Why are hotel stocks shining?

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After a long rally in the domestic stock market, things seem to have slowed down a bit. Although the market’s pace may be slow, the shares of the hotel sector are making headlines. Several shares in this sector, including Kamat Hotels, Royal Orchid Hotels, and Oriental Hotels, have rallied in the range of 2.5% to 13%. There are prospects for further growth in this sector. Let’s try to understand what the reason behind this is!

Reasons for rise in share prices of hotel stocks:

After the fear of the coronavirus pandemic subsided, people started going out again. After a long time, people are now venturing outside to travel and explore. This has apparently boosted the hotel industry’s business. There has been increase in tourist arrivals. As a result, there has been a significant increase in the average room rent (AAR) of hotel companies during the January-March quarter of the financial year 2022-23. This has led to significant amount of growth in the hotel companies’ revenue. Due to this, there has been strength in hotel stocks.

What’s next?

People’s fear of Coronavirus is now almost over. The trend of work from home is also slowly coming to an end. All major companies are now calling their employees back to the office. The hotel industry’s business is gaining momentum. According to ICICI Securities’ report, passenger traffic is expected to remain at 105% of pre-Covid levels in the financial year 2023-24.

The G20 summit is also taking place in India this year. ICC’s most coveted tournament, one-day cricket World Cup, will also be held in India. The Indian government has simplified the rules for e-visas to a great extent. This is expected to further strengthen the demand for hotel room bookings. This could lead to a significant rise in share proce of hotel stocks. What do the experts say?

The summer vacation season is underway in the country. Most people are planning to take a break with their families for a few days. This will increase the demand for hotel rooms during the summer season. Motilal Oswal Securities expects bookings to remain significantly more than pre-Covid levels in the coming days. Technical analyst Nitilesh Pawaskar says that the 17,580-17,600 level is an important level for Nifty. Investors should adopt a wait-and-watch approach for now. Nevertheless, there are signs that there could be an upward trend in share prices of hotel stocks.