Hotel Stocks in India: Should You Consider Investing in Them?

Hotel Stocks in India: Should You Consider Investing in Them?
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The hotel industry is an integral part of the global economy and has a significant impact on the tourism and hospitality sectors. With the rise in disposable income and travel, the demand for hotels has been on the rise, making it a lucrative investment option. 

Investing in hotel stocks can offer diversification to your investment portfolio and can be an effective way to capitalize on the growth potential of the hotel sector stocks. In this blog, we will explore the ins and outs of hotel stocks in India. Moreover, we’ll also we will also highlight the popular hotel shares in India that you can consider buying in 2023.

What are Hotel Stocks?

Hotel stocks are shares of companies that operate in the hospitality industry, including hotels, resorts, and other accommodation facilities. By investing in hotel stocks, investors can participate in the growth and profitability of these companies and potentially earn returns on their investments.

Growth of the Hotel Industry in India

The hotel industry in India has seen significant growth over the past few decades, driven by the rise in domestic and international tourism. The sector is an important contributor to the Indian economy, with a market size of over USD 20 billion and a share of around 9% of India’s GDP.

The industry is dominated by major players such as Taj Hotels, Marriott International, AccorHotels, and IHG, along with various local players. The hotel sector has also seen significant foreign investment over the past few years, with major international hotel chains expanding their operations in India.

However, the industry faces various challenges, including high taxes, regulatory hurdles, and intense competition. The COVID-19 pandemic has also had a significant impact on the industry but now it’s flourishing again. 

In a nutshell, the hospitality industry in India is a key player in the country’s economy and offers various investment opportunities for investors looking for exposure to the tourism and hospitality sector.

Types of Hotel Stocks in India

Hotel stocks can be broadly categorized into three types based on the level of service and amenities offered to customers. These categories are:

Luxury Hotel Stocks

The luxury hotel shares are typically associated with high-end services and amenities such as fine dining, spa services, and personalized attention to guests. These stocks are often considered more volatile due to their dependency on discretionary spending and luxury travel trends. Some of the luxury hotel stocks include Marriott’s Ritz-Carlton and Four Seasons Hotels and Resorts.

Mid-Range Hotel Stocks

Mid-range hotel stocks offer a balance between luxury and affordability, with basic amenities such as Wi-Fi, breakfast, and fitness centres. These stocks are considered less volatile than luxury hotel stocks and have a wider customer base, including both leisure and business travellers. Some of the mid-range hotel stocks are Hilton Garden Inn and Courtyard by Marriott.

Budget Hotel Stocks

Budget hotel shares offer basic services at an affordable price point and are often located in tourist and business districts. These stocks are considered to be the least volatile and offer stable cash flows due to their customer base, which includes budget-conscious travellers and long-term stay guests. Examples of budget hotel stocks include Motel 6 and Red Roof Inn.

List of Popular Hotel Stocks in India

Here is the list of popular hotel sector stocks in NSE: 

Hotel Stocks IndiaMarket Capital (in Cr)
Indian Hotels Company Ltd. ₹48,180
EIH Ltd.₹11,807
Byke Hospitality Ltd. ₹157.00
Chalet Hotels Ltd. ₹7,877
Lemon Tree Hotels Ltd.₹6,972

How to Invest in Hotel Stocks?

Here are the steps that you need to follow to invest in hotel sector stocks:

  1. Research and analyze the hotel industry and its trends.
  2. Identify hotel companies that align with your investment goals and strategy.
  3. Research the financials and performance of the identified hotel companies.
  4. Open a DEMAT account with a reputable broker.
  5. Place a buy order for the desired hotel stocks through the brokerage platform.
  6. Monitor your investment and keep up-to-date with industry news and trends.
  7. Regularly review and evaluate your investment portfolio.

These are the steps to invest in individual hospitality sector stocks. However, you can also invest in ready-made, diversified portfolios that consist of hotel stocks via smallcase.

What is smallcase?

smallcase is a platform that enables investors to invest in diversified portfolios of stocks or exchange-traded funds (ETFs), known as smallcases, with a single transaction. These smallcases are pre-built portfolios of stocks or ETFs that are designed to suit different investment themes or strategies.

You can explore smallcases containing popular hotel stocks via smallcase. Some of the smallcases that consists of hotel stocks are as follows:

House of Tata

The House of Tata is a well-known conglomerate in India that operates in a variety of industries, from automotive to hospitality. IHCL, which is an investor-favourite being a Tata product, is also included in the House of Tata smallcase.

This smallcase is a curated portfolio of stocks that represent the company’s various business interests, giving investors an opportunity to invest in a diverse range of industries through a single investment. Hence, if you want to invest to diversify your portfolio along with investing in hotel stocks, you can check out this smallcase.

House of Tata smallcase by Windmill Capital

Happy Hours: Cheers to Good Times

Happy Hour smallcase is a curated basket of stocks that seeks to benefit from the growth potential of India’s travel, leisure, and entertainment industry. It includes the stocks of hotels, restaurants, travel, and beverage companies. It has been designed to provide investors with diversified exposure to this sector.

Hence, if you want to capitalize on the growth potential of India’s travel, leisure, and entertainment industry, you may check out this smallcase.

Happy Hours: Cheers to Good Times smallcase by Ethical Advisers

Benefits of Investing in the Hospitality Industry in India

Investing in hotel industry shares can provide several benefits to investors. Here are some of the key advantages of investing in hotel stocks:

  • Diversification: Hotel stocks can offer diversification to an investor’s portfolio by providing exposure to a different sector. By investing in hotel stocks, investors can diversify their investments across various industries, which can help in reducing overall portfolio risk.
  • Income Generation: Many hotel stocks offer a dividend to their shareholders, which can provide a steady source of income to investors. The dividend payments can be reinvested to buy more shares, which can help in generating long-term wealth.
  • Potential for Long-term Growth: The hospitality industry has significant growth potential, especially in emerging markets. As the global tourism industry continues to expand, there is a growing demand for hotels and accommodation. This trend can translate into long-term growth opportunities for hotel stocks.
  • Global Exposure: Many hotel stocks have a global presence, which can provide investors with exposure to the international markets. This can help in diversifying one’s investments across different geographies and currencies, which can help in reducing risk and maximizing returns.

Factors Affecting the Indian Hotels Stock Price

Hotel sector stocks can be a promising investment opportunity for those seeking to build a diversified portfolio. However, before investing in any hotel stock, it’s important to consider the following factors:

  • Economic Trends: Economic trends such as the GDP growth rate, inflation, and interest rates can significantly impact the hotel share price. Therefore, it’s essential to keep an eye on economic indicators to gauge the potential impact on the hotel industry.
  • Global and Local Market Trends: It’s important to consider global and local share market trends while investing in hotel stocks. The demand for hotel rooms and occupancy rates are impacted by factors such as tourism, business travel, and events in the area. Therefore, it’s essential to evaluate market trends to gauge the potential performance of hotel stocks.
  • Company Performance and Financials: The financial performance of the hotel company is a crucial factor to consider before investing. It’s important to evaluate the revenue, profit margins, debt, and liquidity of the hotel company. It’s also essential to keep an eye on the company’s growth plans and expansion strategies.
  • Government Regulations: Government regulations such as zoning laws, taxes, and labour regulations can impact the hotel share price. Therefore, it’s important to evaluate the regulatory environment and its potential impact on the hotel industry.

Top Hotel Companies in India

1. Indian Hotel Company

Indian Hotel Company Limited (IHCL) is a leading hotel company in India and is part of the Tata Group. It operates under various brands such as Taj, Vivanta, and Ginger. The company has a presence in several countries worldwide, and its portfolio includes luxury hotels, resorts, and palaces.

2. EIH Ltd

EIH Limited, also known as Oberoi Hotels & Resorts, is another prominent hotel company in India. It has a presence in India and abroad, including countries like Egypt, Indonesia, and Mauritius. The company operates luxury hotels and resorts under its flagship brand, The Oberoi.

3. Byke Hospitality Ltd

The Byke Hospitality Ltd. is a mid-sized hotel company in India that operates under the brand name “The Byke.” The company has a presence in several locations across India, and its portfolio includes mid-segment hotels, resorts, and villas.

4. Chalet Hotels Ltd

Chalet Hotels Ltd. is a hospitality company that operates under the brand names “JW Marriott” and “Renaissance.” The company has a presence in several locations across India, and its portfolio includes luxury hotels, resorts, and serviced apartments.

5. Lemon Tree Hotels Ltd

Lemon Tree Hotels Limited is a mid-sized hotel company in India that operates under various brands such as Lemon Tree Premier, Lemon Tree Hotels, and Red Fox Hotels. The company has a presence in several cities across India and offers a range of hotels, from midscale to upscale.

Risks Associated with Hotel Stocks

Hotel shares, like any other stocks, come with certain risks that you must consider before investing. Some of the key risks associated with hotel stocks are as follows:

  • Economic Downturns: The hotel industry is highly sensitive to economic cycles. During an economic downturn, people tend to cut back on discretionary spending, including travel and vacations. This can lead to a decrease in demand for hotel rooms and a corresponding drop in revenue and profitability for hotel companies.
  • Natural Disasters and Pandemics: Natural disasters such as hurricanes, floods, earthquakes, and wildfires can damage hotel properties and disrupt travel plans. Similarly, pandemics like COVID-19 can severely impact the hotel industry by reducing travel demand, leading to hotel closures and job losses.
  • Competition: The hotel industry is highly competitive, with numerous players vying for market share. This competition can lead to price wars and thin profit margins, which can impact the financial performance of hotel companies.
  • Regulatory Risks: Hotel companies are subject to various regulations related to zoning, building codes, environmental laws, and labour laws. Non-compliance with these regulations can result in fines, legal liabilities, and reputational damage.

Final Thoughts

Investing in hotel shares can be a smart move to diversify your portfolio and capitalize on the growth potential of the hospitality industry. However, it is important to consider various factors such as economic trends, company performance, and government regulations before making any investment decisions. 

With the right approach, investing in hotel sector stocks can offer potential long-term growth and income generation while also providing exposure to global markets. Hence, hotel stocks can be a great addition to your investment strategy. Moreover, instead of investing in individual hotel stocks, try smallcases that consist of hotel stocks. Why? Because it will help you diversify your portfolio without wasting a hell lot of time evaluating individual stocks.


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