After a quiet April-June quarter in 2024-25 (FY25), the operational and financial performance of India’s largest listed hotel company, Indian Hotels Company, clearly rebounded in the July-September quarter (Q2) of FY25.
With double-digit growth in the average room rate (ARR) and higher occupancy, the Taj Hotels chain owner reported a 16 per cent revenue increase and a 30 per cent rise in operating profit.
Total revenue grew by 27 per cent, including figures from the consolidated airline catering unit, TajSATS.
The company’s best-ever Q2 results were well-received on the Street, with stock prices rising over 7 per cent on Friday, pushing its market capitalisation above Rs 1 trillion.
Indian Hotels reported a standalone occupancy rate of 78 per cent, up 210 basis points (bps) from the same quarter last year, while room rates increased by 10.4 per cent to Rs 14,321.
This led to a 13.4 per cent rise in revenue per available room (RevPAR), which reached Rs 11,163. With many hotels nearing 80 per cent occupancy, most of the growth stemmed from increased room rates.
Management noted that the hotel business’ strength is driven by a supply-demand imbalance and favourable demographics.
In Q2, demand grew by 7 per cent, while supply rose by just 2 per cent. All company brands saw double-digit year-on-year RevPAR growth, and this trend is expected to persist.
Analysts at Motilal Oswal, led by Sumant Kumar, expect strong performance in the second half of FY25, driven by a busy wedding season (with 30 per cent more wedding dates compared to last year), increased free trade agreements, and growth in the meetings, incentives, conferences, and exhibitions segment, supported by convention centres and favourable demand-supply dynamics.
In response to these trends, Indian Hotels plans to expand its portfolio of 25,230 rooms, with 14,145 owned and the remainder managed.
The company aims to add 17,354 keys in the next four to five years, comprising 3,532 owned keys and 13,822 managed keys.
Beyond FY25, the company expects steady growth driven by rising disposable income, new tourist destinations, and evolving traveller behaviour.
These trends prompted Elara Capital to upgrade its rating from ‘sell’ to ‘accumulate.’ Analyst Prashant Biyani from Elara noted, “Indian Hotels is a bigger beneficiary of the strong demand undercurrent than we had estimated earlier.”
As a result, Elara raised its revenue and operating profit estimates by 20-21 per cent for FY25 and 23-24 per cent for 2025-26, factoring in higher business growth and the consolidation of TajSATS.
Motilal Oswal has maintained its ‘buy’ rating, citing ARR growth driven by strong demand, effective asset management, and corporate rate hikes.
Higher occupancy levels due to favourable demand-supply dynamics and a robust room addition pipeline through 2027-28, spanning owned/leased and managed hotels, will further support growth.
Additional growth drivers include higher income from management contracts and value unlocking through the scaling of new and reimagined brands.
Alongside revenue growth, the company is expected to see margin improvements.
Consolidated margins for the quarter improved by 269 bps to 27.5 per cent, thanks to better cost control and operational leverage.
Looking ahead, operating profit margins are likely to benefit from stronger leverage and reduced losses from the international hotel portfolio, according to analysts at PhillipCapital.
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