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C. Raja Rajeshwari

EIH: Hold ITC Hotels: Hold Hotel Leela Venutre: Buy, high risk Taj GVK Hotels: Buy Indian Hotels: Buy

THE optimistic outlook for the industry and good quarterly results have pushed hotel stocks to higher levels. The stocks surged after the 2003 Budget, thanks to the sops offered to the industry.

SARS, however, did have a debilitating effect, with investors turning wary and dumping the stocks. And in April and May, with occupancy levels remaining flat,the stocks found less favour. However, with occupancies in June higher than in the previous year , select stocks have resumed an upward journey.

The stocks that attract maximum trading interest are Indian Hotels, EIH and ITC hotels. Of late, though, relatively low-priced stocks such as Taj GVK Hotels and Hotel Leela Venture have caught investor fancy.

ITC Hotels, a 70 per cent subsidiary of ITC, posted a turnaround for the year ended March 2003. The company operates in the all the market segments — from high-end luxury to budget hotels. With the revival in business travel, ITC Hotels might reap the rewards of this upturn.

EIH's performance has been lacklustre over the past two years. However, there is likelihood that the company could become a part of the consolidation process in the industry. ITC owns a 14.24 per cent stake in the company and if the former raises its stake, an open offer would become inevitable and may bring with it scope for gains.

Hotel Leela Venture (HLV) owns three five-star deluxe properties at Mumbai, Goa and Bangalore. Recently, HLV tied up with General Hotel Management of Singapore for marketing and operating its Goa property. The company has also revived its Udaipur project — a seven-star luxury hotel. However, the company carries a huge debt burden, which is cause for concern.

Taj GVK Hotels has three hotels at Hyderabad catering to various segments of customers — Indian Hotels has a 25.52 per cent equity stake in the company. The Chandigarh-based Punjab Hotels, which it recently acquired from Indian Tourism Development Corporation, would augur well in the long run.

Indian Hotels had higher occupancies in June. The company is also looking at entering, among others, the Chinese and American markets. Domestically, it plans to open luxury apartments, spas and wildlife game parks. These augur well for the company in the long run. Hence, shareholders with a medium-term perspective can consider exposures at current levels.

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