Strong domestic demands defy global headwinds: ICICI Sec on hotel sector

Hotel stocks to buy in India: ICICI Securities has maintained 'Buy' ratings on major listed players - Indian Hotels, ITC Hotels, Leela Palaces Hotels & Resorts, Lemon Tree Hotels, and Chalet Hotels

Hotel stocks to buy in India: India’s hotel sector continues to demonstrate resilience despite global headwinds, said ICICI Securities in a report on the hotel sector. It said that strong domestic demand is cushioning the impact of a slowdown in foreign guests amid escalating geopolitical tensions. 

Analysts noted that industry performance remained steady in the month of January, with revenue per available room (RevPAR) rising 5 per cent YoY and average room rate increasing by 4 per cent, though occupancy remained largely flat, unchanged at 66-68 per cent. This, it said, indicates a stable demand environment. 

The momentum continued in the month of February, with large-scale events contributing to higher occupancy. As per the brokerage, February was a strong month, driven by corporate and meetings, incentives, conferences and exhibitions (MICE) travel, particularly events like the AI Summit in New Delhi. 

 

However, geopolitical tensions in March impacted the sector as foreign inbound travel slowed, though domestic demand remained resilient. The brokerage said that luxury hotels account for 30 to 50 per cent of foreign inbound guests and have higher food and beverage and MICE revenue compared to upper-upscale and upscale hotels. 

Analysts also highlighted that cancellations for the April-May period have increased due to uncertainties around international travel and elevated costs. 

Despite these near-term challenges, analysts at ICICI Securities said that domestic travel demand remains robust and continues to act as a key buffer for the industry. It said that unless geopolitical tensions persist for an extended period, the sector is well-positioned to maintain its growth trajectory. 

Hotel industry's ARR/occupancy trends from Jan'19 to Jan'26

  Demand is expected to grow at around 10 per cent CAGR, outpacing supply growth of 5-6 per cent, analysts said, expecting a high single-digit ARR CAGR of 6 to 8 per cent across hotels over FY25-28E, with occupancies rising 100-200 bps each in FY26E and FY27E.

 

“Going ahead, new asset additions/completions remain key for companies to deliver an EBITDA CAGR of 15-20 per cent over FY25-28E,” analysts said. 

The brokerage has maintained ‘Buy’ ratings on major listed players - Indian Hotels Company, ITC Hotels, Leela Palaces Hotels & Resorts, Lemon Tree Hotels, Chalet Hotels, and Brigade Hotel Ventures.  ===============================

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