Lemon Tree Hotels zooms over 100% in one year, stock nears record high

The increasing traction in corporate travel will benefit us to a great extent as more than 85 per cent of the company's inventory is in business hotels, the company said in its annual report.

Shares of Lemon Tree Hotels hit a three-year high at Rs 82.65, up 3 per cent on the BSE in Monday’s intra-day trade on the back of heavy volumes. In the past two weeks, the stock has rallied 21.5 per cent. Lemon Tree Hotels operate in the upscale segment and in the mid-market sector, consisting of the upper-midscale, midscale and economy segments.

In the past one year, the stock has zoomed 106 per cent, as compared to 3 per cent rise in the S&P BSE Sensex. It trades at its highest level since April 2019. The stock is quoted close to its record high level of Rs 91 touched on April 23, 2018.

At 10:13 am, Lemon Tree Hotels traded 2 per cent higher at Rs 81.80, as compared to 0.72 per cent rise in the S&P BSE Sensex. A combined 4.38 million equity shares representing 0.55 per cent of total equity of the company had changed hands on the NSE and BSE.

Last month, Lemon Tree Hotels announced its plan for - Lemon Tree Hotel, Hubli, Karnataka. This property is expected to be operational by May, 2023, and shall be managed by Carnation Hotels Private Limited, a subsidiary and the management arm of Lemon Tree Hotels.

With increasing momentum of the vaccination drive, travel demand improving in the country coupled with declining Covid-19 cases and easing of travel restrictions across the country, plus pent-up travel demand has led to the revival of the hotel industry.

After peaking of the average daily rate (ADR) and occupancy in FY19, FY20 saw a dip due to the initial impact of the pandemic. However, FY22 witnessed quick recovery in average room rate (ARR) and occupancy despite recurrent Covid waves. According to HVS Anarock, occupancy and ARR is expected to return to Pre-Covid levels by the end of CY22 and by midCY23, respectively.

With occupancy expected to return to pre-COVID levels of 70 per cent plus by mid FY23 and with rapid expansion underway in the industry, the management of Lemon Tree Hotels said the company is now at the cusp of the next upward cycle.

The increasing traction in corporate travel will benefit us to a great extent as more than 85 per cent of the company’s inventory is in business hotels. “Consequently, we expect to deliver strong growth in revenue and a significant net EBITDA margin expansion on the back of improved ARRs, higher occupancy and favourable cost dynamics. The opening of Aurika, Mumbai in CY23 will further drive our performance,” the company’s management said in FY22 annual report.