Investors have cheered the strong commentary of The Indian Hotels Co. Ltd (IHCL) management post the December quarter (Q3FY24) earnings, taking the stock to a 52-week high of ₹515.95 apiece on Friday. IHCL has guided for double-digit revenue growth in FY25, driven by growth in its portfolio, new brands and businesses. It sees portfolio growth primarily through management contracts. IHCL has raised management fees to ₹319 crore in the nine months of FY24, doubling from ₹156 crore in the corresponding period of FY20. Management contracts account for 42% of operational inventory, and form 76% of the pipeline.
IHCL aims to open at least two hotels per month. It expects to launch two brands in the next six months. With this, a 10-15% growth in average room rate (ARR) next year won’t be surprising, IHCL’s management said in a Q3 earnings call. In Q3, standalone ARR grew by 17% y-o-y, leading to a 25% surge in revenue per available room (RevPAR). After Q3 earnings, many anal-ysts have raised their assumptions for the coming years.
On the flip side, operations in US, especially New York, are yet to return to pre-covid tre-nds. San Francisco faces temporary headwinds. In Q3, RevPAR in US dropped 3% year-on-year. That said, Prashant Biyani, analyst at Elara Securities (India), said that Ebitda contribution from US is insignificant. He emp-hasized that monitoring trajectory of ARR growth and occupancy rates is crucial, in future.
Demand growth outpacing supply coupled with IHCL’s strong balance sheet, has helped its shares rally 57% in the past year. Emkay Global Financial Services has assig-ned valuation of 24x EV/Ebitda for December 2025, a tad up from 23.5x earlier, reflecting business strength.
Increased demand from domestic travellers, rebound in foreign tourist arrivals, and rise in corporate travel will sustain high room demand for hotels, leading to elevated room rentals in short to medium term. Indian Premier League, and new meetings, incentives, conferences and exhibitions, tourism venues, are some short-term growth drivers for IHCL.
Though, any slowdown in corporate travel or a slower recovery in inbound and outbound tourism pose a risk.
