Hotel Stocks Set for BIG Gains: Motilal Oswal Reveals Stunning Sector Outlook!

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AuthorAarav Shah|Published at:
Hotel Stocks Set for BIG Gains: Motilal Oswal Reveals Stunning Sector Outlook!
Overview

Motilal Oswal has issued a positive sector note on Indian hotels, citing strong demand from travel, weddings, and conferences against limited supply. The brokerage anticipates 12-15% RevPAR growth in 3QFY26 and reiterates 'Buy' ratings on Indian Hotels Company (target Rs 880) and Lemon Tree Hotels (target Rs 200), highlighting their growth potential and regional exposure. Other companies like EIH, Chalet Hotels, SAMHI Hotels, Park Hotels, and Juniper Hotels are also seen benefiting.

Motilal Oswal's latest sector report paints a bright picture for Indian hotel stocks, anticipating firm room rates and profitability. This optimism stems from a rare confluence of robust demand, driven by sustained domestic travel, weddings, and corporate events, and constrained supply due to infrastructure upgrades outpacing new hotel construction. The firm projects Revenue Per Available Room (RevPAR) growth of 12-15% year-on-year for the third quarter of fiscal year 2026.

The Core Issue

The Indian hotel business is currently benefiting from a strong combination of visible demand and restrained supply, according to Motilal Oswal. Demand drivers include sustained domestic travel, a busy wedding calendar, rising conference activity, and international events. Simultaneously, infrastructure upgrades like new airports and better connectivity are feeding into hotel demand without a corresponding surge in new supply, which continues to support pricing discipline across major markets.

Financial Implications

Motilal Oswal projects a 12-15% year-on-year growth in Revenue Per Available Room (RevPAR) for the third quarter of fiscal year 2026. This growth is expected to translate into firm profitability over the near to medium term as the imbalance between demand and supply persists. The brokerage expects room rates and profitability to remain strong.

Market Reaction and Recommendations

Motilal Oswal has reaffirmed its 'Buy' rating on Indian Hotels Company, setting a target price of Rs 880. This implies a potential upside of approximately 21% from its current market price. The brokerage also reiterates a 'Buy' rating on Lemon Tree Hotels with a target price of Rs 200, indicating a potential gain of nearly 24% or approximately Rs 39 per share.

Specific Company Coverage

Indian Hotels Company (IHCL) delivered strong 21% year-on-year standalone revenue growth in 1HFY26, driven by higher room rates, improved occupancy, and a strong showing from its food, beverage, and banqueting segments. Its exposure to the Mumbai Metropolitan Region, particularly near the upcoming Navi Mumbai International Airport, positions it as a prime beneficiary.

Lemon Tree Hotels is expected to enter a phase of meaningful operating leverage as occupancy rises. The company's planned addition of around 400–500 rooms in Navi Mumbai provides early exposure to airport-driven demand in a market with limited supply.

EIH is identified as a premium play on the hotel cycle, benefiting from its luxury Oberoi and Trident brands and a diversified revenue mix. Chalet Hotels offers exposure to business-centric demand in metro markets, with properties linked to corporate hubs and convention centres.

SAMHI Hotels is positioned to gain from airport-led travel growth in Navi Mumbai, with a significant expansion project planned. The company reported the highest EBITDA growth of 30% year-on-year in 1HFY26 among the tracked hospitality companies.

Park Hotels is also expected to benefit from the Navi Mumbai airport development, with plans to add about 250 rooms in the area. Juniper Hotels recorded strong EBITDA growth of 28% year-on-year in 1HFY26.

Future Outlook

The sector's outlook remains constructive, underpinned by consistent demand visibility and controlled supply additions across key markets. Motilal Oswal advises investors to focus on selectivity, prioritizing companies with pricing strength, strong regional exposure, and disciplined expansion plans rather than making broad sector-wide bets.

Impact

This positive outlook and specific stock recommendations could lead to increased investor interest and potential stock price appreciation for key players in the Indian hospitality sector. It reinforces confidence in the sector's growth trajectory and may attract further investment. Impact rating: 8.

Difficult Terms Explained

  • RevPAR (Revenue Per Available Room): A key performance indicator measuring a hotel's ability to fill its rooms at an average rate.
  • EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization): A measure of a company's operating performance, indicating profitability before accounting for financing and accounting decisions.
  • Operating Leverage: The degree to which a company's costs are fixed. Higher operating leverage means small changes in revenue can lead to large changes in profit.
  • FY26: Fiscal Year 2026, which in India typically runs from April 1, 2025, to March 31, 2026.
  • 1HFY26: The first half of Fiscal Year 2026.
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