Why hotel industry stocks are the next big thing!

The hotel industry is known for its resilience in the face of adversity. But when the COVID-19 pandemic hit, the industry faced unprecedented difficulties. However, as Albert Einstein once said, during every crisis lies great opportunity. And the hotel industry has taken this to heart, rolling up its sleeves and adopting changes to stay afloat.

Reconceptualized the services

Hoteliers have been proactive and positive in their outlook, making a slew of changes to optimize operations, streamline service delivery, cluster roles, and multi-skill line staff. They have also integrated technology and digital services to both cut costs and create new revenue streams. From food delivery, luxury dining and bar at home, to expanding into a workstation, staycation, and blesiure travel segment, the industry has reconceptualized its services. 

Despite the mainstream still remaining the same, these changes have given a strong push to rapid recovery, creating long-term benefits for the industry. The hotel industry has demonstrated resilience, creativity, and adaptability in the face of the pandemic, proving that with the right mindset, crisis can be turned into an opportunity.

Outlook of hotel industry stocks 

If you're looking to invest in the hotel industry stocks, there are a few key parameters to focus on. Firstly, hotels are capital-intensive and have long gestation periods, which can impact their free cash flow and return on capital employed over time. A hotel's revenue is based on its occupancy and average room rate, as well as income from food and beverage sales.

In Q3FY23, the hotel industry's performance was robust, driven by an improvement in revenue per available room (RevPAR) and an increase in the average room rate (ARR). The ARR saw a sharp rise of 56% YoY and 34% sequentially, even though occupancy levels have not yet crossed pre-COVID levels. 

Happening events to drive the market

Two major growth drivers for the hotel industry in India are the IPL and ICC Men's World Cup 2023, which are expected to generate significant travel and hotel demand. The arrival of the "big fat Indian wedding" is also expected to spur demand for hotels with multiple banquets and venues. Additionally, the G20 Summit meetings, foreign inbound travel, and new initiatives to promote domestic tourism are expected to keep occupancy rates high.

Conclusion

While the hotel industry faced many challenges during the pandemic, it has also presented many opportunities for investors. By focusing on key parameters such as occupancy and average room rate, as well as upcoming events and initiatives to promote tourism, investors can make informed decisions about investing in the hotel industry stocks.