Indian hotel stocks surge as sector benefits from festive demand and asset-light expansion

Brokerages become more optimistic about listed Indian hotel operators, citing robust demand, pipeline growth, and asset-light models fueling potential upside amid a favourable macro environment.

Brokerages are turning more positive on listed Indian hotel operators as the sector moves into the festival and wedding-heavy second half of FY27, with IDBI Capital placing Lemon Tree Hotels at the top of its preference list and maintaining Buy calls on Indian Hotels, Brigade Hotels, Apeejay Surrendra Park Hotels and Chalet Hotels as well. The optimism is not confined to one house: ICICI Securities has also kept a broader positive stance on the space, arguing that demand and room additions are still working in the sector’s favour. (ndtvprofit.com)

The case rests on operating data as much as on valuation. Moneycontrol, citing ICICI Securities and HVS Anarock on 3 August, said hotel revenue per available room, or RevPAR, rose 17-19 per cent year on year in June 2026, helped by an 11 per cent increase in average room rates and a 400 basis-point rise in occupancy. An earlier ICICI note, reported by NDTV Profit on 30 June, had already pointed to a sharp rebound in May, when RevPAR climbed by more than 20 per cent on 10 per cent higher room rates and a 700 basis-point occupancy gain. ICICI’s estimate for same-store Q1 FY27 RevPAR also strengthened from 8-12 per cent in the June note to 11-13 per cent in the August update, suggesting trading improved as the quarter progressed. (moneycontrol.com)

That strength matters because the industry’s expansion model is becoming increasingly asset-light. Moneycontrol said ICICI expects management contracts to account for more than 80 per cent of incremental room additions over FY26-FY29E, with new additions and completions remaining central to an expected 15-20 per cent EBITDA compound annual growth rate across the sector. The same note retained Buy ratings on Indian Hotels, ITC Hotels, Leela Palaces, Chalet Hotels, Lemon Tree Hotels and Brigade Hotels, showing that analysts see a broad organised-sector opportunity rather than a narrow company-specific trade. (moneycontrol.com)

Lemon Tree sits at the middle of that argument. In a company-specific note carried by NDTV Profit on 11 August, IDBI Capital said it continued to favour the chain in the mid-scale segment because of its scale and better operating margin than comparable peers, while management’s focus on adding rooms and repaying debt was seen as supportive for the balance sheet. Lemon Tree’s own media page shows why that pipeline is being taken seriously: the company announced a Manali signing on 5 August, properties tied to Madurai and McLeodganj on 10 August, a Visakhapatnam signing on 13 August, the opening of Bharuch on 20 August and the opening of Vadodara on 27 August. Those updates show a mix of signings and operational launches rather than a single one-off expansion burst. (ndtvprofit.com)

Indian Hotels offers the higher-end version of the same story. IDBI Capital’s target of Rs 869 implies a smaller upside than Lemon Tree’s, but it is still backed by a sizeable development pipeline and firm demand. According to the Business Today source material, Indian Hotels had about 33,600 operational keys at the end of June 2026, with another 32,600 in the pipeline for the next four to five years. That helps explain why brokers remain comfortable with the name even as Lemon Tree draws more attention for upside. Business Today also said Indian Hotels and Lemon Tree each added six hotels in August, reinforcing the view that room growth is not confined to one operator.

The rest of IDBI’s list shows how widely that confidence is spread. Brigade Hotels, with an Rs 86 target, carries implied upside of 47.6 per cent from the brokerage’s reference price, putting it just behind Lemon Tree. Apeejay Surrendra Park Hotels, targeted at Rs 138, offers 23.6 per cent upside, while Chalet’s Rs 938 target suggests only 4.6 per cent, a sign that much of the good news may already be reflected in its share price. Even so, the Chalet call still leans on operating momentum: Business Today said IDBI expected average daily rates to benefit from higher pricing around the Independence Day weekend and forecast healthy RevPAR growth through the first nine months of FY27.

The macro backdrop remains supportive, even if the pace is moderating from the sharp post-pandemic rebound. In its research summary, ICRA said Indian hospitality revenues should rise by 7-9 per cent in FY2027 after 9-12 per cent growth in FY2026. It expects premium hotel occupancy to hold at 72-74 per cent, while average room rates are projected to rise to Rs 8,600-Rs 8,800 from Rs 8,200-Rs 8,500. ET HospitalityWorld, reporting on the same outlook, said ICRA’s sample was likely to deliver operating margins of 34-36 per cent in 2026-27, against 37 per cent in 2025-26. Domestic leisure travel, meetings and exhibitions, weddings and business travel remain the core drivers of that forecast. (icra.in)

There are still risks to that upbeat view. ET HospitalityWorld said foreign tourist arrivals fell 7.9 per cent in calendar 2025, while inbound traffic weakened further in March and April 2026 as the West Asia conflict disrupted routes and raised fares. ICRA said travellers from West Asia make up only around 3 per cent of total foreign tourist arrivals to India, which helps explain why the industry’s domestic bias has cushioned the hit so far, but the agency also warned that a prolonged conflict could weigh on business travel, meetings activity and costs. For now, though, the dominant market view is that a supply-constrained industry with expanding branded networks and resilient domestic demand can still support higher room rates and selective upside in hotel shares. (hospitality.economictimes.indiatimes.com)