The wave of robust demand was led by the sugar rush in leisure and corporate travel, a boost from international travel, sports tournaments, and so on. The G20 summit taking place in India has also opened avenues as an international tourism place.
These have been the main factors that have attributed to the increased occupancy and the revenue per room. The occupancy rate has started to normalize over the quarters and there is still plenty of headroom for it to go up.
The demand outlook gives encouraging signs of further growth. Resultantly, the Average Revenue per Room (ARR), has seen a surge beyond the pandemic levels. This looks promising as it is all set to climb up the ladder. Meanwhile, the depressed financials of the hotels have turned already favourable. The cost-optimisation measures taken by the company management have led to margin expansion and favourable ratios.
Foreign business remains subdued as the demand is not back in full force yet. However, the same has started to climb up the growth hill, pulling back from its down-cycle. The ARR is expected to inch up further as the international business grows.
Back home, top hospitality companies have been aggressively adding more rooms to their kitty. The supply is being increased in order to match the demand. The new inventory pipeline remains packed as the companies aim to take a large bite of the market share and profitability. In order to keep up with the pipeline and the cost that comes with it, there will be an upward revision of the prices further pushing the revenues. The aviation sector too has reported brilliant results supporting the strong opportunities in this space.
The show has just begun, given the healthy growth potential ahead. Investors should keep a long-term horizon and seek out opportunities in quality names within the theme, where the multiples have room to expand and the risk-reward has turned favourable. The stock prices seem to have already factored in the fast recovery, so buying on dips should be the strategy.Technical Outlook
Nifty rose by 29.30 points, gaining a meagre 0.16% this week. It has formed a shooting star candle on the weekly chart which is a bearish reversal signal. Nifty consolidated between the 18,530-18,730 zones during the week.
A triple top structure is visible on the daily chart with Nifty making swing highs on 19th Oct’21, 1st Dec’22 and 8th June’23 around the 18,600-18,900 zones. A strong close above the 18,700 level only will drive a further uptrend in Nifty.
The India VIX, known as the fear indicator, fell -0.04% during the week and closed at 11.12. However, the Put-Call Ratio (PCR), a sentiment indicator, reached its highest level of 1.429 in 2023 on 7th June. The FPIs, on the other hand, were seen steadily increasing their short positions in Index futures. Consecutive Short Buildup was observed in Future Open Interest Data as Nifty closed the week at 18,563.40.
The Index took resistance around the 88.6% retracement level of 18,665, drawn from the 1st December high of 18,887.60 to the 20th March low of 16,828, since the last three days. The Relative Strength Index (RSI), a momentum indicator, continued to move in a lower-high formation, keeping the negative divergence intact on the daily chart.
The level of 18,500, on the downside, will act as a strong support for Nifty. The move above 18,700 will come if call writers start to exit their positions. At the moment, the bears are having a firm grip on the 18,700 Strike. 44,000 will be the make-or-break level for Bank Nifty. A break will 44,000 can take Bank Nifty to 43,500 zones, where its next visible support is placed.