Q2 preview: ITC Hotels, Lemon Tree, Juniper shares; brokerage sees up to 91% upside potential

Hotel companies are expected to report a healthy second quarter (Q2 FY27), with demand strengthening month-on-month (MoM), supported by leisure travel and MICE (Meetings, incentives, conferences and exhibitions) activity, brokerage Elara Capital said in a sector preview.

The domestic brokerage expects revenue per available room (RevPAR) to grow 11-13 per cent year-on-year (YoY), driven by a 200-400 basis points (bps) improvement in occupancy and around 6-7 per cent growth in average room rates (ARR).

Elara said business locations led ARR growth, while occupancy at these properties remained elevated. Leisure destinations, meanwhile, contributed to incremental occupancy gains.

However, the brokerage noted that the replacement of foreign leisure guests by domestic travellers has constrained ARR growth, as domestic guests typically generate lower ARR.

Preferred plays

Elara said it prefers Lemon Tree Hotels and ITC Hotels in the short term, while The Leela Palaces Hotels & Resorts is its preferred pick from a longer-term perspective.

The brokerage identified Juniper Hotels, The Leela and Indian Hotels Company (IHCL) as key beneficiaries of the BRICS event in Delhi, along with ITC Hotels and Lemon Tree Hotels.

For Juniper Hotels, RevPAR growth is being driven by higher ARR at Andaz by Hyatt in Delhi and a sharp expansion in occupancy at Grand Hyatt Mumbai, Elara said.

The brokerage said Chalet Hotels' Mumbai micro-market saw sequential improvement, while occupancy at Marriott's Bengaluru property remained weak amid the West Asia conflict. For Samhi Hotels, better booking visibility and robust ADR growth in Bengaluru, Hyderabad, Pune and Gurgaon supported growth, it said.

Chalet Hotels and Samhi Hotels continue to see some impact from the Middle East conflict on international bookings through the Marriott Bonvoy network, limiting RevPAR recovery at affected properties, Elara said.

Delhi, Mumbai events support Q2 demand

Elara said September saw stronger activity in Delhi, supported by BRICS, SEMICON India and the India-Afghanistan T20I series. In Mumbai, the Global FinTech Fest was held in September this year, compared with October last year, while IIJS also supported MICE demand.

Domestic air passenger traffic declined 6.3 per cent YoY to 12.1 million in August 2026 from 12.9 million a year earlier, the brokerage said.

Q2 FY27 also had five auspicious marriage days, compared with none in Q2 FY26. The number of dry days stood at seven, unchanged from the year-ago quarter.

Q3 outlook

Elara expects leisure travel to drive hotel demand in Q3 FY27, supported by several long weekends, Christmas and New Year's celebrations. Foreign arrivals typically peak in the third quarter, and their pace of recovery will influence ARR growth for luxury and upper-upscale hotels, it said.

Concerts and other events in Delhi-NCR, Mumbai, Bengaluru and Guwahati, along with events such as the India Mobile Congress, Bloomberg New Economy Forum, India International Trade Fair and CPHI India in New Delhi, and the Tech Summit in Bengaluru, are expected to support occupancy and ARR.

Elara maintained a positive medium-term outlook on the hotel sector, citing resilient demand despite geopolitical conflicts.

Stock targets

Elara Capital has an 'Accumulate' rating on Indian Hotels Company, with a target price of Rs 786, implying 9 per cent upside from the brokerage's assessed price. The Leela has a 'Buy' rating and a target price of Rs 669, indicating 17 per cent upside.

Chalet Hotels has a 'Buy' rating with a target price of Rs 1,081, implying 29 per cent upside, while Samhi Hotels also has a 'Buy' rating with a target price of Rs 200, indicating 29 per cent upside. ITC Hotels has a 'Buy' rating and a target price of Rs 213, implying 35 per cent upside.

Lemon Tree Hotels has a 'Buy' rating with a target price of Rs 165, indicating 54 per cent upside. Juniper Hotels has a 'Buy' rating and the highest potential upside of 91 per cent, with a target price of Rs 418.