Hotel Stocks FY26: War Risk, ARR Trends, Broker Calls

What changed for listed hotel companies

Early trends for Q4 FY2026 were tracking positive before the onset of the West Asia conflict, but brokerages now see near-term risks building for listed hotel majors. The immediate concerns are geopolitical uncertainty and softer average room rates (ARRs), both of which can pressure earnings in the coming quarters. Domestic travel demand is still described as robust, but foreign tourist arrivals are at risk of declining, which matters most for premium and luxury inventory. Brokerages broadly continue to like the sector’s medium-term setup, yet they flag that near-term growth and margin trends will depend on how long the conflict lasts.

Domestic demand holds up, but inbound travel shows stress

ICICI Securities analysts Adhidev Chattopadhyay and Saishwar Ravekar noted that domestic demand remained resilient through March, while geopolitical tensions had already started affecting inbound travel. The sensitivity is higher in luxury hotels because of their heavier reliance on international guests and higher ancillary spends. According to ICICI Securities, luxury hotels derive about 30% to 50% of guests from abroad and earn relatively higher revenue from food and beverages and MICE (meetings, incentives, conferences, and exhibitions) versus upper-upscale and upscale hotels. Cancellations for April to May were reported in the luxury segment, linked to uncertainty over international flights and higher travel costs.

What broker checks are saying about IHCL and ITC Hotels

Nomura Research, citing management commentary from Indian Hotels Company (IHCL) and ITC Hotels, said the war has had a limited impact on these chains so far. For IHCL, the direct exposure highlighted was its three hotels in Dubai under management contracts, contributing about 5% to 6% of consolidated revenue. Nomura analyst Akash Gupta said that since only the Dubai properties were affected, the impact on management fees should be limited. Even so, the company saw some domestic cancellations and extension requests tied to the conflict.

ARRs and occupancies: stable rooms sold, volatile pricing

ARR trends have been volatile, and that volatility is central to near-term earnings expectations. An HVS Anarock Monitor said January recorded the slowest growth in 14 months, with low-to-mid single digit ARR growth of 3% to 5% to a band of ₹9,400 to ₹9,600. The monitor attributed this to after-wedding normalisation and tapering demand after the festival peak. Occupancy stayed stable at 66% to 68%, which translated into 4% to 6% year-on-year growth in revenue per available room.

February peak and March moderation: event-led demand fades

Antique Stock Broking, led by Vikas Ahuja, expects the sector to continue showing strong operating performance, supported by corporate travel, MICE, large-scale events, and a resilient wedding segment. Average daily rates across major cities peaked toward the end of February, driven by event-led demand, including large international summits and conferences in Delhi such as the India AI Impact Summit 2026. Rates then moderated in early to mid-March as event-related demand tapered. Nomura estimated a 15% to 20% month-on-month decline, largely due to geopolitical events in West Asia driving cancellations.

Broker ratings: bullish medium term, watch near-term disruption

Despite the near-term noise, several brokerages remain constructive. Nomura maintained ‘buy’ ratings on IHCL and ITC Hotels, and expected 7% to 10% quarter-on-quarter and 8% to 9% year-on-year room rate growth for Q4 (January to March) FY26. ICICI Securities expects high single-digit ARR growth of 6% to 8% across hotels through FY28, assuming no extended geopolitical disruptions. ICICI Securities also said new asset additions and completions will be key for companies to deliver operating profit growth of 15% to 20% over 2024-25 through FY28.

ICICI Securities has ‘buy’ ratings on IHCL, ITC Hotels, Leela Palaces Hotels & Resorts, Chalet Hotels, Lemon Tree Hotels, and Brigade Hotel Ventures. Antique Stock Broking’s top picks were Chalet Hotels and Samhi Hotels, with target prices of ₹1,250 and ₹255, respectively. Antique also highlighted a demand-supply mismatch, noting that 65% to 70% of future supply is expected outside the top 10 cities.

IHCL stock moves and downgrades: what triggered selling

IHCL’s share price action also reflects how investors are weighing near-term trends and valuations. On 23 January 2026, Indian Hotels Company shares fell 2.01% to ₹643.35, despite strong annual performance showing revenue growth of 23.13% to ₹8,334.54 crore and net profit growth of 63.25% to ₹1,961.25 crore in 2025. The same coverage noted that quarterly results showed pressure, with September 2025 net profit down 44.84% year-on-year to ₹316.18 crore, while revenue was relatively flat.

On 7 January 2026, Morgan Stanley downgraded IHCL to ‘equal-weight’ from ‘overweight’ and cut its target price to ₹780 from ₹811. The stock fell over 3% and hit an intraday low of ₹703.30. Morgan Stanley also cited limited upside surprises in the revenue per available room cycle, cut its FY26-28 EPS outlook by 2% to 3% due to slightly lower RevPAR estimates and margins, and referenced an EV/EBITDA of 27.5x for FY27 as capturing the risk-reward.

Key data points to track

IHCL quarterly snapshot and financial metrics cited

Other metrics referenced in the coverage include an improved ROE of 17.09% and a debt-to-equity ratio of 0.02. Valuation metrics cited included a price-to-book ratio around 8.8 to 9.2 and a PEG ratio around 3.2 to 3.3. Over the last 12 months in one note, IHCL delivered a return of -15.95% versus the BSE500’s 7.21%.

Market impact: where investors are focusing

The market discussion around hotel stocks is currently split between operating demand and pricing power. Domestic travel and MICE demand are being cited as supports, but the West Asia conflict has introduced immediate uncertainty for inbound travel and luxury-led occupancies. With occupancies reported stable in some recent data, near-term earnings sensitivity shifts more to ARR and mix, especially cancellations that affect higher-yield categories. Brokerages are therefore monitoring month-to-month rate movements and how quickly event-led pricing normalises after the February peak.

Why the story matters for FY27 earnings visibility

For the sector, the key question is how durable the current demand-supply dynamics remain if geopolitics drags on and energy prices surge, worsening domestic macros into FY2027 as noted in the sector commentary. Brokerages that remain bullish are anchoring their calls on continued corporate travel, a steady wedding segment, and new supply being skewed away from top cities, which can support pricing in key markets. At the company level, investors are also balancing expansion plans with valuation comfort, with IHCL’s CEO Puneet Chhatwal outlining a roadmap to cross 700 hotels by 2030 without overleveraging the balance sheet.

Conclusion

Listed hotel stocks are entering FY27 with supportive domestic demand signals but more fragile inbound visibility, especially for luxury hotels facing April to May cancellations. The next set of updates on ARRs, occupancies, and management commentary on cancellations will be central to near-term expectations, while brokerages continue to track signing momentum and openings for medium-term growth.