Ventive Hospitality’s recent IPO announcement came at the perfect time for the company, but maybe not for investors. As the domestic IPO market is booming and the hotel industry has been experiencing an upswing, Ventive plans to raise up to ₹2,000 crore through a fresh issue of shares.
Industry experts believe that Ventive’s promoters are taking advantage of the current market excitement to cash out, as the hotel industry’s growth is starting to slow. There are signs of this in the form of reduced urban spending and slower growth in hotel occupancy rates. For example, major hotel companies saw only a 1% increase in their occupancy rates in FY24, reaching 75%. This is slightly higher than the peak occupancy rates of 71-72% during the last industry boom in FY06-FY07.
Premium Hotels Still in Demand
While the overall growth in the hotel industry may be slowing, there is still strong demand for premium hotels. Factors such as increased spending on experiences by younger generations, the rise of spiritual tourism, and the booming domestic wedding industry are expected to keep demand for premium properties strong in the near future.
A report by IDBI Capital highlighted that 2,706 new rooms were added in the premium hotel segment in the first half of this year. Out of these, 994 rooms (37%) were in the upscale category, while the remaining 63% were premium.
Ventive’s Mixed Performance
Ventive, which operates in the premium hotel segment, appears to be in a good position to benefit from this demand. However, the company’s performance has been somewhat mixed. While it had an impressive profit margin of 34% in FY24, the highest among its competitors, it also recorded the lowest occupancy rate at just 56%.
Most hotel companies saw a slight increase in occupancy rates during FY24, but Ventive’s occupancy actually fell by 7%. Despite having an average room rate of ₹12,690.40 (second only to India Hotels Company), Ventive’s revenue grew by only 11% to ₹478 crore. The company’s net profit increased by 27% to ₹166 crore in the same period.
Ventive, a joint venture between Panchshil Group and Blackstone, owns 11 luxury properties in India and the Maldives, operated by global brands like Marriott, Hilton, Minor, and Atmosphere. It also has three more properties under construction in India and Sri Lanka.
Has the Post-COVID Boom Ended?
After the pandemic, the hotel industry saw a huge surge in “revenge” travel, which boosted demand and occupancy rates. As a result, many hotel companies’ stocks performed exceptionally well, with the top listed hotel companies delivering average returns of 35% in 2024. However, newer entrants like Juniper Hotels and Apeejay Surrendra Park Hotels, which were listed in February, are down by an average of 10%.
Experts believe that the hotel industry’s growth may be nearing its peak. According to a fund manager from a mutual fund, investors who have already invested in hotel stocks have likely benefited from the industry’s strong performance. However, those looking to enter the market now, including through Ventive’s IPO, should be cautious, as the best growth opportunities may have already passed.
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