These 2 hotel stocks are a must-have as hospitality boom continues; details

The Indian hospitality sector has begun FY26 on a strong footing, sustaining its growth trajectory despite softer air traffic and macro uncertainties. Industry data shows average revenue per available room (RevPAR) rose ~12 per cent in the June quarter, powered by healthy growth in average room rates (ARR, up ~9 per cent Y-o-Y) and higher occupancy levels. Aggregate revenue for the sector advanced 20 per cent Y-o-Y to ₹50,900 crore in 1QFY26, while operating profit grew 22 per cent and net profit surged 62 per cent, underscoring robust fundamentals.

 

A key highlight has been the stellar performance of southern markets—Hyderabad, Bengaluru, and Chennai—which registered double-digit ARR growth and 100–400 basis point occupancy gains in the quarter. Hyderabad’s momentum is anchored by its IT, pharma, and biotech base alongside a thriving meetings, incentives, conferences, and exhibitions (MICE) segment. Bengaluru continues to benefit from its deep technology ecosystem, startup vibrancy, and a strong events calendar, while Chennai draws strength from its industrial hubs, medical tourism, and cultural-tourism mix. Demand growth in these cities is expected to outpace supply additions through FY30, reinforcing pricing power and sustained occupancy.

 

 

On a broader scale, industry resilience was visible despite a 3 per cent sequential dip in passenger air traffic, impacted by geopolitical factors and airspace restrictions. Leisure and business travel remained buoyant, with Chennai and Mumbai recording 73–76 per cent occupancy, and Jaipur and Ahmedabad posting the strongest year-on-year gains. Weddings, cultural events, and corporate travel also added to demand, with the upcoming festive and wedding season in the second half of the year likely to further lift performance.  ALSO READ | 5 hotel stocks with up to 20% upside potential; check list, details here 

Looking ahead, the sector is poised for steady growth over the medium term. With limited supply additions across key business cities, strong demand drivers, and a rising base of domestic and international travelers, RevPAR momentum is expected to remain healthy. Momentum is expected to accelerate in the second half of the year, aided by an extended wedding calendar and a robust pipeline of MICE events across major cities.

 

Structural tailwinds—ranging from infrastructure development and expanding commercial hubs to the sustained revival of MICE and leisure tourism—underscore a positive two-to-three-year outlook for the industry. Elevated occupancy, resilient ARR growth, and diversified demand catalysts position the Indian hospitality sector for sustained expansion, making it one of the more promising consumption plays in the services economy.

 

Indian Hotels (TP: ₹900)

 

Indian Hotels is aggressively expanding its presence in India’s hospitality sector through its ‘Accelerate 2030’ roadmap, targeting growth in the midscale segment. IHCL recently acquired a 51 per cent stake in ANK Hotels and Pride Hospitality, adding ~135 hotels (~6,800 keys) for ₹2.04 billion, which will double its midscale portfolio to over 240 hotels, primarily under the Ginger brand. Alongside this inorganic expansion, the company posted a strong 1QFY26 with consolidated revenue up 32 per cent Y-o-Y and Ebitda rising 28 per cent Y-o-Y, the fastest growth among peers. With sector tailwinds and scale benefits, IHCL is expected to achieve a 16 per cent/20 per cent/17 per cent CAGR in revenue/Ebitda/adjusted PAT over FY24–27, reinforcing its strong growth trajectory.

 

Lemon Tree (TP: ₹200)

 

Lemon Tree has strengthened its portfolio with the signing of Lemon Tree Resort, Pench (Maharashtra), managed by its subsidiary Carnation Hotels, adding 60 rooms to its wildlife offering. The company reported a resilient 1QFY26 with 18 per cent revenue growth Y-o-Y, 14 per cent RevPAR growth, and 22 per cent Ebitda growth. Growth is further supported by the stabilization of Aurika, Mumbai, an expanding management contract pipeline of ~7,770 rooms, and timely portfolio renovations — including the rebranding of its Red Fox property into a Lemon Tree Hotel by mid-FY27. With revenue/Ebitda/adj. PAT projected to grow at a 13 per cent/16 per cent/34 per cent CAGR over FY25–27 and RoCE improving to ~18 per cent by FY27 from ~11.7 per cent in FY25, Lemon Tree is positioned on a strong long-term growth trajectory.