Hotel demand rebounds; ICICI Sec keeps Buy on ITC Hotels, IHCL, Lemon Tree

Domestic brokerage firm ICICI Securities has shared a positive outlook on India's hotel industry, which witnessed a strong recovery in May 2026. The brokerage noted that a demand recovery was seen in May after geopolitical disruptions earlier this year.

 

The brokerage said industry revenue per available room (RevPAR) rose more than 20 per cent Y-o-Y, driven by a 10 per cent increase in average room rates (ARR) and a 700 bps jump in occupancy to 63-65 per cent in May 2026. The sharp growth came on a low base, as regional geopolitical tensions had impacted demand in May 2025. 

 

 

According to commentary from listed hotel operators and channel checks, foreign inbound travel improved during May-June, while domestic demand gained further M-o-M traction.

 

Analysts expect the momentum to continue in June, supported by improving foreign tourist arrivals and strong domestic demand.

 

"With June seeing decent demand traction, it estimates that same-store industry RevPAR for Q1FY27 may grow between 8-12 per cent Y-o-Y and allay concerns of a weak start to FY27," ICICI Securities said.

 

ICICI Securities expects a high single-digit ARR CAGR of 6–8 per cent during FY26–FY29, barring any extended geopolitical impact on demand, and expects the sector to demonstrate resilience. Occupancies are estimated to rise 50-100bps each in FY27E and FY28E.

 

The brokerage added that new asset additions and completions remain key for companies to deliver an Ebitda CAGR of 15–20 per cent over FY26–29E.

 

The brokerage expects "management contracts to remain the preferred choice of  expansion for most hotel companies (over 80 per cent of incremental room additions over FY26–29E), with pure asset owners looking to either acquire operational hotels or utilise the existing land banks to drive growth."

 

Against this backdrop, ICICI Securities has reiterated its 'Buy' rating on ITC Hotels, Indian Hotels Company, Leela Palaces Hotels & Resorts, Chalet Hotels, Lemon Tree Hotels and Brigade Hotel Ventures.  ================================================ 

Disclaimer: View and outlook shared belong to the respective brokerages/analysts and are not endorsed by Business Standard. Readers' discretion is advised.