Strong domestic demand could ease war's impact for Indian Hotels

Strong domestic travel demand helped IHCL offset West Asia conflict impact, with Q4 revenue rising 14% and occupancy levels remaining robust

The performance of Indian Hotels Company Ltd (IHCL) for the fourth quarter of financial year 2025-26 (Q4FY26) shows that the company has managed to offset the impact of the West Asia war with strong domestic occupancy. Consolidated revenue grew 14 per cent year-on-year (Y-o-Y) to ₹2,760 crore. The management continues to guide for 12-14 per cent top-line growth, with 7-9 per cent revenue per available room (RevPAR) growth. The business could benefit from continuing domestic travel, limited supply addition, pricing upside, and better contributions from recent acquisitions.

 

Consolidated RevPAR grew 10 per cent Y-o-Y to ₹13,250, and standalone RevPAR increased 12 per cent Y-o-Y to ₹18,800. Occupancy rose 100 basis points (bps) to 78 per cent at a consolidated level, and for the standalone business, it was 82 per cent, up 200 bps Y-o-Y. IHCL also gained from rupee depreciation.

 

Consolidated operating profit grew 14 per cent Y-o-Y to ₹970 crore, while margins declined by 15 bps Y-o-Y to 35.2 per cent. The adjusted net profit grew 14 per cent Y-o-Y to ₹590 crore. Subsidiary sales were at ₹1,100 crore, up 16 per cent Y-o-Y. The subsidiary operating profit came in at ₹180 crore, up 1.2 per cent Y-o-Y. The TajSATS operating profit grew 7 per cent Y-o-Y. The premium Taj brand posted 10 per cent RevPAR growth, while Vivanta, SeleQtions, and Gateway delivered an average 6 per cent growth, and Ginger recorded 5 per cent growth.

 

Room and food and beverage (F&B) revenue increased by 13 per cent Y-o-Y and 9 per cent Y-o-Y, respectively, and management fees grew 30 per cent Y-o-Y. Management fees were up 24 per cent due to new signings. Domestic growth offset an estimated Rs 40-45 crore impact on the MICE (meetings, incentives, conferences and exhibitions) business due to the conflict. 

 

For FY26, revenue was up 16 per cent to ₹9,700 crore, operating profit was up 15 per cent to ₹3,200 crore, and adjusted net profit was up 12 per cent to ₹900 crore. Gross debt stood at ₹51 crore, down from ₹220 crore (March 2025). Operating cash flow was ₹2,500 crore (₹2,200 crore in March 2025). During FY26, IHCL opened 132 hotels and is targeting over 60 openings in FY27.

 

The consolidated Q4FY26 operating profit margin of 35.2 per cent was flat Y-o-Y. Standalone revenue grew 12.5 per cent Y-o-Y to ₹1,660 crore with average room rent up 9 per cent, occupancy up 2 per cent, and RevPAR expanding 12 per cent Y-o-Y. Standalone operating profit margin was 47.7 per cent, up 170 bps Y-o-Y. Consolidated margins are expected to remain stable.

 

Consolidated cash was ₹4,300 crore and capex was ₹1,000 crore during FY26, with ₹650 crore towards renovation and upgradation, and the rest on greenfield development. Management has annual capex guidance of ₹1,000-1,200 crore. Dividend at ₹3.25/share was higher than ₹2.25/share in FY25.

 

The management believes the consolidated operating profit margin of 35 per cent could improve as new brands mature. IHCL expects over 60 hotel openings in FY27, with over 4,250 new keys. Management expects over 12 per cent Y-o-Y top-line growth in Q1FY27, off a low base due to Operation Sindoor.

 

The hospitality industry was in an upcycle until March, and IHCL was well-placed given the diversified brand portfolio, track record, robust balance sheet, and capital-light strategy. IHCL’s new business verticals, such as Ginger and Qmin, among others, grew 25 per cent Y-o-Y to ₹750 crore in FY26. The integration of newly acquired brands such as Clarks, Brij, and Atmantan could generate revenue of ₹250 crore in FY27, with RevPAR growth of 7-9 per cent, and scale-up of new and re-imagined brands. IHCL has a pipeline of 31,300 signed keys (80 per cent asset-light) with a current operational portfolio of 33,091 keys, guaranteeing top-line growth as capacity rises.

 

IHCL could deliver annual mid-to-late teens growth in revenue, operating profit, and net profit over FY26-FY28. Apart from the hotel segment, TajSATS grew by 13 per cent Y-o-Y to ₹320 crore. The US arm UOH and London’s St James’ revenue grew 27 per cent and 21 per cent Y-o-Y, but operating profit fell 17 per cent and 14 per cent, respectively.

 

Management said business trends were stable despite geopolitics. Dubai and the Maldives saw soft demand, but London was steady. The key monitorable is the West Asia conflict, which started impacting in March. IHCL estimates about ₹45 crore impact in Q1FY27, especially in the last four weeks. It has continued through Q1FY27 to date. Obviously, the timeline for resolution of the conflict and its severity may be critical for future prospects.