Hotel stocks gain on hopes of demand rebound; Chalet Hotels surges 20%

Analysts anticipate a faster recovery in the demand environment and are hopeful that consumption will reach normalised pre-Covid levels in H1FY23

Shares of listed hotel companies rallied up to 20 per cent on the BSE in Monday's intra-day trade, supported by heavy volumes, on expectation of strong outlook.

Chalet Hotels, for instance, surged 20 per cent to hit a 52-week high of Rs 301.40 on the back of two-fold jump in trading volumes. The stock surpassed its previous high of Rs 292.50 touched on November 25, 2021. A combined 6.3 million equity shares, representing 3 per cent of total equity of Chalet Hotels, changed hands on the NSE and BSE. At 01:25 pm, the stock was 13 per cent higher at Rs 285.75 as compared to 0.40 per cent rise in the S&P BSE Sensex.

The October-December (Q3FY22) quarter saw the hospitality segment demonstrating strong recovery with segment revenue growing quarter-on-quarter (QoQ) by 55 per cent and segment earnings before interest tax and depreciation and amortization (EBIDTA) was up 167 per cent. The management of Chalet Hotels said the impact from the third wave has been lower and the pick-up is likely to be faster than the earlier waves giving visibility of full recovery in the near future.

Shares of Speciality Restaurants, meanwhilw, too hit a fresh 52-week high of Rs 161.75 after they soared 10 per cent in the intra-day trade. In the past one month, the stock has zoomed 67 per cent, against nearly 2 per cent decline in the benchmark index.

For Q3FY22, the company reported a consolidated net profit of Rs 11.20 crore. It had posted a loss of Rs 3.69 crore in the year-ago quarter (Q3FY21) and profit of Rs 2.60 crore in the previous quarter (Q2FY22). In Q3FY22, Speciality Restaurants’ revenue from operations jumped 57 per cent year-on-year at Rs 88.99 crore as against Rs 56.81 crore in Q3FY21.

Besides these two stocks, Mahindra Holidays & Resorts India and Lemon Tree Hotels gained 5 per cent; EIH Ltd, Taj GVK Hotels & Resorts, EIH Associated Hotels and Indian Hotels Company added up to 2 per cent.

"While there was a significant rebound in overall demand in Q3, the third wave of infections in the country has had an impact on travel and tourism in Q4FY22. However, given the vaccination drives and improving economic indicators, we anticipate a faster recovery in the demand environment and are hopeful that consumption will reach normalised pre-Covid levels in H1FY23. This would be led by revenge travel in the domestic tourism segment along with the demand emanating from wedding season and likely reopening of doors for foreign tourists from Q1FY23 onwards," ICICI Securities said in Q3 earnings wrap.

In terms of supply of rooms, opening of new supply would also be delayed or cancelled, which bodes well for strong established players. Further, hotel players are now leaner in terms of costs that are sustainable in nature. This, coupled with reduced room supplies, would make strong players even stronger in the long run, the brokerage firm said.