Indian hotel companies are set to report strong performance for the second quarter of fiscal year 2027 (Q2 FY27), according to a sector preview by brokerage firm Elara Capital. The positive outlook is primarily fueled by a month-on-month strengthening of demand, bolstered by both leisure travel and a vibrant MICE (Meetings, Incentives, Conferences, and Exhibitions) sector.
Q2 Performance Outlook
Elara Capital projects an 11-13 percent year-on-year (YoY) growth in Revenue Per Available Room (RevPAR) for the hotel sector. This growth is expected to be driven by a 200-400 basis points improvement in occupancy rates, coupled with an approximately 6-7 percent increase in average room rates (ARR). Business-centric locations have been instrumental in leading ARR growth, maintaining elevated occupancy levels. Concurrently, leisure destinations have contributed significantly to incremental occupancy gains.
However, the brokerage notes a slight constraint on ARR growth due to the increased presence of domestic travelers, who typically generate lower average room rates compared to international leisure guests.
Key Beneficiaries and Preferred Picks
In the short term, Elara Capital expresses a preference for Lemon Tree Hotels and ITC Hotels. For a longer-term investment perspective, The Leela Palaces Hotels & Resorts is identified as the top pick. Several companies, including Juniper Hotels, The Leela, Indian Hotels Company (IHCL), ITC Hotels, and Lemon Tree Hotels, were highlighted as key beneficiaries of the BRICS event hosted in Delhi during the quarter.
Company Specifics
- Juniper Hotels: RevPAR growth is being propelled by higher ARR at its Andaz by Hyatt property in Delhi and a notable expansion in occupancy at Grand Hyatt Mumbai.
- Chalet Hotels: The Mumbai micro-market witnessed sequential improvements. However, occupancy at Marriott's Bengaluru property remained subdued, partially impacted by the West Asia conflict.
- Samhi Hotels: Growth was supported by improved booking visibility and strong Average Daily Rate (ADR) growth across Bengaluru, Hyderabad, Pune, and Gurgaon.
Both Chalet Hotels and Samhi Hotels have experienced some impact on international bookings through the Marriott Bonvoy network due to the Middle East conflict, which has limited RevPAR recovery at affected properties.
Demand Drivers and Q3 Forecast
September saw strong activity in Delhi, boosted by events such as BRICS, SEMICON India, and the India-Afghanistan T20I series. Mumbai benefited from the Global FinTech Fest, held in September this year compared to October last year, and the IIJS exhibition, which supported MICE demand. Despite a 6.3 percent YoY decline in domestic air passenger traffic in August 2026, the quarter also saw five auspicious marriage days, a significant increase from none in Q2 FY26.
Looking ahead to Q3 FY27, Elara expects leisure travel to continue driving hotel demand, supported by numerous long weekends, Christmas, and New Year's celebrations. The pace of recovery in foreign arrivals, which typically peak in the third quarter, will be crucial in influencing ARR growth for luxury and upper-upscale hotels. Upcoming events in major cities like Delhi-NCR, Mumbai, Bengaluru, and Guwahati are also anticipated to bolster occupancy and ARR.
Elara Capital maintains a positive medium-term outlook for the hotel sector, citing resilient demand despite ongoing geopolitical challenges.
Stock Target Prices and Potential Upsides
Elara Capital has issued the following ratings and target prices for selected Indian hotel stocks:
- Indian Hotels Company: 'Accumulate' rating with a target price of Rs 786, implying 9 percent upside.
- The Leela: 'Buy' rating with a target price of Rs 669, indicating 17 percent upside.
- Chalet Hotels: 'Buy' rating with a target price of Rs 1,081, implying 29 percent upside.
- Samhi Hotels: 'Buy' rating with a target price of Rs 200, indicating 29 percent upside.
- ITC Hotels: 'Buy' rating with a target price of Rs 213, implying 35 percent upside.
- Lemon Tree Hotels: 'Buy' rating with a target price of Rs 165, indicating 54 percent upside.
- Juniper Hotels: 'Buy' rating with the highest potential upside of 91 percent, with a target price of Rs 418.