Hospitality Sector: Post pandemic travel boom to leverage growth in the sector

Hospitality Sector: Post pandemic travel boom to leverage growth in the sector

Market Outlook
by 5paisa Research Team Last Updated: 2022-07-20T14:42:52+05:30

 One of India's main drivers of growth and one of its most rising industries is the hospitality sector.

In the last five years, the hospitality sector has produced more than 15 million new job possibilities and represents more than 8.78% of the overall workforce. Despite being one of the worst-hit sectors throughout the pandemic, the industry has recovered quickly after experiencing essentially low occupancy for almost two years. As the COVID limits relaxed, the industry began operating at full capacity, making up for the loss that had been incurred. The base of the business—domestic leisure, business travel, long weekends, weddings, and events contributed to the revival.

The two main parameters to measure the success of the hospitality sector are:  

  1. Average Room Rate (ARR)  
  2. Revenue per Available Room (RevPAR)  

As per the Hospitality Valuation Services, in April 2022, the occupancies touched the 65% mark for the first time since the commencement of the pandemic. An increase in travel, and weddings alongside new trends like staycations and workcations, contributed to the boom in each ARR and RevPAR. In recent months, the ARR was up by 4% from April 2019 levels to Rs 5850 and the RevPAR was up by 5% from April 2019 levels to Rs 3804.   

Investors in this sector also had to deal with the repercussions of this crisis. However, when the industry started to recover, hotel stocks that had plummeted during the pandemic have lately become multibaggers. Hotel shares are once again attracting the attention of investors supported by strong growth patterns.

Outlook 

In general, as the hotel industry is flourishing, the markets have also responded favourably, and investors who purchased these companies have also benefited. This trend will last mainly because corporate travel, leisure travel, and events like weddings and seminars have become more frequent. Additionally, hotels are attracting visitors by providing a range of amenities throughout their stay and have boosted their online presence for simple reservations. The size of the Indian hotel market in FY2022 was USD 32 Billion and is expected to expand to USD 125 Billion by FY2027. As a result, this industry is anticipated to experience tremendous growth in just 7 years. The main issue with this industry is that the increase of Covid-19 cases has a direct impact on it, but this is unforeseeable.

Financials

Currently, there are 54 hotel stocks listed in the market. Here are some major industry players that have made great progress after going through the worst.  

The Indian Hotels Company Limited is South Asia’s largest hospitality company by market capitalisation. It is managed as a subsidiary of Tata Group. With businesses ranging from iconic luxury to upscale and budget stopovers as well as in-flight catering, IHCL’s pioneering leadership is backed by a rich 115-year legacy. This hotel reported a net profit of Rs 3056.22 crore for FY22 compared to Rs 1575.16 crore for FY21. In FY21, the EBITDA which stood at a loss of Rs 195.68 saw a reversal and the FY22 EBITDA stood at Rs 559.91, witnessing a gain. It stated a decrease in loss and stood at Rs 222.40 crore for FY22 as compared to the loss of Rs 694.21 crore reported in FY21.  

EIH is primarily engaged in owning and managing premium luxury hotels and cruisers under the luxury Oberoi, Trident, and Maidens brands. This hotel reported net sales of Rs 985.26 crore for FY22 compared to Rs 497.08 crore for FY21. In FY21, the EBITDA, which stood at a loss of Rs 233.98 saw a reversal and the FY22 EBITDA stood at Rs 57.42, witnessing a gain. It stated a decrease in loss and stood at Rs 48.27 crore for FY22 as compared to the loss of Rs 314.63 crore in FY21.

Chalet Hotels Ltd, owner, developer, and asset manager of high-end hotels in key metro cities like Mumbai Metropolitan Region, Hyderabad, Bengaluru, and Pune. It is the owner of the JW Marriot Group and the Westin chain of hotels in India. This hotel reported net sales of Rs 507.81 crore for FY22 compared to Rs 294.39 crore for FY21. In FY22, the EBITDA stood at Rs 120.41 as against the FY21 EBITDA which stood at Rs 29.39 crore. It stated a decrease in loss and stood at Rs 74.93 crore for FY22 as compared to the loss of Rs 135.07 crore in FY21.  

Lemon Tree Hotels Ltd is the largest mid-priced and the third-largest overall hotel chain in India. It operates in 54 destinations and has 87 hotels. This hotel reported net sales of Rs 402.24 crore for FY22 compared to Rs 251.72 crore for FY21. In FY22, the EBITDA stood at Rs 139.65 as against the FY21 EBITDA which stood at Rs 83.26 crore. It showed a decrease in loss and stood at Rs 138.40 crore for FY22 as compared to the loss of Rs 182.55 crore in FY21.

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Our research team is composed of some highly qualified research professionals, their expertise range across sectors.

Disclaimer

Investment/Trading in securities Market is subject to market risk, past performance is not a guarantee of future performance. The risk of loss in trading and investment in Securities markets including Equites and Derivatives can be substantial.

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