Thinking of investing in hotel stocks? Read this!

Hotel stocks are in the vogue. In the past year, several have scaled record highs, with some more than doubling in value. On a hot streak Shareholders of hotels have earned significant gains over the last year Company Market cap (Rs cr) 1Y price return(%) Benares Hotels 1,158 169.5 EIH 26,187 149.7 HLV 1,545 133.8 Chalet Hotels 14,707 93.9 Indian Hotels 80,438 79.1 Lemon Tree Hotels 10,081 66.4 Price data as of March 14, 2024 The rally was not pure euphoria either. Post-pandemic, the industry has been on a dream run. In FY22, the pent-up demand from the lockdown translated into soaring toplines. And in the last two financial years, the government's increased focus on tourism and infrastructure has kept the momentum alive. Unsurprisingly, hotel stocks are frequently featuring in several hot stock lists. So, here's a Value Research crash course on how to analyse the hotel industry. The nature of the beast Before you consider investing in any industry, it's crucial to evaluate if its characteristics align with your investment philosophy and risk tolerance. For example, several investors might not have the stomach for high volatility and should refrain from investing in cyclical stocks. Here are four traits of the hotel industry you must consider before investing. It is highly cyclical. While all industries experience cycles, the hotel industry ranks particularly high in terms of cyclicity. First, demand is linked to seasonal factors; demand often peaks in the latter half of the year, driven by holidays and weddings. Also, economic ups and downs affect how much people travel, leading to noticeable shifts in hotel revenues.