- Goldman Sachs has initiated Buy on IHCL and Neutral on ITC Hotels for medium-term growth
- IHCL target price Rs 800 with expected ROIC rising from 14% in FY25 to 23% by FY30
- ITC Hotels valued at Rs 200 with lower room growth and returns expected to improve gradually
Global brokerage Goldman Sachs has turned optimistic on India's hotel sector, citing tight room supply, strong domestic travel demand and a structural shift towards asset-light expansion models. In a recentnote, the brokerage initiated coverage on Indian Hotels Company with a Buy rating, while starting ITC at Neutral.
Goldman expects these trends to drive sustained growth in revenue per available room (RevPAR) and improve return ratios across the sector over the medium term.
IHCL: Buy Call on Strong Growth
Goldman initiated IHCL at Buy with a target price of Rs 800, implying a 19% upside from current levels. The brokerage expects IHCL's return on invested capital (ROIC) to improve meaningfully from 14% in FY25 to 23% by FY30, driven largely by asset-light growth.
According to the note, the bulk of IHCL's revenues are concentrated in the top eight Indian cities, where Goldman's city-wise analysis suggests room supply growth will remain below 5% CAGR between FY25 and FY30. With occupancies already near all-time highs, this supply discipline is expected to support pricing power.
Goldman also highlighted IHCL's aggressive expansion in the midscale segment through Ginger Hotels, where room additions are likely to exceed expectations. Inorganic growth opportunities, backed by a strong balance sheet, distribution capabilities and a portfolio of brands, are seen as additional upside catalysts.
ITC Hotels: Neutral on Slower Growth, Lower Risk
Goldman initiated ITC at Neutral with a target price of Rs 200, implying an upside of 11%. While positive on the sector outlook, the brokerage flagged comparatively lower room inventory growth for ITC, noting that its guidance appears conservative and may be revised upward over time.
ITC's hotel assets are less mature than IHCL's, which translates into lower current return ratios. However, Goldman expects these returns to gradually converge towards IHCL's levels as the portfolio scales up.
The brokerage values ITC Hotels at an EV/EBITDA multiple of ~21x, applying a 15% discount to IHCL, reflecting differences in growth visibility and asset maturity.
Supply Constraints, Domestic Travel Drive Pricing Power
A key theme underpinning Goldman's thesis is modest supply growth across major cities. High land costs, limited space availability and rising development expenses are expected to cap new hotel supply, even as demand remains strong.
Domestic tourism continues to be the primary demand driver, with consumers increasingly prioritising spending on travel and leisure experiences. Both IHCL and ITC derive a large share of revenues from the top eight cities, positioning them well for a high single-digit RevPAR CAGR over FY25–30, Goldman said.
Goldman also pointed to a structural shift towards asset-light growth models, including management contracts and revenue-share leases. Both IHCL and ITC are increasingly adopting these models, which allow faster room additions without heavy capital deployment, supporting improving return metrics over time.
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