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Hotel companies – resilience performance - Maintained double digit RevPar growth guidance in FY26

ICICIdirect Research 18 Jul 2025 DISCLAIMER

Indian Hotels Company
Consolidated revenues grew by 32%yoy to Rs2,041.1crore with 14% growth in core hotel business and 22% growth in the Taj Sats business (air catering biz). Hotel business growth was lower by 2-2.5% due to disruption in May,25 led by geopolitical disruption.
Hotel business growth was driven by 11% RevPar growth in domestic business (occupancy declined by 90bps to 74.3%; ARR grew by 12%yoy to Rs14,552) and international business RevPar grew by 13% (occupancies improved by 460bps yoy to 78%). Management contract revenues grew by 17%yoy.
Consolidated EBIDTA margins decreased by ~80bps yoy to 28.2% . However, excluding one-offs the EBIDTA margins would have been flat at 29%.
Reported EBIDTA and PAT grew by 28%yoy (to Rs576crore) and 27% (to Rs329crore).
 
ITC Hotels
Consolidated revenues witnessed 15.5% YoY growth to Rs.815.5cr. India business grew by 14.4% YoY in Q1FY26 to Rs.743.6cr. Subsidiaries reported revenue of Rs.71.9cr (Difference between Consolidated and Standalone Revenues) growing by 29.3% YoY which we believe is largely driven by scale-up in Sri Lanka business.
India business RevPAR grew by 13% YoY to Rs.7900 driven by 9% YoY growth in average room rental (ARR) and 275bps YoY improvement in occupancy to 73%.
EBITDA witnessed 19% YoY growth to Rs.244.7cr while margins improve by 85bps to 30%.
This along with higher other income led 53% yoy growth in the PAT to Rs133.7crore.
 
RevPar premium maintained over industry
Indian Hotels Company Domestic RevPar at Rs 9,800 per night, a premium of 60% over the industry RevPar.
ITC Hotels RevPar at Rs7,900 per night stood at 34% premium over the industry.
 
Outlook remained strong for FY26 and years ahead
More than 50% of supply is coming in the tier 2 and tier 3 towns with limited supply coming up in the top 10 cities. On the other hand, room demand is expected to remain high in key metros. This will help large hotels having presence in the top cities/metros to generate higher room rentals in the near term.
Indian Hotels Company has maintained its outlook of double digit RevPar growth in FY26 with room occupancy expected to remain flat or marginally increase while average room rental will growth in low double digits.
ITC Hotels occupancy rate below 75% is lower compared to large hotels, which provides good scope to achieve higher RevPar growth compared with large hotels.
Room expansion will continue for both the hotels with Indian Hotels Co planning to add 2500-2600 rooms (including 600 owned rooms) in FY26. ITC Hotels is planning to add 700-800 rooms under management contract; further operationalise of 100 rooms for Ratnadipa, Sri Lanka.
 
Valuation and view
Indian Hotels Company and ITC Hotels are trading at 25-26x its FY27E EV/EBIDTA. In view buoyancy in the domestic tourism (room demand to grow by 6-7%) and steady room supply growth (expected to grow at 3%), we believe large hotel companies will continue to perform well. We maintain our Buy on Indian Hotels with price target of Rs950 and ITC Hotels with a price target of Rs282

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