Shares of hospitality companies were buoyant in early morning trade today with the likes Kamat Hotels India Limited, EIH Ltd, EIH Associated Hotels Ltd all trading in green. This upswing in the stock prices could be attributed to the fact that the hotels could expect to see room revenue rising at about 11-13% CAGR over the next five years according to the study by CARE ratings.
The shares of companies like Royal Orchid Hotels Ltd and Kamat hotels were up 7.13% and 16.40% respectively. Another key reason for the rise in the share price of hotel companies is the benefit of GST for mid-sized hotels (below Rs. 5,000 rates) and very less capacity addition in the hotel industry. Additionally, the companies like Royal Orchid Hotels are moving towards asset light model which is management contracts rather than setting up hotel properties. This will results in improved capital efficiency for hotel companies moving towards this model.
Also according to data compiled by VC Circle hotel deals are slowly picking up in India after a slump in 2016 as institutional investors and hospitality firms show increasing interest in acquiring assets. However the hotel industry could be garnering interest from investors on the backdrop of improved performance during the past one year.