Depreciating rupee to benefit Indian Hotels

MUMBAI: The depreciating rupee as against the dollar has worked in favour of India's luxury hotels, which have overseas operations. In the last one month, the stocks of EIH and Indian hotels have seen steep appreciation after weak investors' interest for a long period. The stock of Indian Hotels has surged by 15% in the last one month, while the stock of EIH has appreciated by 5%.

Beside, the exercising of warrants by the promoters of Indian Hotels, a major factor that has been encouraging for Indian Hotels is the depreciation of rupee. It is being observe that the tariffs of luxury hotels have become economical in dollar terms for foreign tourists. For Indian Hotels, foreign tourists account for 60% of the total demand. Hence, it is expected that the company would report revenues in the coming quarters as regards domestic operations. At present, Indian Hotels is clocking an average occupancy rate of 65%.

A report believes that the company has still scope to increase its tariffs since in the last four years the company has not changed its tariffs. Assuming an average occupancy rate of 65%, the report estimates that the company can opt for a tariff hike of 8-10%.

The only glitch is the company's international operations. The company's has three hotels in the US. Despite the appreciation in the dollar against the rupee, the company would not benefit amply since these properties are not making profits.