Investors planning to take an exposure to the hospitality sector may be better off boosting their holdings in time-share or vacation ownership resorts companies, given their dependence on domestic travel and the strong potential for growth in the coming quarters.
At a time when other segments in the hospitality industry are struggling, vacation ownership resort companies have performed reasonably well. Mahindra Holidays, which has a 72% market share of India's vacation ownership market, has reported a better growth than hotels companies.
The company's net sales in the last five fiscals have grown at a compounded annual growth rate, or CAGR, of 13%, while its net profit has shown a CAGR of close to 5%. Compared to this, the financial performance of Indian Hotels Company-- the largest player by size in the hotels industry-- has been poor in the last five fiscals. Its net profits have fallen at a CAGR of 44%, while its net sales have grown at a meagre 4% during the same period.