Hotel sector looks lucrative amid govt's special focus on tourism, says ICICI Securities - suggests to buy these 2 stocks

Being bullish on the long-term growth of the overall sector, the brokerage recommends to Buy Tata Group-backed Indian Hotels and Lemon Tree Hotels for bumper returns with a long-term view.

With the government’s special push to tourism and hospitality, the Hotel’s sector looks attractive and would see stupendous growth on the multiple factors in the coming financial year, a domestic brokerage firm ICICI Securities said in its report on the segment.

Being bullish on the long-term growth of the overall sector, the brokerage recommends to Buy Tata Group-backed Indian Hotels and Lemon Tree Hotels for bumper returns with a long-term view.

“Heading into FY24, demand drivers like the government’s intent to leverage the G20 Summit as a launchpad to boost inbound tourism coupled with sports events such as the Men’s ODI World Cup in October-November 2023 to be held in India may drive RevPAR growth for the sector,” it noted.

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Here, RevPAR stands for Revenue Per Available Room.

Given favourable demand-supply dynamics over the long term with industry demand expected to grow at 10 per cent CAGR (compound annual growth rate) over FY23-26E against room supply CAGR of below 5 per cent over the same period, ICICI Securities also said in its report on Hotel sector.

At the same time, the brokerage also remains cognizant of any headwinds in the form of global macro factors and discretionary consumption slowdown which may impact demand.

As per HVS Anarock, December 2022 was a strong month for the Indian hotel industry with sector’s RevPAR being 13 per cent above pre-Covid levels.

Mumbai continued to clock the highest occupancies of over 80 per cent for December 2022, and Goa reported ever average room rate (ARR) of over Rs 13,000, 31 per cent higher than pre-covid levels, Anarock report said.

Asserting that promotion of tourism will be taken up on a "mission mode", Finance Minister Nirmala Sitharaman announced in the Budget that at least 50 travel destinations would be developed as a "complete package" and states will be encouraged to set up a 'unity mall' for the sale of their products.

In her speech in Lok Sabha, she emphasised that the country offers "immense attraction" for domestic as well as foreign tourists and can be a major job creator.

"There is a large potential to be tapped in tourism. The sector holds huge opportunities for jobs and entrepreneurship, for the youth in particular," she said.

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