Hotel stocks: Lemon Tree, ITC Hotels, Chalet soar up to 5%; here's why

The hospitality sector is expected to remain stable in FY27, supported by domestic leisure travel and MICE sector demand, with room rates likely to remain firm, said Indian Hotels Company.

Share price movement of hotel companies

 

Shares of listed hotel companies rallied up to 5 per cent on the BSE in Monday’s intra-day trade, extending its previous week up move, on expectations of an improvement in business outlook.

 

Lemon Tree Hotels, Samhi Hotels, ITC Hotels and Chalet Hotels gained in the range of 3 per cent to 5 per cent on the BSE in intra-day deals. In comparison, the BSE Sensex was up 0.65 per cent at 77,302 at 11:33 AM.

 

In the past one week, these stocks outperformed the market by surging between 5 per cent and 11 per cent, as against a near 1 per cent rise in the benchmark index. However, in the past one year, hotels stocks tanked up to 17 per cent, as compared to 5.6 per cent decline in the BSE Sensex.

 

 

What’s driving hotel stocks?

 

FY2025-26 was a volatile year marked by geopolitical shifts, extreme weather events, international trade limitations and airline disruptions. The volatility continues into the current financial year through the ongoing West Asia conflict with extended economic impact of rising fuel prices and broader retail inflation implications, said Indian Hotels Company (IHCL) in its FY26 annual report..

 

The travel and tourism sector's long-term outlook continues to be strong, driven by India maintaining its status as the fastest growing large economy, an undersupplied industry, rising disposable incomes and sustained development and expansion of the country’s travel infrastructure. 

The hospitality sector is expected to remain stable in FY27, supported by domestic leisure travel and MICE (Meetings, Incentives, Conferences, and Exhibitions) sector demand, with room rates likely to remain firm, the release added.  According to ICRA, industry revenues are projected to grow by 7–9 per cent year-on-year (Y-o-Y) in FY2026-27, with occupancy and average room rate (ARR) continuing to improve. Near-term performance, however, may be affected by geopolitical developments in West Asia and related aviation disruptions, which could temporarily impact select international and corporate travel corridors while keeping fuel, logistics and utility costs elevated.

 

Over the medium to long term, structural drivers, including rising discretionary spending, an expanding middle class and continued business travel, are expected to support industry growth. India’s rising prominence in the global economy is also expected to contribute to sectoral growth by attracting higher inflows of foreign visitors, including heads of states and senior business executive, IHCL said.  CHECK Stock Market LIVE Updates

Brokerages view on Lemon Tree, Indian Hotels Company 

 

Lemon Tree Hotels earlier announced the demerger of the company into two focused platforms – Lemon Tree Hotels, as a pure-play asset-light hotel management company focused on hotel management, branding and distribution, and Fleur Hotels as a dedicated hotel ownership and development vehicle. Post the demerger, Fleur will emerge as one of India’s largest hotel ownership platforms with over 5,500 operational rooms and a sizeable development pipeline, said analysts at JM Financial Institutional Securities.

 

The transaction simplifies the group structure, enables independent capital-raising and creates two distinct entities – a high-RoCE  (Return on Capital Employed) fee business and a capital-backed hotel ownership platform.  In the brokerages's view, the combination of higher effective share in Fleur, (potential) valuation re-rating of the operating company and a strengthened growth runway supported by Warburg’s capital commitment of ₹960 crore creates multiple levers for value creation over the medium term. JM Financial has BUY rating on Lemon Tree Hotels with a target price of ₹160.

 

According to analysts at ICICI Securities, FY26 saw IHCL deliver resilient performance, with 16 per cent/15 per cent revenue/EBITDA growth against the backdrop of geopolitical disruptions in Q1FY26 and March 2026. Overall, IHCL has delivered 18.6 per cent/21 per cent revenue/EBITDA CAGRs over FY23–26, the brokerage said.   

As of April 2026, IHCL has ~33,100 operational keys at an entity level, with a pipeline of another ~31,300 keys set to open over the next 4–5 years. With a strong net cash position of ₹4,300 crore, as of March 2026, acting as a cushion, analysts build in consolidated 12 per cent/15 per cent revenue/EBITDA CAGRs over FY26–29E, assuming 7 per cent LTL RevPAR (Revenue Per Available Room) growth. The brokerage firm retained its 'BUY' rating on IHCL with a revised target price of ₹925 (earlier ₹916), valuing the company on 30x June’28E EV/EBITDA. 

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