Indian Hotels

In the early 1900s, Jamsetji Tata was refused entry to Watson’s Hotel, one of the poshest hotels and an exclusive European-only establishment in Bombay at the time. This snub led the founder of the Tata group to launch India’s first luxury hotel in 1903, the Taj Mahal Palace, with the aim of rivalling the best in the world. The Taj was the first hotel in the country to have electricity and, more than a century on, it has become the crown jewel within Indian Hotels (IHCL), the hotel arm of the Tata group and the largest hospitality group across South Asia with a global portfolio of around 360 hotels.

Today, “Taj” is an iconic brand that is recognised across the world and is part of the reason why we invested in Indian Hotels. We also see the group as benefiting from emerging structural growth trends in the hospitality sector in India and across South Asia. As the middle class grows and Indians turn increasingly affluent, we are seeing consumption preferences change and aspirations evolve. With this comes the rise of premiumisation, experiential travel and brand consciousness, all of which plays into Indian Hotels’ rich heritage and strong branding. Indian Hotels is expanding its portfolio to include more upscale and luxury hotels, which are in high demand.

Travel and tourism are also among the fastest-growing economic sectors in India. The tourism industry regained its 5% contribution to India’s GDP in FY23, and the World Travel and Tourism Council expects this number to reach the global average of 10%, as the industry grows 7% annually over the next decade. This positive outlook is borne out by the latest industry numbers, which also highlights a demand-supply gap. Occupancy is rising, room rates are firming and revenue per available room (RevPAR) is also increasing. In February 2025, hotel room occupancy increased by 2-4% compared to last year. The average room rates (ARR) went up by 14-16% year-onyear, crossing Rs 10,000 for the first time, while RevPAR also rose by 19-21%.

Crucially, domestic tourism has sustained the sector post-pandemic. Religious tourism accounts for over 60% of domestic travel in India. This is not lost on the central government, which is investing to boost spiritual journeys. States like Uttar Pradesh are developing tourist circuits and Uttarakhand and West Bengal are enhancing infrastructure for pilgrims. A rebound in foreign tourist arrivals has also helped, along with India’s rising appeal as a MICE (Meetings, Incentives, Conferences, and Exhibitions) destination. Key cities like Delhi, Bangalore, Chennai, and Hyderabad are seeing strong demand for business travel, while leisure destinations like Goa and Rajasthan are also performing well.

Within this promising landscape, Indian Hotels’ management remains optimistic about both the short-term and medium-term outlook, citing sustained growth in demand. The group recently reported impressive quarterly results with revenue growth of 29% year on year and EBITDA growth of 32%, according to the company’s quarter 4 results. The company plans to add 17,600 keys in the next four to five years, adopting a mainly asset-light model which will help further boost its already healthy return metrics, while its digital initiatives and loyalty programmes are also seeing a good uptake.

From our perspective, Indian Hotels serves as a strong proxy for the under-penetration of the branded hotel segment in India and the broader infrastructure development and economic growth promise of the entire country.

Indian Hotels has also impressively grown beyond what its founder Jamsetji Tata once said, “If you cannot make it greater, at least preserve it.”

Companies selected for illustrative purposes only to demonstrate the investment management style described herein and not as an investment recommendation or indication of future performance.