Hotel industry likely to post double-digit revenue growth over robust demand, says Prabhudas Lilladher


The travel industry is anticipated to report robust earnings for the quarter ended March 31, 2024 (Q4FY24), driven by significant growth in the hotels and aviation sector. According to brokerage firm Prabhudas Lilladher (PL), the hospitality sector witnessed a surge in all India average occupancy, reaching 66-68% in January 2024 and further increasing to 72-74% in February 2024. This represents a 200 basis points year-on-year (YoY) rise, indicating sustained demand momentum.

Key drivers for the strong performance in Q4 include healthy economic growth, robust demand for meetings, incentives, conference and events (MICE), scheduling of various events, high double-digit growth in foreign tourist arrivals, and a 5% increase in domestic passenger traffic.

Despite a 26% growth in new hotel openings to 146, there was a 10% decline in room additions to 9,833 between April 2023 and February 2024, as per the HVS Anarock report.

Elara Capital forecasts continued acceleration in Average Room Rate (ARR) growth and increased occupancy due to strong leisure and growing business travel. The firm highlights the robust macroeconomic environment in India, which is expected to sustain demand for the hotel industry.

In addition to the hospitality sector, luggage companies are also expected to deliver a decent performance. PL notes, “We expect luggage stocks in our universe to report decent performance as VIP is expected to clock double-digit growth in top-line after 3 quarters while Safari’s market share gain journey will continue.”

PL expects Chalet to witness a 16.4% YoY increase in ARR with an occupancy of 72%. The hotel is projected to report a 36.6% YoY revenue growth with an EBITDA margin of 46.0%. PL maintains its ‘ACCUMULATE’ rating on Chalet with a revised Target Price (TP) of INR 888 (previously INR 820), based on the Sum-of-the-Parts (SOTP) method.

For Lemon Tree, PL anticipates a 12.8% YoY increase in ARR with an occupancy rate of 72%, excluding Aurika. The firm expects a 26.9% YoY revenue growth with an EBITDA margin of 49.7%. Despite a marginal cut in EPS estimates for FY25E/FY26E, PL maintains a ‘BUY’ rating on the stock with a SOTP-based TP of INR 153 (previously INR 155).

PL forecasts a 17.2% YoY growth in top-line for the aviation sector, reaching INR 11.3 billion. The firm expects ticketing volumes of approximately 115 million for the quarter, with internet ticketing revenues of INR 3.2 billion. Overall, an EBITDA margin of 34.2% is anticipated.

The travel industry’s performance in Q4FY24 underscores the resilience and adaptability of the sector amidst evolving market dynamics and economic conditions.

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