Q4 Results Preview: Hotel industry likely to post double-digit revenue growth over robust demand

The travel industry is likely to post stronger earnings for the quarter ended on March 31, 2024 (Q4FY24), led by healthy growth in hotels, luggage and aviation sector. In hospitality, all India average occupancy stood at 66-68 per cent in Jan-24 and increased to 72-74 per cent in Feb-24. Occupancy levels are higher by 200 bps YoY indicating demand momentum is intact, according to brokerage firm Prabhudas Lilladher (PL)

Healthy economic growth, robust demand for meetings, incentives, conference and events (MICE), scheduling of various events, high double-digit growth in foreign tourist arrivals and 5 per cent growth in domestic passenger traffic were key drivers for Q4.

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In terms of new hotels openings, the industry has seen 26 per cent growth in new hotel openings to 146 but a 10% decline in room additions to 9,833 between April 2023 and February 2024, as per HVS Anarock report.

According to Elara Capital, strong leisure and growing business travel will continue to accelerate ARR growth and increase occupancy. The macroeconomic environment for India remains robust, which is expected to sustain demand for the hotel industry.

On the other hand, luggage companies are also expected to post decent performance. “We expect luggage stocks in our universe to report decent performance as VIP is expected to clock double digit growth in top-line after 3 quarters while Safari’s market share gain journey will continue. Within hospitality, we expect double digit ARR growth for both Chalet and Lemon Tree with EBITDA margin of 46.0%/49.7% respectively,” PL said in its note.

Chalet Hotels

For Chalet, the brokerage firm expects ARR’s to increase 16.4 per cent YoY with an occupancy of 72 per cent. Overall, the hotel is likely to report 36.6 per cent YoY growth in revenue with EBITDA margin of 46.0 per cent.

“We maintain our ‘ACCUMULATE’ rating on Chalet as deleveraging process has begun and demand environment continues to remain robust. Our revised SOTP based TP stands at Rs888 (earlier Rs820),” PL added.

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Lemon Tree

The firm expects ARR’s to increase 12.8 per cent YoY with an occupancy of 72%. Excluding Aurika, and a single digit hike in ARR with occupancy being a replica of 4QFY23. 

“We expect Lemon Tree to report 26.9% YoY growth in revenue with EBITDA margin of 49.7%. We have marginally cut our EPS estimates by 1.7%/1.1% for FY25E/FY26E respectively, but maintain ‘BUY’ rating on the stock with SOTP based TP of Rs153 (earlier 155),” it said.

Safari Industries

Safari's top-line is expected to grow 27.2 per cent YoY to ₹ 3.9 billion. Furthermore, the brokerage firm expects GM/EBITDA margin of 47.9 per cent/17.5 per cent in 4QFY24E. PAT is expected to increase 9.3 per cent YoY to ₹416 million.

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VIP Industries

VIP's top-line is expected to grow 16.3 per cent YoY to ₹5.2 billion. The brokerage firm expected its GM/EBITDA margin of 54.7 per cent/8.8 per cent in 4QFY24. Adjusted PAT is expected to decline 73.6% YoY to ₹113 million.

IRCTC

The firm expects 17.2 per cent YoY growth in top-line to ₹11.3 billion. “We expect ticketing volumes of ~115mn for the quarter with internet ticketing revenues Rs3.2bn. Overall, EBITDA margin is expected to be at 34.2%,” it said.