Hotel stocks to check-in | Why buy Leela, Lemon Tree, ITC Hotels ahead of Diwali, holiday season? JM Financial explains

Hotel stocks could remain in focus ahead of the Diwali and holiday season, with JM Financial maintaining a constructive view on the sector on the back of resilient domestic travel demand, favourable demand-supply dynamics and sustained pricing power. According to the brokerage, the hotel industry’s RevPAR (revenue per available room) is expected to grow 12–13% year-on-year in Q2 FY27, extending the momentum seen in the previous quarter. The growth is expected to be driven by resilient discretionary spending on leisure, staycations and social events, along with robust MICE demand and sustained corporate travel. Delhi-NCR, Mumbai among key demand drivers JM Financial’s channel checks suggest that Delhi-NCR could emerge as the standout market in Q2 FY27, supported by an uptick in demand around the 2026 BRICS summit. Mumbai, meanwhile, is expected to benefit from robust corporate and event-led demand, including GFF 2026. The brokerage said business on the books for October 2026 remains healthy, setting the sector up for a seasonally strong second half of FY27. Demand momentum is expected to remain firm through the rest of the year, supported by a strong events pipeline, a favourable wedding season and resilient domestic leisure demand.JM Financial noted that the number of auspicious wedding dates is expected to be higher this year, with more than 90 days in FY27 compared with around 70 days in FY26.Leela expected to outperformAmong the companies under its coverage, JM Financial expects Leela Hotels to post the highest same-store RevPAR growth of 15–16% in Q2 FY27, followed by IHCL at around 14%.The brokerage expects Leela to remain a clear outperformer, with revenue growth of 22% YoY, supported by industry-leading RevPAR growth of around 16% and a 13% rise in average room rates (ARR).For Leela Hotels, JM Financial has rolled forward its valuation to September 2027 while retaining its target multiple of 20x. This has resulted in a revised target price of ₹685, up from ₹610, with the brokerage maintaining its ‘Buy’ rating.Lemon Tree, ITC Hotels also among top picksJM Financial expects ITC Hotels to report revenue and EBITDA growth of around 15% and 18%, respectively, supported by the ramp-up of newer properties. Domestic RevPAR is expected to grow around 10% YoY.For Lemon Tree Hotels, the brokerage expects occupancy to improve by around 370 basis points YoY, while ARR is estimated to rise 6%. Revenue and EBITDA are expected to grow 14% and 16%, respectively.“Our preferred picks in the space are Leela, Lemon Tree and ITC Hotels,” JM Financial said, citing healthy domestic travel demand, favourable demand-supply dynamics and sustained pricing power.Hotel sector margins likely to improve The brokerage expects most companies under its coverage to report year-on-year EBITDA margin expansion in Q2 FY27, supported by a favourable revenue mix. Brigade Hotels is expected to see the strongest margin expansion of 345 basis points, while Chalet Hotels could see margins improve by 189 basis points, according to JM Financial. For the broader sector, the brokerage remains positive on the demand outlook, although it flagged some risks. What are the risks? JM Financial said a moderation in ARR growth could pose a risk, particularly as room rates are already 40–45% above pre-Covid levels. An unexpected sharp slowdown in the economy and renewed geopolitical escalation that affects domestic or inbound travel demand are other key risks to its outlook. Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.