Indian Hotels to Lemon Tree: Motilal Oswal sees up to 34% upside in hotel sector stocks

India's hotel industry is heading into the second half of FY27 with an unusual combination of growth triggers. Hotel rooms remain relatively limited in several markets. At the same time, weddings, corporate travel and large events are driving bookings.

According to domestic brokerage firm Motilal Oswal, the demand environment remains supportive. The brokerage has retained its 'Buy' rating on Indian Hotels Company , Lemon Tree Hotels and Ventive Hospitality.

However, the potential upside differs across the three stocks.

They have set a target price of Rs 870, implying around 22% upside for Indian Hotels Company, while Lemon Tree Hotels and Ventive Hospitality have got a target price of Rs 140 and Rs 750, respectively. Both Lemon Tree Hotels and Ventive Hospitality offer around 34% upside based on Motilal Oswal's estimates.

The brokerage has a 'Buy' rating on all three stocks.

What is driving this outlook? Here's what the brokerage says -

Hotel demand remains strong

According to the Motilal Oswal report, the sector is coming out of the Q2FY27 on a healthy note.Motilal Oswal expects 10-12% growth in Revenue per Available Room (RevPAR) during the quarter.

The brokerage expects Delhi-National Capital Region (Delhi-NCR) to outperform other markets. Mumbai is also seeing strong demand from corporate travel and events. Motilal Oswal said, "We expect 10-12% RevPAR growth in Q2FY27, led by the Delhi-NCR outperformance, resilient demand across cities, healthy corporate/MICE demand, and sustained pricing power."

Hotel sector stocks: Why the momentum may continue?

September ended on a strong note for the hotel sector. October bookings are also providing visibility. The next few months could get another boost from weddings and large events.

The wedding calendar is particularly important. According to the brokerage report, FY28 is expected to have around 95 auspicious wedding dates, compared with around 69 in FY27.

Motilal Oswal expects this to support hotel occupancy, room rates and revenue from weddings, banquets and food and beverages.

The brokerage said, "Growth momentum witnessed in FY27 is likely to sustain into FY28, supported by a stronger wedding calendar (95 auspicious wedding dates in FY28 vs ~69 in FY27), continued large-format events, and an estimated 18% CAGR in the Indian MICE market through CY33."

Large events can push room rates higher

Events are becoming another important demand driver. The 2026 BRICS Summit, for instance, resulted in a sharp increase in hotel room rates in Delhi, according to the brokerage report.

Hotels near Bharat Mandapam reportedly saw tariffs rise by two to four times during the event.

When demand rises quickly but room supply remains limited, hotels can increase prices.

Motilal Oswal said, "Large-scale events are emerging as a key pricing catalyst for the sector."

Northeast India emerges as another opportunity

The brokerage is also watching a less-developed hotel market in Northeast India.

As of March 2026, the region had only 3,674 branded hotel rooms, accounting for just 1.7% of India's branded inventory.

Motilal Oswal said, "Northeast India remains one of the most underpenetrated hospitality markets in the country."

Improving roads, airports and rail connectivity could gradually increase tourism demand across the region.

What investors need to watch

Motilal Oswal said, "We remain positive on the Indian hospitality and tourism sector over the near-to-medium term, led by healthy structural tailwinds, favorable demand-supply dynamics, and rising domestic travel fueled by increasing MICE activity, weddings, cultural events, and leisure and corporate travel."

For investors, the key factors to track will therefore be occupancy, room rates, corporate and MICE demand, weddings and the ability of hotel companies to benefit from tight room supply.