The Indian hotel industry has seen strong growth in the last few years. Post-COVID, as more Indians have begun travelling domestically and now as business travel is beginning to look up again, premium and luxury hotels have seen rising demand.
Against this backdrop, investors have lapped up shares of some of the listed hotel companies, like Indian Hotels, EIH and Chalet Hotels, which have jumped 92 per cent, 75 per cent and 57 per cent, respectively, over the past year. The listed hotels segment is now set to expand, with at least three companies likely to go public.
Together Schloss Bangalore, which operates properties under the Leela brand, Ventive Hospitality, a unit of Pune-based Panchshil Realty, and Brigade Hotel Ventures, a unit of realty company Brigade Enterprises, are expected to cumulatively raise around Rs 8,000 crore, pointed research firm Jefferies. Of the total money being raised, Rs 6,000 crore will be fresh fundraising.
Already this year, there have been three IPOs in this space. Samhi Hotels, Juniper Hotels and Park Hotels, cumulatively raised Rs 4,000 crore. Separately, Chalet Hotels, real estate developer K. Raheja Corp's hospitality arm, which had gone public in 2019, raised Rs 1,000 crore via a qualified institutional placement.
Cigarettes to software major ITC is also expected to demerge its hotel business and list it separately. It had already been approved by the National Company Law Tribunal in October.
What's driving this IPO frenzy and strong investor interest in the hospitality industry?
"Travel demand in India has remained healthy even post the growth normalisation seen in many consumer segments post COVID. Industry pricing across segments remains elevated without hurting growth materially, suggesting that Indian consumers are prioritising travel over many other spending categories, also aided by macro trends. The demand and supply growth imbalance continues to support growth in average room rates (ARR) for the hotel industry," pointed out Jefferies analysts Prateek Kumar and Raghav Malik.
According to IBEF (India Brand Equity Foundation), the market size of the hospitality industry in India is expected to grow to USD 31 billion by 2029 from USD 24.61 billion in 2024. With demand expected to outpace supply, revenues are expected to remain firm. A report by Axis Capital sees demand growing at a 12 per cent compounded annual rate over FY2024-2027, while supply is estimated to rise at a 9 per cent CAGR.
Among the three new companies that are expected to go public, Ventive and Schloss (Leela) will be among the top five listed players by revenue, EBITDA (earnings before interest, taxes, depreciation and amortisation), noted Jefferies. The two hotel companies will also be among the top five in terms of average room rates and RevPAR (revenue per available room), given their higher mix of luxury hotels, it added.
All three companies are comparatively smaller than some of the listed players, like Indian Hotels. The operator of the Taj Group of hotels has a room inventory of over 25,000 keys. In comparison, the inventory of the three upcoming IPOs is in the range of 1,600-3,400 keys, according to Jefferies. All three have expansion plans, which will see them cumulatively add around 2,000 rooms in the coming years.
