Valuations, expansion may drive gains for hotel majors

THE COMPASS

- DEVANGSHU DATTA

The share prices of hotel companies have corrected sharply due to the Iran war.

Average room rates (ARR) and occupancy may drop in the fourth quarter of financial year 2025-26 (Q4FY26) as foreign arrivals dwindled. The Q1FY27 performance will depend on geopolitics and April has seen some cancellations. There could be a partial offset due to a shift of big-ticket events planned in West Asia. Other

than that, the Indian Premier League (IPL), and many sectoral expos are on the schedule.

Among metros, Delhi (and Guru-gram, Noida), Mumbai and Kolkata saw weak revenue per available room or RevPAR performance in January and February. Pune, Chennai, Hyderabad, Kochi, Goa and Chandigarh saw growth. Bengaluru and Ahmedabad delivered average RevPAR in Q4.

The current stock prices discount very low RevPAR over prolonged periods and, hence, there could be a sharp rebound. A stretched out conflict and elevated airfares may, however,

hurt. Investors are braced for tepid demand and high uncertainty. Analysts have cut operating profit expectations and valuations, but medium-term prospects are structurally positive.