This Sector Outperformed the Stock Market During the Downturn

In the past few months, the Indian stock market has given investors and traders headaches, with an 8% decline driven by weak Q2 results and FIIs pulling out of the country. However, the hotel and restaurant sector has bucked the trend. Seasonal strength helped hotel stocks soar, with some gaining between 10% and 20%. which stocks are they? take a look below!

Hotel Sector Overview

The hotel sector plays a vital role in the global economy, contributing significantly to employment, tourism, and trade. In India, the sector has witnessed substantial growth, particularly in the past decade, driven by increasing domestic and international tourism.

The hotel sector has become a significant player in India’s stock market, with leaders like the Tata Group owned Indian Hotels which also includes luxurious hotels like Taj Hotels. Furthermore, this sector also have listed companies like EIH (East India Hotels), Lemon Tree, Chalet Hotels, and Mahindra Holidays.

Despite the broader market downturn in recent times, some of these hotel stocks have posted positive returns. So, what has driven their upward movement?

Factors Behind Stocks Growth

Seasonal Strength

In Quarter 3, from October to December, the hotel industry experiences a surge in activity due to the holiday season, festivals, weddings, and year-end celebrations. These events drive increased demand for services in hotels and restaurants. As demand rises, companies are able to raise their rates, which in turn boosts profits during this busy season.

Strong Demand

December Month is always been the favourite month from the tourism perspective but this year, the growth has been on higher side since the covid pandemic. As per the sources from evbharat.com, the Uttarakhand’s major hotel and restaurant booking surged well over 90% across the state.

The MD of Mahindra Holidays also stated, “if I were to look at December occupancy, in some of our resorts we have no space for even a single room available in December because people have all booked up.”

Increased Average Rates

These increased demands also create an opportunity for hotels to boost profits by raising their rates. As a result, The average room rates of branded hotels are expected to increase by 6-7% this fiscal year.

Double digit growth Expectations

In November, Puneet Chhatwal, Managing Director of Indian Hotels, predicted that the company’s growth is likely to be in double digits. He expects a surge in revenue during Q3 and Q4, following a softer first half of FY25.

Top Hotel Stocks that surged during Q3

For stocks, seasonal strength is not the only factor that matters. While some stocks may perform well during this period, others may not. Here’s a list of the major hotel stocks that saw the highest gains from October to December.

Indian Hotels

Indian Hotels, a prominent player in the hospitality industry, is owned by the Tata Group and operates several well-known subsidiaries, including Taj Hotels. The company’s stock has experienced significant growth, surging around 100% in CY24, with an impressive 28% increase in the last quarter (October to December). Following strong performance in Q2, broker firms such as Sharekhan and Motilal Oswal issued buy ratings with price targets of ₹910 and ₹880, respectively.

In December, the stock reached an all-time high of ₹894, coming close to these targets. However, in January, the stock has seen a 5% decline and is currently trading at ₹823.

East India Hotels (EIH)

EIH, owned by the Oberoi Group, is one of the largest hotel chains in India. The company’s stock saw impressive growth, surging 68% in CY24, with an 11% increase in the last quarter (October to December). EIH has consistently performed well in the hospitality sector, benefiting from the increasing demand for luxury accommodations.

However, in January, the stock has seen a slight dip, falling 3%, and is currently trading at ₹409.

Chalet Hotels

Chalet Hotels, owned by the K Raheja Corp Group, operates international high-end hotel chains in India. The company’s stock gained nearly 40% in 2024, with an 11% increase in the last three months. However, like many others, the stock has fallen more than 10% from its all-time high and is currently trading at ₹919.

Lemon Tree

Lemon Tree Hotels, founded in 2002 by Patu Keswani, has made significant strides in the Indian hospitality industry. The company’s stock gained nearly 28% in 2024, with a 25% increase in the last three months. However, the stock has fallen more than 10% from its all-time high of ₹162 and is currently trading at ₹143.

Final Words

While the Indian stock market has faced challenges in recent months, the hotel and restaurant sector has managed to defy the broader downturn, thanks to seasonal strength and strong demand. With key players like Indian Hotels, EIH, Chalet Hotels, and Lemon Tree posting solid gains, the sector has shown its resilience. As the industry continues to benefit from increased tourism and rising demand, these stocks may still hold potential for investors in the coming quarters. Keep an eye on these hospitality giants, as their performance in Q4 could provide further insights into the future of the hotel sector.