Leading brokerages are maintaining a bullish outlook on India's hotel sector, forecasting another resilient quarter for the June period despite recent geopolitical tensions and travel disruptions impacting occupancy. Analysts expect robust room rate growth, healthy expansion in Revenue Per Available Room (RevPAR), and sustained long-term demand, supported by a favorable supply-demand balance across the country.
Q1FY27 Performance and Outlook
Elara Capital projects the hospitality industry to report like-for-like occupancy growth of 100-150 basis points and an average room rate (ARR) increase of 10-12 percent in Q1FY27, leading to an overall RevPAR growth of approximately 12-14 percent. While demand remained strong, occupancy growth faced limitations from border tensions, safety concerns, and flight cancellations, particularly affecting markets like Chandigarh, Amritsar, Srinagar, Jodhpur, Ahmedabad, Goa, Jaipur, Udaipur, Mumbai, and Delhi.
However, a strong wedding calendar and continued domestic tourism helped cushion these impacts. Elara Capital anticipates this momentum will extend into Q2FY27, bolstered by multiple long weekends, festive travel during Onam, and business events such as the Indian International Jewellery Show in Mumbai. Double-digit RevPAR growth, primarily driven by increases in room rates, is expected.
Resilient Domestic Demand Offsets International Weakness
Choice Institutional Equities noted that foreign tourist arrivals experienced pressure in Q1FY27 due to conflicts in West Asia, airspace restrictions, and flight cancellations. Nevertheless, robust domestic demand largely compensated for the weaker inbound tourism. The firm estimated industry RevPAR growth at 7-9 percent in April and a significant 22-24 percent in May, benefiting from a favorable base effect. Overseas-focused assets, particularly hotels in the Maldives and Dubai, are likely to face a greater impact from reduced international travel and higher operating costs.
The structural growth narrative for the sector remains intact, underscored by increasing domestic travel, improving infrastructure, rising middle-class incomes, a recovery in corporate travel, and growing spiritual tourism. Choice expects demand to rebound strongly in the latter half of FY27 as geopolitical concerns subside and pent-up travel demand returns.
PL Capital also anticipates steady operational performance in the June quarter, attributing it to a favorable wedding season and a low comparative base. Occupancy levels are expected to remain broadly stable despite temporary disruptions.
Industry Expert Insights
Animesh Kumar, Commercial Head at ibis & ibis Styles India, stated, "Markets heavily dependent on international arrivals or transit traffic may experience softer demand, while destinations with strong domestic tourism or diversified source markets are likely to remain more resilient. Domestic demand has done a great job of supporting the hospitality sector, and I believe it will continue to remain a key growth driver."
Kumar added that while travelers become more cautious during geopolitical uncertainties, they are not necessarily canceling holidays but becoming more selective. "Hotels achieve stronger pricing when demand comes from a healthy mix of domestic travelers, international tourists, and business guests, as each segment has different travel patterns and spending behavior. The trend is sustainable in the near term, but stronger ARR growth will improve as inbound tourism recovers, international connectivity strengthens, and business travel gains momentum," he explained.
Top Stock Picks and Target Prices
Choice Institutional Equities' high-conviction ideas include:
- ITC Hotels: Target Price: Rs 210
- Ventive Hospitality: Target Price: Rs 790
- SAMHI Hotels: Target Price: Rs 200
- Chalet Hotels: 'Buy' rating, Target Price: Rs 920
- Juniper Hotels: 'Buy' rating, Target Price: Rs 240
Elara Capital's preferred asset owner picks are:
- Chalet Hotels: Target Price: Rs 1,039
- SAMHI Hotels: Target Price: Rs 329
- Juniper Hotels: Tactical play, Target Price: Rs 402
- Lemon Tree Hotels: Tactical play, Target Price: Rs 185
- ITC Hotels: 'Buy' rating, Target Price: Rs 213
- Indian Hotels: 'Accumulate' rating, Target Price: Rs 732
Overall, brokerages remain constructive on the Indian hospitality sector. While near-term geopolitical uncertainty and global travel disruptions may weigh on occupancy, limited room supply, sustained domestic travel demand, and healthy pricing power are expected to support earnings growth over the medium term.
Disclaimer: This article provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.