- Prominent hospitality stocks fell sharply since the Iran war outbreak in late February
- Hotel room rates in India peaked in February then softened in March due to waning event demand
- March saw a 15-20% month-on-month decline in average daily rates across major Indian metros
Prominent hospitality stocks including ITC Hotels Ltd., Indian Hotels Co., and Lemon Tree Hotels Ltd. have fallen sharply since the outbreak of the Iran war late February, amid a broader market slump. According to analysts at multinational brokerage Nomura, hotel room rates across major Indian cities have begun to soften in March after reaching their peak towards the end of February, driven by event-related demand. But the ongoing conflict in the Middle East has had only a limited negative impact on the sector.
Nomura noted that average daily rates (ADRs) in Mumbai, Delhi, Bengaluru and Hyderabad surged through February, buoyed by large international summits and conferences in Delhi like the artificial intelligence summit along with robust corporate travel and seasonal leisure demand. These rates, however, eased in early to mid-March as event-driven demand waned and travel patterns normalised.
Overall, Nomura is observing a 15-20% month-on-month decline in March ADRs across major metro markets. Some of this moderation, it added, may be due to cancellations linked to geopolitical tensions in West Asia.
Despite the pullback, March ADRs in all four metros remain above December levels, typically a peak holiday season, suggesting that the broader impact on hotel pricing remains contained.
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ITC Hotels, IHCL Stock Movement Month-To-Date
For IHCL (Taj) and ITC Hotels, Nomura said March ADRs are at December levels or slightly higher, and strong February pricing should keep fourth quarter average ADRs healthy.
As a result, the brokerage estimates 7-10% quarter-on-quarter (Q-o-Q) ADR growth for both companies in the March quarter, translating into 8-9% year-on-year ADR growth. It added that the extent to which ADR gains translate into revenue per available room (RevPAR) remains to be seen.
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