The hotel industry in India is booming these days. Some investors buy stocks and earn profits. We will discuss the best stocks to invest in 2022.
The hospitality sector of India has witnessed modest growth over the years. Moreover, the sector has a considerable capacity to perform better in the upcoming years. India has become a tourist attraction due to its fascinating culture and diversity. It is estimated that the industry can observe a net worth of up to USD 300 billion in the coming years. Simultaneously with the growth of the hospitality sector hotel stocks are expected to perform well.
In the current situation, Investor interest is on the rise due to improving travel demand and an increase in room fares. In the hospitality sector, an investor has the highest potential to earn high investment in these shares.
Even if you’re running on a budget and looking to invest in small, the hospitality sector provides various options for the same as they are known to provide maximum profit for a lower investment deck. With a rapid increase in business-related and personal travel leisure, the tourism sector is considered to bloom over the years yielding a good stock value.
The Indian Hotel Industry is standing at a crossroads for a significant, vast, and rapid transformation. They are also considered one of the prime and most important contributors to India’s GDP growth. Concluding, these shares are considered better than the others due to constant growth and development.
Here we will discuss the hotel stocks and the factors influencing its performance.
Best Hotel Stocks for Investment:
EIH Ltd.
EIH Ltd. leads the chain of prestigious hotels in India named The Oberoi Group. They also operate Trident and Maidens Hotels. EIH Ltd. is known to play the industry upcycle due to its high demand by both local and foreign travelers. Over the next year, the earnings of EIH are predicted to double which increases the cash flow indicating a higher share value and an optimistic future.
The group approximately runs 20 hotels under the luxury brand of Oberoi Hotels & Resorts and 10 five-star properties under the Trident Hotels brand. It doesn’t have a heavy debt load which distinguishes it from other companies with high debt. With an excellent reputation in the Indian market, EIH Ltd. is chosen by mostly every investor to invest.
Mahindra Holidays and Resorts India
It is considered India’s leading company in the leisure hospitality industry. It offers quality family holidays and vacations. Often overlooked but Mahindra Holidays and Resorts India stock might be the most beneficial stock market fair. Mahindra Holidays and Resorts India is known for their unique business model and is far ahead compared to other traditional hoteliers. This stock proves to be an interesting bet as it grows at a decent pace without sinking into debt.
The company has a very strong balance sheet which helps to tide over short-term challenges and ensures higher growth in the hospitality industry. Considering the past ten years’ financial record of Mahindra Holidays and Resorts India, it is good to say that this share is worth the price!
Lemon Tree Hotels Ltd.
An Indian-based hotel chain company that operates in the upscale segment and mid-market sector is potentially growing. The company operates through various brands especially Aurika Hotels and Resorts, Lemon Tree Premier, Red Fox Hotels, and many more. It is vastly spread across India and abroad considering 87 hotels across 54 destinations.
Lemon Tree Hotels Ltd. has always reported higher profit margins due to higher occupancy and room rates. The interest cover and net debt (to EBITDA) are negative but the conversion of EBIT to cash flow cannot be ignored. With a strong position to pay down the debt, Lemon Tree hotels Ltd. is considered one of the best hotel stocks to invest in 2022.
Byke Hospitality Ltd.
Byke Hospitality Ltd. is one of the fastest-growing pure vegetarian hotel chains in India. They have 21 hotels with approximately 1225 rooms. They have marked their presence in 9 Indian states and make a significant amount of revenue from the hotels spread across India.
Their motto ‘Atithi Devo Bhavah’ reflects the way of treatment they give to the customers. People visit them again because of their Indian style of hospitality. Byke Hospitality Ltd. makes their visitors feel at home.
Although the stock price for Byke Hospitality Ltd. still has not reached its full potential. It showed 20% returns in the past year and making it a good investment opportunity. An investor can count TBHL in their list.
Factors influencing the performance of Hotel stocks
Location Influence
Visitors always search for a location which provides comfort and prefer luxurious locations if they are spending a handsome amount of money. The nearby location and competitor of the hotel is the main drawback of being a hotel investor. The location can influence the popularity of a hotel. Everyone searches for an aesthetic picturesque view while searching for a hotel. The goodwill of a hotel can decide their yearly revenue and they welcome a huge crowd on vacations.
However, competitors may come up with policies with a lower price and drive the masses towards their business.
Management influence
Investment depends upon the hotel management and function decisions. It is an issue that investors encounter while investing. The first impression is the last. The staff treatment is also taken into consideration while visiting a hotel.
The hotel must keep itself updated in terms of hospitality industry trends. They must adopt the latest technologies and software. Hotels must focus on providing their customers with a memorable experience.
The physical location must always be considered before setting up a business there. Decisions made by the hotel administration are responsible for its success.
Debt Influence
Investor usually borrows huge amounts of debt from several resources for their investments which results in increasing the debt burden of hotels. They have to pay higher interest rates on higher borrowings which results in a loss of money.
Sometimes, the hotel property or assets are kept as mortgages with the lenders. In case of repayment failure, it may result in the loss of the hotel’s property.
Conclusion
Being an investor in the hospitality sector, you can benefit from favourable tax rules and access to hotel properties while also trying to diversify your property portfolio. India’s tourism is constantly expanding which helps the hotel stocks to outperform. If you’re looking to invest in the hospitality sector, it is important to look over the balance sheet, debt, location, and management as they are considered influential aspects. The EIH Ltd., Mahindra Holiday and Resorts India along with Lemon Tree Hotels Ltd. are one of the best stocks and cannot be undermined.
Did You Know?:
The domestic hotel sector reported a 50% occupancy rate for the fiscal year 2021–2022.This rate is anticipated to increase to 69–70% for the fiscal year 2022–23.
