Hotel stocks: Good room for gains as demand-supply scene turns favourable

Strong occupancy rates and muted increase in new rooms to keep the demand-supply scenario favourable for the next 5 years; top listed players to benefit more

The September 2019 quarter (Q2) results of many listed hotel companies were not encouraging due to slow demand, which also warranted a downward revision by analysts in RevPar (revenue per available room) growth estimates for FY20. However, there is a sunny side to the story as well. Analysts say the sector’s prospects look good given the favourable demand-supply situation and growth expectations over the medium term.

Archana Gude, an analyst at IDBI Capital, says, “We believe that the hotel industry in India is on a strong revival path. The expected improvement in occupancy and in average room rates (ARR) indicate