Hotels Q3 Results Preview- Defying Consumption Blues; Priced-In: Mahindra Holidays Is Dolat Capital's Top Pick

Dolat Capital Report

The hospitality industry experienced robust growth during FY23-FY25E. Stock prices and valuations broadly capture this optimism. However, maintaining revenue per available room growth in FY26 (projected at mid-to-high single-digit) will be crucial for sustaining current positivity, especially as growth starts to moderate on a high base, which is a key risk in our view.

With ARRs up ~45- 50% versus pre-covid, any pause in ARR uptick will also be a key risk. Supply, too, is inching up at a healthier pace, which could further impact future growth dynamics.

Chalet has the highest salience in Mumbai city (especially in Airport cluster viz. JW Mariott and Westin Powai). With newly opened hotels of Aurika by Lemon Tree (largest in India-670 rooms), Ginger Santacruz (371 rooms) and upcoming Fairmont, we believe that occupancy rates and subsequently average room rate may exert pressure for Chalet Hotels’ largest flagship hotel JW Marriott, Mumbai.

We find Mahindra Holidays (top pick) to be better positioned from a risk-reward standpoint in the Hospitality space over the medium term. The hotel is undergoing a transformative journey which will likely impact operational performance for next two-three quarters, but eventually come out significantly stronger post it.

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