fleur in stages to support the latters’ growth. Shareholders of Lemon Tree Hotels would be given shares in Fleur Hotels.
Return on Equity – which chain uses capital more efficiently
Indian Hotels Company has a Return on Equity (RoE) of 14.2%, according to Screener.in, while it is 19.4% for Lemon Tree Hotels.
| Company | Return on Equity (RoE) (in %) |
| Indian Hotels Company Ltd | 14.2% |
| Lemon Tree Hotels | 19.4% |
Growth outlook and valuations
The two hotel chains are expanding their portfolio over the next few years largely with an asset-light model. The domestic hospital industry has benefited over the last few years with increased domestic spending.
Any tensions on the India – Pakistan border as well as conflicts in the Middle East can have an adverse direct impact on the performance of these two hotel chains.
Lemon Tree Hotels has broadly matched the growth of the industry leader, The Indian Hotels Company, on a much smaller base. Also, Lemon Tree Hotels trades at nearly 40% discount to Indian Hotels Company.
Readers can put Lemon Tree Hotels on their watch list of stocks for 2026, and monitor if its performance matches expectations.
Disclaimer:
Amriteshwar Mathur is a financial journalist with over 20 years of experience.
The writer and his family have no shareholding in any of the stocks mentioned in the article.
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