Why Lemon Tree Hotels Share Price is Falling

India's hospitality sector has witnessed a resurgence in recent years, buoyed by a growing economy, rising disposable incomes, and increased domestic tourism.

This resurgence has been a boon for many hotel chains, propelling their stock prices to new heights.

Lemon Tree Hotels is a prominent name in the industry. The company has carved a niche for itself with its mid-priced hotels catering to both business and leisure travelers.

However, the company's stock price has exhibited a roller-coaster ride in 2024, oscillating between gains and losses. The stock managed to eke out a modest 0.8% return in 2024 so far.

Recently the stock has come under steep pressure, with a 14.8% decline in the last five days. What factors are driving this downturn?

Let's find out...

#1 Weak Quarterly Results

In its Q1 FY25 results the company reported a 20.6% increase in revenue compared to the same period last year.

However, despite this growth in revenue, the profit declined by 15.6% YoY. This decline in profit indicates challenges in managing costs or other financial pressures during the period.

On a sequential basis, revenue saw a significant drop of 18.1%. This decline highlights the cyclical nature of the hospitality industry, where fluctuations in demand can impact performance.

The profit also took a steep hit, decreasing 70.4% QoQ. This sharp drop in profit suggests a substantial reduction in profitability, possibly due to seasonal factors or increased operational costs.

Selling, general, and administrative expenses rose 6.4% QoQ. These expenses also increased by 19.7% YoY.

Operating income was down 41.7% QoQ, indicating a significant decline in the company's core profitability from the previous quarter. On a YoY basis, operating income decreased 1.5%, showing a slight drop in operating efficiency compared to last year.

The earnings per share (EPS) for Q1 was Rs 0.3, which was a 16.7% decline YoY. This drop in EPS reflects the overall reduction in profitability and the impact of rising expenses on the company's bottom line.

What Next?

Lemon Tree Hotels is preparing for a period of transformation and growth despite short-term challenges.

The company is undergoing a significant renovation for about half of its owned and leased properties. This renovation will temporarily increase costs and affect occupancy rates, as rooms will need to be completely shut during the process.

In the near future, the company's focus will be on completing these renovations efficiently while managing the impact on its financial performance.

Although the renovation will raise costs and reduce revenue from affected properties in the short term, it is expected to enhance the overall guest experience. This improvement in quality could lead to higher occupancy rates and better pricing power once the renovations are complete.

Its future strategy includes leveraging these upgraded properties to attract a more premium customer base. This could help the company increase its revenue per available room (RevPAR) and improve its overall profitability.

Additionally, the company may also consider expanding its footprint by exploring new markets, both domestically and internationally, to fuel future growth.

By upgrading its properties and enhancing its brand value, Lemon Tree is positioning itself for stronger future performance.

The success of these initiatives will be crucial for the company's ability to meet its future targets and maintain its competitive edge in the hospitality industry.

How Lemon Tree Hotels Share Price has Performed Recently

In the past five days, Lemon Tree Hotels share price tumbled 14.8%. In the past month, its share price is down 20.5%.

In 2024, so far its share price is up 0.8% and it is up 25.3% in the last year.

The stock touched its 52-week high of Rs 158.1 on 6 May 2024 and a 52-week low of Rs 92.5 on 14 August 2023.

About Lemon Tree Hotels

Lemon Tree is largest mid-priced and the third largest hotel chain in India overall.

It operates in the upscale segment and in the mid-priced sector, consisting of the upper-midscale, midscale, and economy segments.

Lemon Tree Hotels is one of the largest hotel chains in India, and owns, leases, operates, franchises hotels. The company delivers differentiated yet superior service offerings, with a compelling value proposition.

The group offers seven brands to meet guests needs across all levels viz. Aurika Hotels & Resorts, Lemon Tree Premier, Lemon Tree Hotels, Red Fox Hotels by Lemon Tree Hotels, Keys Prima by

Lemon Tree Hotels, Keys Select by Lemon Tree Hotels, and Keys Lite by Lemon Tree Hotels.

LTHL opened its first hotel with 49 rooms in May 2004. Today, the company has a portfolio of 160+ hotels, which includes over 100+ operational hotels and more than 60 hotels set to open in India and internationally.

For more details, see Lemon Tree Hotels' company fact sheet and quarterly results.

You can also compare Lemon Tree Hotels with its peers:

Lemon Tree vs Indian Hotels

Lemon Tree Hotels vs EIH

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