HOTEL STOCKS - IT'S THE TIME TO DISCO!!

By Ruma Dubey

Hotel Leela hit a new 52-week high today and showed an almost 5 times surge in volumes.

Taj GVK also hit a new 52-week high with volumes up 3.5 times.

Royal Orchid Hotel too hit a new high and was locked on the 10% upper circuit.

Jindal Hotel also hit its 20% upper circuit and a new high.

Viceroy Hotels also hits a new 52-week today.

Mac Charles had hit a new high yesterday and today too it was at a new 52-week high.

Kamat Hotels breached the upper circuit today and so did Hotel Rugby.

EIH is in the green and it had hit a new 52-week high on 1^st Jan.

Advani Hotels is up today over 5%.

ITDC was up 6% intra day.

Indian Hotels is the only hotel stock in the red today.

And today, one of the reasons why all hotel stocks are up in the green after such a long time could also be attributable to the optimism shown by Goldman Sachs. Yesterday, it has invested Rs.440 crore for a significant minority stake in Indian hotel investment and development firm Samhi Hotels which currently owns some 10 hotels and it is leased to operators such as Marriott International, Starwood Hotels, Accor SA and Hyatt International.

Something seems to be brewing in Royal Orchids too. SBI Mutual Fund under its various schemes sold 22.98 lakh equity shares, representing 8.4% of paid up share capital of the company on December 31^st. There is no knowledge yet about the buyer of this stake but market is hoping that it is some other FII.

Thus over the past two days, these two news have made one relook at this long ignored sector. Is there a turnaround which the FIIs have noticed?  For hotels it is all about occupancy – the more the tourists come the more will its occupancy rates go up. And as per a recent report put out by Delhi based research outfit, HVS, hotel occupancy in India in the year to 31 March 2015 rose to 60.3%, the highest in four years. Revenue per available room, a measure of profitability, grew for the first time since 2010-2011. So occupancies have hit a 5-year high – the first time since the Wall Street collapse; that’s certainly a news worth celebrating!

The sector has been under pressure ever since then, with inflow of tourists being low. Looks like now in 2015 and 2016, slowly they are making a come back and hotels are seeing a result of this. Seasonally too, second half of Q2 and then entire Q3 is usually the best. The good weather and festivals make it the ideal time to travel. With airline companies also announcing special deals and fuel prices coming down, most certainly people are traveling.

Another research firm, STR Global has reported that Mumbai hotels saw the highest occupancy at 74% and then came Goa at 72%. Except for Kolkatta, all cities across India saw a significant YoY rise.

There is also rising hope that with many hotels being under financial stress, we could see some more acquisitions happening, leading to a consolidation. Hotels selling their noncore assets to relieve debt will also be the norm as business picks up.

Royal Orchid, Mac Charles, EIH, Gujarat Hotels are some of the good picks and one can pick up Indian Hotels or Hotel Leela only if one has the very long term view in mind.