Hotel stocks slide up to 5% on PM remarks; analysts optimistic, back IHCL

Hotel stocks: Analysts said that domestic travel has remained strong, supported by hotels reporting solid bookings in advance and a consistent rise in their RevPAR.

Hotel sector stocks tumbled by up to 5 per cent in today’s trading amid a broader market weakness following Prime Minister Narendra Modi’s recent appeal to citizens to curb non-essential foreign exchange outflows, including overseas travel.

 

As of 12:55 PM, Praveg was the top loser as it declined 4.6 per cent to trade at ₹289.40 on the National Stock Exchange (NSE). Thomas Cook, Orient Hotels, ITC Hotels, Apeejay Surrendra Park Hotels, and Wonderla Holidays, which were down over 3 per cent each to quote at ₹93.53, ₹104.50, ₹159.58, ₹125.53, and ₹491.05, respectively.

 

Taj GVK Hotels & Resorts (₹322.35), EIH Associated Hotels (₹326.50), Samhi Hotels (₹154), The Indian Hotels Company (₹665), EIH (₹328.50), Chalet Hotels (₹778.85), Leela Palaces Hotels & Resorts (₹414.30), Lemon Tree Hotels (₹117.84), Mahindra Holidays (₹235.35), and Juniper Hotels (₹209.55) were down in the range of 1 to 3 per cent.

 

 

Analysts say PM Modi’s recent appeal has triggered a knee-jerk reaction in the market, but suggested investors not to arrive at any conclusion before assessing the situation. They said that domestic travel has remained strong, supported by hotels reporting solid bookings in advance and a consistent rise in their RevPAR.  'PM remark positive for domestic hotel industry'  Gaurav Sharma, head of research, equity, Globe Capital Market, said that investors should not misread the PM's statement, as he only urged people to avoid foreign travel. Instead, this is a positive for the domestic industry. 

 

"I don't really think it is negative for the Indian hotel industry. Because the Prime Minister has emphasised that one should not travel abroad. One should not plan destination weddings abroad. So that clearly means he is emphasising to stay home and restrict the tourism to domestic tourism only, restrict the wedding or other functions to Indian cities or Indian locations only," he said.

 

"He (PM Modi) is encouraging Indian travellers to travel within the country. I think this is positive news for the hospitality sector," Gaurav said, adding that his top pick from the hospitality space is Indian Hotels.

 

According to Rajesh Palviya, senior vice president, head of research, Axis Securities, the initial reaction was expected because when a Prime Minister says anything, the Street takes it seriously. 

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  What PM Modi said  PM Modi's comments at a public event in Secunderabad came at a time when the West Asia crisis has triggered a sharp rise in energy prices and disrupted supply chains, creating pressure on economies that are more import-dependent. In his address, PM Modi urged Indians to revive Covid-era practices, including postponing overseas travel, destination weddings and foreign holidays for at least one year to conserve foreign exchange reserves.

 

"We have to save foreign exchange by any means," the Prime Minister had said, adding that due to the West Asia conflict, prices of petrol and fertilisers had increased significantly.

 

Notably, India's forex reserves dropped by USD 7.794 billion to USD 690.693 billion during the week ended May 1. In the previous reporting week, which ended April 24, the overall reserves had declined by USD 4.82 billion to USD 698.487 billion.  IHCL stock: Buy for ₹750 target  Palviya, however, said that "this is temporary" and "it is too early to say whether this will hit their business or not, because this is just a reaction to the statement."

 

"The kind of bookings Indian hotels are getting is very encouraging. Long-term investors should not exit their positions because of just one statement," Palviya said, adding that he prefers Indian Hotels from the space for a target of ₹750.  ==================== 

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