Hotel stocks have rallied, but Elara says growth story isn’t over yet

Despite a few one-off disruptions in the first quarter, Elara Securities expects the hotel sector to remain strong, with RevPAR (revenue per available room) emerging as the primary focus area for operators and investors alike.Prashant Biyani, Vice President–Institutional Equity Research at Elara Securities, said occupancy in April-June was impacted by geopolitical tensions and flight disruptions, including the Air India incident. However, the growth trend remains intact. “We are expecting 12–14% growth in Q1 RevPAR for the industry,” he said.

While some moderation is expected in occupancy levels from the second quarter, room rates are likely to stay firm. According to Biyani, the focus has now shifted from individual levers like pricing or occupancy to RevPAR as a whole. “The focus of the hoteliers now has shifted on RevPAR, either it comes through occupancy or through ARR, that is not a matter for them right now.”

Demand, he said, is visible across segments — not just in luxury hotels. Brands across the spectrum, from Lemon Tree and SAMHI to IHCL and Chalet Hotels, are seeing both rate and occupancy growth.Hotels like Lemon Tree, Samhi Hotels, and IHCL are witnessing growth in both occupancy and room rates.

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Biyani also pointed out that hotel stock valuations are no longer cheap, given the sector’s recent performance.

Indian Hotels, for instance, trades at a premium of 47.7 times its one-year forward earnings, according to Bloomberg data. In contrast, companies like Tata Motors and Maruti Suzuki

which are also part of the broader discretionary spending space, are valued at less than 25 times their estimated earnings for the financial year ending March 2026.

Among listed hotel stocks, Elara Securities prefers Indian Hotels Company (IHCL) and Chalet Hotels. He highlighted the ongoing asset additions by Chalet Hotels over the next 4–5 years and IHCL’s strong development pipeline as key positives.

The current hotel expansion cycle is also different from the previous one (2008–2014). Back then, growth was mainly in business cities. This time, the expansion is more broad-based.

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He explained that high construction costs have limited new supply in major cities, creating a demand-supply mismatch and pushing ADR growth into double digits in many metro areas.

By 2030, Biyani expects to see “one or two branded hotels in almost all prominent locations across tier-I to tier-IV cities,” highlighting a major shift from the last asset addition cycle.

For the full interview, watch the accompanying video

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