Hotel stocks are riding on high occupancies and ARRs to deliver handsome returns to investors, reports Priya Kansara in Business Standard. Even accounting for a correction in the range of 10-35% post May 10, when the Bombay Stock Exchange (BSE) slipped into roller-coaster mode, all the major hotel stocks have recovered smartly and given phenomenal returns in the last one year.

Leading the pack is Indian Hotels, owner of the Taj Hotel Resorts and Palaces, whose stock value rose by 73.22% to trade at Rs 1,120.60 on June 23. It was followed by East India Hotels, which owns The Oberoi Group, whose stock clocked a 57.56% growth to touch Rs 590. Hotel Leela came third with a stock quoted at 303.35 - a 52% growth in value. The other two hotels in the top five are the Asian Hotels, owners of the Hyatt brands in India (Rs 562.35; 88% growth) and Taj GVK, an affiliate of Indian Hotels which owns three hotels in Hyderabad and one in Chandigarh .

"Hotels stocks are quoting at attractive valuations and can be safe havens to park your money to get decent returns even for a short span of one year," says a stock market analyst quoted by Business Standard.

With the volume of business travel rising at an unprecedented rate, foreign tourist arrivals recorded an 11% year-on-year growth to touch 4.07 million in the 2005-06 financial year. Though still lower than the number reported by countries such as Egypt (6.1 million) and Thailand (12 million), for luxury hotels, already thriving in a market where demand far outstrips the supply of rooms, it translates into a seller's market.

Despite emerging as an international business hub, India has a woefully inadequate hotel infrastructure - with 1.5 lakh registered rooms, it is far behind China, which has a million rooms to offer. India 's room capacity, according to experts, must double in the next five years.

With average occupancy rates rising to 75% in fiscal 2005-06 are expected to rise further to over 80 per cent in next two years. Similarly, the average room rates (ARRs) are likely to increase by 20%. It's bad news for travellers, especially in Bangalore, where the ARR has touched Rs 11,100 (US$250 a night), but for hotel stocks, the going couldn't have gotten better.

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