In this article on top Stocks of the Hospitality sector, we have curated top 5 Hotel stocks by Market Cap and analyzed the hospitality industry, impact of Coronavirus Crisis on the Hotel sector and spoken about the fundamentals of best hotel stocks in detail.
Top 5 Hotel Stocks by Market Cap in 2021
Hey friends! In 2020 businesses faced a negative impact due to covid. The worst affected sector (because of covid) was hospitality. Today we are going to talk about the hospitality sector. We will discuss about the entire business of this sector, covid's impact, and recent scenario in this sector.
In the second part of the article, we will talk about 5 such stocks that emerge out of India's hospitality sector and trade on the share market. We will tell you about the business of such stocks and discuss some financial numbers so that you get entire information about the hospitality sector.
India's Hospitality Sector
Without taking much time let's first talk about India's hospitality sector.
India's hospitality sector is important for a lot of things. It offers employment to a lot of people and the income generated from this sector is distributed well. A lot of businesses are directly dependent on this sector. Because of this hospitality sector is quite important.
Whenever we talk about the hospitality sector then one number is quite important- It is FTA (Foreign tourist arrivals). This tells the numbers of foreign tourists that came to India in the last one year. A high FTA is considered better for the hospitality sector. On arrival of tourists, the government will also have an e-visa collection. Besides this hospitality/hotel sector will also benefit from this.
Here we will not talk about 2020 as it was severely impacted by covid.
All the numbers that I will discuss belong to 2019 so that you get a better picture of the hospitality sector. In 2019 about 10.28 million FTAs came to India i.e. the foreign tourists that came to India were more than 10.28 million in 2019. The growth rate of FTAs as compared to the previous year is around 3.2%. This is a great number for FTAs in 2019.
Another important number that has emerged is e-Visa fee collection. In 2019 23% growth rate was seen in e-Visa collection in one year. FDI in the hospitality sector (Foreign direct investment) from Apr 2020-June 2020 was more than US$15 Bn. From here you can understand that a remarkable FDI flow was seen from Apr 2020-June 2020 in the entire hospitality sector.
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Covid's impact on the hospitality sector
Now let's talk about covid's impact on the hospitality sector. I will discuss this topic point by point.
The first important impact is on the hospitality sector's revenue. Let's assume that there is a hotel (in the hospitality sector). From where will it get revenue? The total will receive revenue when people will stay there by booking rooms in the hotel.
You would know that because of covid the entire hospitality sector was severely impacted. The quantum of revenue loss in the entire hospitality sector was Rs. 90,000 cr (due to covid).
The second point is an important metric for the hotel industry. It is revenue per available room. The more this number the better it is. When there is more revenue from a room then hotels will also get more revenue/profit. After covid arrived the revenue per available room fell significantly.
In Mumbai revenue per available room fell by 71.7% in quarter 3 as compared to the same quarter in 2019. While for Bengaluru (IT hub of India) this number went by more than 88% in quarter 3. From here you can understand that an important metric of the hotel industry was severely impacted because of covid. Whenever there is any unforeseen event then the perception and priorities of different industries change.
Over here when we talk about the hospitality sector then we will surely discuss the ANAROCK report. This report stated that there was a huge change in the perception and priorities of the entire hospitality sector.
In recent times the priorities have moved to safety and sanitization. A lot of hotels have moved towards sanitization, cleanliness, and safety. This report also tells that in recent times the domestic travel has seen a pickup.
But corporate sector where the hospitality sector depends still has a low demand. Corporate sector people are still using a virtual mode for meetings. Hence its overall demand for corporate is still low; while domestic demand has seen a slight improvement.
Deficient demand is seen in the corporate sector. The capacity addition expected in FY 2020 or 2021 was 11,500 rooms. But due to covid this the capacity addition has achieved only 10-15% level. The remaining number is positioned post-2020.
So this was the discussion regarding covid's impact that we discussed in detail. In the coming time, the demand pickup will be known. We can't speculate in this regard. The vaccine has just launched.
Its roll-out, distribution, and confidence among people can only lead to an increase in travel and a demand pickup. But speculating this timeline is completely wrong. We should not aim for doing this.
Top 5 Hotel Stocks and Share price of Indian Hotels
Now let's speedily move towards the second part where we will talk about 5 such stocks in the hospitality sector that trade on the Indian stock market. We will talk about each one of them and also discuss their financial numbers.
The Indian Hotels
The first stock for today's discussion is The Indian Hotels.
We discussed about this in the Tata Group of companies article. This is a Tata company- A hotel chain. Over here let me tell you an interesting fact. This is the oldest company of Tata Sons that was started in 1889.
Indian Hotels has 93 hotels in India. They operate and run them. They are spread in 55 locations. It has 16 Overseas hotels that operate in different locations.
The revenue of Indian hotels in quarter 2 was 75% down (YoY) But as compared to quarter to quarter we find that it was 79% up. Their revenue has started increasing. But if you compare the figures with last year then they are significantly low even now.
The target segment of Indian hotels is spread out through different brands. It tries to target different segments through Taj Hotels, Vivanta, and Ginger hotels.
The share price of Indian Hotels is around Rs.123. In the last one year, it has given a negative 10% return to its investors. In the last 6 months, this company has given a positive 55% return to its investors. The market capitalization of Indian Hotels is Rs.14,500 cr. Its debt-equity ratio is above 1. This company has reasonable debt.
EIH hotels
Now let's talk about the 2nd company that emerges from the hospitality sector.
Its name is EIH hotels. This is a flagship company of the Oberoi group. It is one of India's largest hotel chains. This company operates its brand through two hotels in India.
The first is the Oberoi group and the second is Trident. I will take you to my screen and explain their business overviews. The company's two major brands are Oberoi and Trident.
It has a total of 4572 rooms, 30 hotels, and 2 cruisers. Let's discuss the bifurcation of the two brands. Its Oberoi brand and Trident has 2340 and 2232 rooms respectively. Total 19 hotels operate under the Oberoi brand. While 11 hotels operate through the Trident brand. Not just in India but EIH hotel brands are spread outside India as well. Its brand is spread in Bali, Lombok, and Mauritius.
The current share price of EIH hotels is Rs.98. In the last one year, it has given a negative 30% return to its investors. But last 6 months return for the investors has been more than +60%. The market capitalization of the company is around Rs. 6000 cr. Its debt-equity ratio is around 0.25.
An interesting fact is that company's debt-equity ratio is low as compared to other players in the hospitality sector. This can be considered a remarkable point.
Chalet Hotels
Now let's talk about the third company. Its name is Chalet Hotels.
This company develops properties and operates those assets as well. Its major business is spread in cities like Bangalore, Hyderabad, and Mumbai.
This company has/operates more than 2,000 rooms. The key strength of this company is its strategic location. This company is strategically located in every corporate city. This company gets the advantage of this.
The total revenue of this company in Q2 FY 2021 was Rs.59 cr. But in Q2 FY 2020 the company's revenue was Rs.235 cr. From here you can understand that in recent times there has been a dip in the revenue of the company. (But as compared to) In Q1 the company's revenue was around Rs.55 cr. There has been a minor jump in quarter 2. But compared to last year their revenues are still low. The current share price of Chalet hotels is around Rs.183. In the last one year, this company has given a negative 40% return to its investors.
An interesting fact over here is that in the last 6 months this company has given a positive 40% return to its investors. The market capitalization of the company is around Rs.3,700 cr. Its debt-equity ratio is around 1.12.
Lemon Tree hotels
Now let's talk about the fourth company.
This is such a company in the list that has given the highest return to its investors in the last 6 months in the hotel sector. Its name is Lemon Tree hotels. In the last 6 months, it has given a positive 72% return to its investors. Lemon Tree Hotels is the largest player in the mid-price segment. On an overall basis, it is India's third-largest player in the hospitality segment.
An interesting fact about Lemon Tree Hotels is that in 2004 it started its journey with 54 rooms. Currently, it has 8,100 rooms that it operates through 80 hotels. Its business is spread in 50 cities. From here you can understand that in recent times it has exponentially grown. (for its investors).
In Q2 its total sales figure was around Rs. 48 cr. But the same figure(revenue) last year was Rs. 153 cr. Currently, its overall sales have fallen significantly. Its current share price is around Rs.42. Its market capitalization is around Rs.3,300 cr. In the last one year, it has given a negative 26% return to its investors.
The most interesting fact is that (I told you in the starting) this hotel company has given a positive 72% return to its investors in the last 6 months. The debt-equity ratio of the company is around 2.71. The company has significant debt as compared to equity.
Mahindra Holiday and Resorts India Limited
Now let's talk about the last company of today's discussion. Its name is Mahindra Holiday and Resorts India Limited.
This is one such company of Mahindra that works in the hospitality sector. The customers of this company are mainly its members. After becoming a member they take benefit of their hotels in the hospitality sector.
Now let's talk about the total members. There is a membership fee is charged for becoming a member. Mahindra has more than 2.5 lakhs members and it has more than 100 resorts that operate in and outside India.
The operating profit margin of the company is above 50%. This is a great number. But a red flag in the company is its high debt. Its debt-equity ratio is above 4. From here you can understand that the company has high debt as compared to equity investment.
The Q2 sales of the company was Rs.481 cr. As compared to the same time last year, it had sales of Rs.550 cr.
An interesting fact over here is that a significant delta was seen when we compared last year's revenues with the current years of other companies. But in the case of this company the delta is quite low. Its revenue is low but not as low as other companies.
The current share price of Mahindra holidays is around Rs.212. In the last one year, it has given a negative 8% return to its investors. In the last 6 months, the company has given a positive 29% return to its investors. The market capitalization of the company is around Rs.2,800 cr. Its debt-equity ratio is around 44. Because of this, we can understand that company has a huge debt.
We talked about the severe impact of covid on the hospitality sector. Besides this, we talked about 5 stocks in this regard. We don't give any recommendation to buy/sell any stock.
We make all articles for educational purposes. I hope that you liked today's article.
Comment below the name of the stock where one must invest (if planning to invest in a hospitality theme)
Happy investing!
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