Hotel Industry Stocks - Quick Overview

           Indian Hotel Company Ltd

Indian Hotel Company Ltd             (updated - 18 Aug 2009)
With the economy in adownturn, Indian Hotels was not really expected to turn in good numbers for the June 2009 quarter. But occupancies, estimated at 40-45 per cent, were lower than estimated and coupled with low average room rates (ARR) resulted in the standalone top line coming off by 24 per cent, way below the Street’s expectations. Since fixed costs, such as expenses on employees, remained high, the operating profit margin crashed to 12.1 per cent from 31 per cent in the June 2008 quarter.

Had it not been for extraordinary income, the company would have reported a loss of Rs 27 crore. The second half of the year could see business picking up, though it’s likely to be a while before ARRs and occupancies move up meaningfully because neither foreign businesspeople nor tourists are likely to travel to India in large numbers anytime soon.

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Moreover, since Indian Hotels has several overseas properties, consolidated numbers could stay weak till the global economy recovers. The average occupancy at Indian Hotels was around 66 per cent in the year to March 2009 but is likely to be lower this year. A couple of the chain’s overseas properties could remain in the red. The Pierre in New York, however, will be soon reopened after being renovated and much depends on how it performs.

After all, the US is a key geography for Indian Hotels as it accounts for about a fifth of its revenues. It’s not simply that the business is dull. The company remains fairly highly-leveraged with adebt of Rs 4,600 crore at the end of March 2009, implying a debt to equity ratio of around 1.4. Revenues are expected to rise just about 15 per cent this year over the Rs 2,712 crore posted last year while net profits are expected to be in the region of Rs 100 crore.

The Indian Hotels stock has rallied about 18 per cent since May while the Sensex has gained 27 per cent. Given that the earnings growth will be weak, at least in the first half of the year, the stock could continue to underperform.
source - BS

Indian Hotel Company Ltd             (updated - 16 June 2009)
The Indian economy seems to be on the mend but with the global economy still in a downturn, it’s unlikely hotels in the country are going to be full in the hurry. Occupancies at Indian Hotels of around 66 per cent in the year to March 2009 were understandably lower than they had been in the previous year, partly because of the terrorist attacks at the Taj hotel in Mumbai and also because of the weak economic environment.

The hotel chain is understood to have commanded slightly lower Average Room Rates(ARR) during the year with the result that the stand-alone profits, dropped 38 per cent to Rs 234 crore. Not surprisingly, the consolidated numbers have been a lot worse—profits down nearly 100 per cent at Rs 12.46 crore—with some of the chain’s properties overseas incurring losses and the Pierre in New York remaining closed for a while for renovation.

The US, incidentally, is afairly important market for Indian Hotels accounting for just under a fifth of revenues. Which is why, even though worst may be over, it could take a while before occupancies and ARRs pick up in the overseas markets.
As for the home market, foreign tourists aren’t as yet flocking to the country and neither are business people. However, it’s possible things could start looking up in second half of the year. Analysts point out that Indian Hotels is highly leveraged with an estimated debt of around Rs 4,600 crore implying a debt to equity ratio of around 1.4 times.
Also fluctuations in currency rates have affected profits and the management has said that profits for the current year are higher by about Rs 15 crore because the value of foreign exchange borrowings have been restated. Revenues for Indian Hotels are expected to rise by about 25 per cent this year over the Rs 2,712 crore posted last year while profits could come in close to Rs 300 crore. The Indian Hotels stock has outperformed the market in the last three months but analysts believe the stock could take a breather since earnings growth will be subdued in the first couple of quarters.
source - BS