Indian Hotels: Targetting business hotels - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

Indian Hotels: Targetting business hotels

Apr 14, 2001

The Indian Hotels Company Ltd (IHCL), India's largest hotel chain continues to see business hotels as its thrust area. Currently over 80% of its revenues still comes from its top five luxury hotels. However, as luxury hotels suffer more during the recession, due to their higher tariffs, the future growth for the sector lies in the business hotel segment. Being the industry leader IHCL, has years of experience and has realized that when the hotel sector is on an upswing the company benefits due to its strong presence in the luxury segment. However to leverage itself during tough times the company is now investing in the business hotel segment (a rung lower than luxury hotels) so as to cushion itself to some extent.

Infact over the years the company is likely to increase its revenue mix from the business hotel segment. The company's recent decision to increase its stake in an affiliate company, Piem Hotels Ltd is a pointer to this strategy of the company. IHCL has recently acquired a 9% stake in Piem Hotels, now increasing its stake to 50% from the earlier 41%.

Occupancy rates (%) 3QFY01 3QFY00
Taj Luxury Hotels 70% 66%
Taj Leisure Hotels 56% 54%
Taj Business Hotels 57% 66%

Piem Hotels, currently owns the Taj Residency in Nashik, Bangalore and Indore, and the Taj President at Mumbai. Besides increasing its presence in this company, IHCL has also decided to directly invest in this segment on its own. It has bought a 100 room property in Pune, and has also invested in three properties in Hyderabad.

Though currently investors may be concerned that returns from business hotels are lower than for luxury properties, in the longer run this stance of the company is sure to fetch it good returns. With the upcoming competition in the luxury hotel segment in the major metro cities of Mumbai, Delhi, Chennai and Calcutta over the next three to four years, IHCL's occupancies and average room rates at its flagship properties are sure to feel the pressure.

In the current financial year, IHCL's occupancies at its business hotels is depressed mainly due to the ongoing renovations at its properties Taj Connemara in Chennai and Blue Diamond Hotel in Pune.

ARR (Rs) 3QFY01 3QFY00 % change
Taj Luxury Hotels 6,337 6,118 4%
Taj Leisure Hotels 3,424 3,000 14%
Taj Business Hotels 3,030 2,233 36%

Hence while other hotel chains will be vying for a share of the pie in the luxury hotel segment, companies like IHCL will benefit due their presence in the business as well as leisure hotel segment. The leisure hotel market too is enjoying higher demand now due to higher domestic demand as well as steady growth in tourist arrivals in the past year.

On the current price of Rs 245, IHCL is trading at a 55% discount to its net asset value per share of Rs 541. It is trading at a price to earnings multiple of 9.3x FY01E EPS of Rs 26.4.

Given its recent renovations and expansions, the company's interest and depreciation costs have risen in the current financial year. Hence we expect IHCL to clock in a net profit of Rs 1,190 m in FY01E, a growth of only 5% YoY, despite higher operating margins.

Equitymaster requests your view! Post a comment on "Indian Hotels: Targetting business hotels ". Click here!


More Views on News

Indian Hotels Q4 Review: Reports Net Loss, Revenue from Operations Decline (Views On News)

May 3, 2021

Key takeaways from Indian Hotels Q4FY21 results.

THE INDIAN HOTELS 2019-20 Annual Report Analysis (Annual Result Update)

Dec 1, 2020 | Updated on Dec 1, 2020

Here's an analysis of the annual report of THE INDIAN HOTELS for 2019-20. It includes a full income statement, balance sheet and cash flow analysis of THE INDIAN HOTELS. Also includes updates on the valuation of THE INDIAN HOTELS.

Why Did Shares of Jubilant FoodWorks Rally Today? (Views On News)

Jun 16, 2021

The company sees a 90% recovery despite minimal dine-ins.

Why Did Burger King India Shares Plunge 7% Yesterday? (Views On News)

May 28, 2021

Key takeaways from Burger King India Q4FY21 results.

THE INDIAN HOTELS Announces Quarterly Results (4QFY20); Net Profit Down 42.9% (Quarterly Result Update)

Jun 11, 2020 | Updated on Jun 11, 2020

For the quarter ended March 2020, THE INDIAN HOTELS has posted a net profit of Rs 668 m (down 42.9% YoY). Sales on the other hand came in at Rs 11 bn (down 14.6% YoY). Read on for a complete analysis of THE INDIAN HOTELS's quarterly results.

More Views on News

Most Popular

Hotel Stocks Will Reward Investors (Fast Profits Daily)

Jun 8, 2021

This is why I'm bullish on the hotel and hospitality sector.

My 'Unlock' Investments (Fast Profits Daily)

Jun 11, 2021

The best unlock investments you can make in the market.

The Most Visible Sign of India's Revival is on Two Wheels (Profit Hunter)

Jun 9, 2021

Investing in the best stocks could result in wealth compounding on a massive scale.

How I Discovered a 400-Year-Old Open Secret to Extreme Wealth (Profit Hunter)

Jun 11, 2021

Charlie Munger's open secret about investing success.


India's #1 Trader
Reveals His Secrets

Secret To Increasing Your Trading Profits Today
Get this Special Report,
The Secret to Increasing Your Trading Profits Today, Now!
We will never sell or rent your email id.
Please read our Terms


Jun 17, 2021 (Close)


  • Track your investment in INDIAN HOTELS with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks