Moitlal Oswal picked Tata Group-backed Indian Hotels, Lemon Tree Hotels as top picks in the Indian hospitality sector.

What The Brokerage Said: In its report on Hospitality, Motilal Oswal said the sector is positioned for a strong second quarter after a soft Q1. The brokerage expects a revenue per available room (RevPAR) growth of 9%-11% year on year in Q2 FY25, driven by a high-single-digit increase in average room rates by 7%-9%.

HVS Anarock's report showed that industry RevPAR was flat in Q1FY25 as a slight increase in ARR was offset by a dip in occupancy. General elections, heat waves and a lesser number of wedding days affected demand during the quarter, the report added.

The research firm expects the sector to bounce back due to pent-up demand from Q1 which was soft, high bookings in convention centres, stronger wedding seasons and favourable demand-supply dynamics.

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Motilal added that the majority of hospitality players are accelerating their execution plans and enhancing their inventories which include managed rooms. 

The brokerage kept its "buy" call for Indian Hotels with a target price of ₹715. 

Indian Hotels had the strongest inventory pipeline with 14,516 rooms. The company expects to add around 6,636 rooms over FY24-26, including over 5,578 rooms under a management contract.

For Lemon Tree Hotels, the brokerage reiterated "buy" call with a target price of ₹170. According to the brokerage, the company is expected to double inventory under the management contract to over 8,300 rooms by FY27 from 4,366 rooms as of June 2024. The majority of these rooms will be operational by FY25-26. 

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