Collecting hotel stocks up to 50% in FY26: Will GST 2.0 give them an extra boost?

The hotel sector warms up in FY26, with shares that rise to 50%. This wave is powered by consistent growth, a thriving demand and growing excitement around the upcoming GST Council meeting (GST 2.0), where expected tax reductions and simpler rules can give industry an extra boost. Reduced GST on hotel services could lower the costs for guests, increase affordability, increase demand and support the recovery of the sector after several challenging years.

Strong market performance so far

In FY26 so far, most hotel shares with market hoods of more than RS 1500 Crore have yielded impressive returns with double digits. Striking are Samhi Hotels and Royal Orchid Hotels, which have risen between 45-50%, while lemon tree hotels, ITC hotels, Mahindra Holidays & Resorts India, and Chalet -Hotels saw profits vary from 20-30%. In the meantime, the Indian Hotels Company (IHCL), the heavyweight sector, has remained relatively flat with a slight negative bias, according to data from ACE Equity.

Outlook in the industry: positive tail wind forward

In the Q1 FY26 review, Nuvama Institutional Shares predicts a strong second half for the sector, supported by seasonal travel tricks during festivals, winter tourism and the wedding season. It is expected that a persistent benefit gap is expected to push the average room prices higher in premium and luxury hotels. Renovation projects at Lemon Tree and Samhi hotels will also increase profitability in the next 12 to 18 months.

Expansion is underway – Lemon Tree has added 1,273 rooms by 14 new contracts, IHCL has more than 90 hotels in the pipeline, and Ventive signed a record deal with Marriott for 1,582 keys in India. Juniper is planning to double his room count by FY29, and Samhi develops more than 1,000 premium rooms among brands such as W and Westin.

Debt reduction remains a priority, in which lemon tree debt with RS 2.06 billion years on year and Samhi leverage after the capital infusion of GIC lowers.

The Q1 FY26 results from Lemon Tree showed growth powered by rising average room prices and occupation, despite geopolitical headwind. Current renovations and technology -upgrades have temporarily put pressure on EBITDA margins, but is expected to be completed by H1 FY27, which improves future profitability. The estimates of the turnover were slightly lowered, but the EBITDA predictions improved, maintaining a ‘buy’ rating and target price of RS 166, which implies an advantage of 17%.

Buy reviews on Leading Players

YES Securities’ Recent Q1 FY26 Review of the Indian Hospitality sector Highlighted Lemon Tree, Chalet Hotels, and Apejay Surrendra Park Hotels as Strong Buy candidates.lemon Tree Hotels has a Buy Rating with a Target Price of Rise Rision And Fee Pointing and Fee Pointinging and Fee Pointinging and Fee Pointinging and Fee Pointinging and Fee Pointinging and Fee Pointing and Fee Pointing Pointinging and Fee Pointing and Fee Pointing Pointing and Fee In ARR, LED by Strong Performances from Aurika, Red Fox, and Keys, With Aurikas Occupancy Up 26 points and Revpar rise 58%.

Chalet -hotels have a buy -rating with a target price of RS 1,090, which reports 26% YOY turnover growth, powered by higher average daily rates and fixed creation, despite a slight occupancy dip due to geopolitical tensions and new offer.

Apejay Surrenderra Park Hotels (ASHL) has a buy -rating with a target price of RS 235, which supports steady revenue growth by its boutique luxury positioning and unique F&B offers, with planned extensions that promise future tariff increases.

Strategic land acquisition increases the visibility of growth

The research by JM Financial underlines the recent victory of Lemon Tree in the E-auction of the Delhi Development Authority for a Prime 2.25 hectare plot in Nehru Place, New Delhi, to build a 5-star hotel. This movement marks an important step in expanding ownership and the Lemon Tree rental portfolio, which currently contains only two hotels with 256 keys.

The next 500+ important hotel in Aurika brand will significantly improve the growth prospects in the luxury segment. The project is expected to be financed by a combination of debts, internal structures and funds from the planned list of Fleurhotels, the special Lemon Tree real estate.

(Disclaimer: recommendations, suggestions, views and opinions of the experts are their own. These do not represent the views of economic times)