Hotel stocks slide, IHCL, Lemon Tree, ITC Hotels down up to 6%; here's why

Analysts believe tourist arrival in Kashmir will take a halt for some time and domestic travelers will switch to other domestic tourist destinations in the near term.

Hotels shares price today: Shares of listed hotel companies are under pressure on the bourses, falling by up to 6 per cent on the BSE in Friday’s intra-day trade on growth concerns. They are falling after media reports suggested that travel firms and hotels are witnessing cancellations due to the terror attack in Pahalgam (Jammu & Kashmir) during the peak season.

 

The stock price of Indian Hotels Company (IHCL), part of the Tata group that manages the Taj brand of hotels, has slipped 5 per cent to ₹780 on the BSE in intra-day trade. In the past three trading days, the stock has dipped 7 per cent.

 

Shares of Lemon Tree Hotels plunged 6 per cent to ₹136.70. EIH stock was down 5 per cent to ₹369, followed by ITC Hotels shares (down 4 per cent at ₹192.60), Mahindra Holiday Resorts (4 per cent at ₹303.80) and Chalet Hotels (down 2 per cent at ₹805.65).  FOLLOW STOCK MARKET LIVE UPDATES TODAY

Reasons for stock price fall

 

According to media reports, Tourist arrivals in Kashmir surged in the past five years, rising from 665,777 in 2021 to a record 3.5 million in 2024, a more than five-fold jump in four years. Due to the terror attack in Pahalgam (Jammu & Kashmir) during the peak season, a tour operator from Srinagar, said 90 per cent of the bookings till June this year have been cancelled. He added many families have rescheduled tickets, which is why there is a huge rush at the airport. 

 

Brokerage view on hotel sector – ICICI Securities

 

ICICI Securities believes tourist arrivals in Kashmir will take a halt for sometime and domestic travelers will switch to other domestic tourist destinations in the near-term. However, the brokerage firm said they see no major impact of cancellations on hotels under its coverage including Indian Hotels, Chalet Hotels and Lemon Tree hotels. 

 

IHCL operates two properties in J&K under management contract while Lemon Tree Hotels operates 4 hotels under the management contract. Chalet Hotels does not operate any property in J&K. Cancellations will have a large impact on the profitability of tour operators, the brokerage firm said in a note.

 

CareEdge Ratings’ view on hospitality sector

 

The demand recovery has lifted industry sentiments, but cost factors still pose challenges for new investments. High land prices, sharp increases in construction costs, lengthy development timelines, and sector cyclicality are prompting a more cautious approach to new capex. Consequently, brands are likely to focus on expanding their room inventories through management contracts, helping to minimise upfront capital outlay.

 

‘India’s hospitality sector is adopting a measured approach to expansion, with greenfield capex growth expected to stay at 4-5 per cent compound annual growth rate (CAGR) over the next few years and lower than demand, which is expected to grow in high single digits,” the ratings agency said in a sector report dated March 28, 2025.  ALSO READ | Why markets fell today: Ceasefire violation on LoC drags Sensex 1,075 pts

 

The segment mix is evolving, with more than 50 per cent of new supply concentrated in the Upper Midscale and Midscale Economy categories. This shift reflects the growing demand for affordable yet high-quality accommodations, particularly in Tier 2 and Tier 3 cities, where infrastructure improvements are driving business and leisure travel. Despite significant room additions, the industry’s occupancy levels are projected to hold steady at 66-68 per cent in the next fiscal year, ensuring continued operating leverage, said Ravleen Sethi, Director CareEdge Ratings.

 

About The Indian Hotels Company, ITC Hotels

 

IHCL and its subsidiaries bring together a group of brands and businesses that offer a fusion of warm Indian hospitality and world-class service. These include Taj – the iconic brand for the most discerning travelers; Claridges Collection, a curated set of boutique luxury hotels merging elegance with historical charm; SeleQtions, a named collection of hotels; Tree of Life, private escapes in tranquil settings; Vivanta, sophisticated upscale hotels;  Gateway, full-service hotels designed to be your gateway to exceptional destinations and Ginger, which is revolutionising the lean luxe segment.