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Hotel Industry performance affected by high base

ICICIdirect Research 07 Nov 2025 DISCLAIMER

Hotel companies Q2FY26 performance was affected by high base, rooms under renovation in lean period and relatively higher rainfall in mountain/hilly reasons affecting the resort biz.
Higher wedding days with a big fat wedding in Mumbai in the base quarter of Q2FY25 and delegates visit impacted the occupancy and ARR growth in Q2.
In Q2FY26, ITC registered steady RevPar growth of 9%. IHCL and Chalet having strong presence in Mumbai witnessed RevPar growth of 0-5% YoY affected by high ARR and Occupancy base in Mumbai region and renovation.
For H1FY26, Domestic RevPar growth for hotels under coverage was around 4-9%.
Despite relative lower RevPar growth, the EBIDTA margins of the hotel companies improved by 50bps-160bps in H1FY26 driven by cost saving measures.


Outlook for H2FY26
Higher wedding days, events such as women’s world cup, delegation visit coupled with increase in the foreign tourist arrivals will help hotel companies to post better RevPar growth ahead of H1FY26.
Double digit RevPar growth expected will largely be driven by stable occupancies and higher ADR growth in the key markets.
EBIDTA margins expansion will be much better in H2 driven by higher operating leverage and better mix with F&B revenues expected to achieve strong growth for hotel companies.
Room demand is expected to grow by 10% while room supply is expected grow by 8%.
The companies continue to add rooms through adequate own room addition along with high management contract signings
We expect Revenues and PAT of the hotel companies under our coverage to grow in double digit over the next three years.
We maintain a Buy rating on Indian Hotels Company with PT of Rs920, ITC Hotels with PT of Rs282 and also Chalet Hotels.

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