Lemon Tree Hotels rallies 15% in 4 days on signing new property in Shimla

Shares of Lemon Tree Hotels rallied 7 per cent on the BSE to hit a new high of Rs 124.90 in Tuesday’s weak broader market trade. In the past four trading days, the stock has surged 15 per cent after the company, on September 6, announced its latest signing – Lemon Tree Hotel, Mashobra.

In comparison, the S&P BSE Midcap and S&P BSE Smallcap index were down 2 per cent and 2.4 per cent, respectively, at 11:53 PM.

The property is expected to be operational by Q1 of FY26 and shall be managed by Carnation Hotels, a wholly-owned subsidiary and the management arm of Lemon Tree Hotels.

This latest signing with Alyvia Hospitality Management Services in Mashobra is an addition to the two operational hotels and four upcoming properties in Himachal Pradesh.

Earlier, on August 21, Lemon Tree Hotels had announced that the company signed a license agreement for two properties in Bhubaneswar and Kasauli.

While the former is expected to be operational by Q4FY25 under the management of their wholly-owned subsidiary Carnation Hotels; the latter is expected to run by Q3FY26.

In the past six months, the stock has zoomed 63 per cent as compared to a 15.6 per cent rise in the S&P BSE Sensex.

The management said the outlook for Lemon Tree Hotels remains promising with healthy occupancy rates and higher average room rates (ARRs).

As the economy revives, the management anticipates a sharp demand rebound and as the largest branded hotel player in the mid-segment, the company is well positioned to benefit and gain market share.

According to HVS Anarock, occupancy is expected to surpass pre-Covid levels by the end of calendar year 2024 due to low supply in the upcoming years.

Meanwhile, analysts at Prabhudas Lilldher believe Lemon Tree Hotels is well poised to capitalize from impending uptick in the Indian hospitality industry given leadership position in midscale/economy segment with a 19 per cent market share, aggressive plans to rapidly expand via asset light management contract route that is expected to improve BS strength and uplift margin profile and operationalization of Aurika hotel in Mumbai with 669 rooms.

Aurika is expected to be a crown jewel for Lemon Tree Hotels as it is strategically located in dense micro-market of Mumbai (near airport) and the brokerage firm expect the hotel to generate revenues of Rs 276.4 crore in FY26E (2nd full year of operations with an EBITDA margin of 60 per cent).