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Is this a good time to buy hotel stocks?

The last fiscal year was a forgetful one for hospitality industry. There were multiple events that disrupted the operating landscape of hoteliers. Some of them have been collated in the table below:-

As can be seen, there were multiple headwinds comprising of war, weather related challenges, and regulatory setbacks in FY26. Despite these challenges, most hoteliers reported a relatively healthy ARR performance during the year. Have a look at the table below.   

What is the read through from ARR table?

Registering an ARR growth in a weak environment was the key highlight of FY26. Intuitively, in a weak demand environment, the tendency is to drop rates to protect business. However, as can be seen, most hoteliers held on to the rates despite weak demand reflecting confidence in their positioning and price point. Dropping rates to boost demand temporarily may not be a very sane move as resetting ARR’s later could prove to be a challenge given rates have been realigned quite sharply post COVID. Also, the operating leverage benefit magnifies if rates remain steady in the interim (difficult period like FY26) backed by improvement in demand at a later stage. Hoteliers know this very well and hence none of them have played the rate card to boost occupancy.  

How does the growth imprint look like in 1QFY27E?

Initial trends for 1QFY27E look better. For instance, the pan-India RevPAR was up ~7-9% YoY to Rs5,525-5,829 in April-26. While data for May-26 is yet to be published, prima facie, it appears that the growth will be much better (double-digit) amid low base (May-25 was impacted by Operation Sindoor). This is corroborated by a few management interviews that caught our attention in last few days. Key interview snippets of select hoteliers are provided below:-

Chalet Hotels:- April-26 witnessed a high single-digit growth. However, in May-26, growth was in high double-digit. Overall, for the quarter, growth in the hospitality business is likely to be in high single to early double-digit range.

Samhi Hotels:- Occupancy in June is trending close to 80%.

Lemon Tree Hotels:- Revenue growth is likely to be in mid-to-high single-digit range for 1QFY27E.       

Should one plunge to buy hotel stocks now?

Amid better valuation comfort (check exhibit below) and initial signs of improving growth imprint from 1QFY27E, we believe it is good time to re-evaluate entry into hotel stocks. We retain BUY on Chalet, Lemon Tree, Samhi Hotels and Park Hotels.   

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