No matter the disruption, you’ll still need bags to travel. Have you invested in Safari or VIP?
You’re absolutely right. We can do a lot of things digitally, but traveling should be a physical experience. We have been running Indian hotels for quite some time. In fact, from the early days of Covid, we remain very constructive on Indian hotels and the general outlook for the hospitality industry as such.
We are exposed to VIP Industries in the luggage segment and we continue to own them both. They’ve done pretty well for us and, as you rightly said, the outlook or the momentum for the business probably continues to remain strong and the companies or industry segments stand to be the big beneficiaries of the tendency. After a very long time, almost a decade, we are witnessing an environment where, especially in the hospitality industry, the demand is much higher than the supply, which effectively means that the industry is experiencing a power of price fixing after almost a decade.
This trend will continue for at least the next four to five years. Given the strong resurgence of people wishing to travel either for holidays or for business, forced in recent years because of Covid, luggage and bag companies are also benefiting. In this sense, we remain positive on the whole trend.
What do you think given that they have created a new category by offering a 350 CC version of Hunter?
I think this is a smart strategy as far as business is concerned, as Eicher clearly dominates the segment with over 90% market share. Obviously, they are constrained by the overall growth of the segment to grow or want to grow faster. They really need to expand their potential pool of customers and that is what they have effectively tried to do by launching this 350 CC at around 15-20% lower price than the existing classic 350.
“ Back to recommendation stories
It effectively helps some customers of some of the other brands like Pulsar and others to migrate to Hunter 350. It becomes the entry level brand for Eicher. In fact, what it will do for Eicher is that it will help increase volumes probably with a somewhat low margin, but at the same time it will also expand its potential pool of customers and probably help in the medium term. to generate much stronger growth given its dominance in the 350 CC plus motorcycle segment. I think from a medium to long term, this makes imminent sense and that’s why we’ve seen a strong rise in the stock over the past four to five months. Strategically, it’s just the right decision. It’s just that the stock has moved a lot over the past six months and there may be some profit taking.
In an otherwise weak market, Indian Hotels is at the peak of its life. , also hold up in the green. What would be your best bet in this space?
I think the sector is in the midst of a very strong demand environment. Usually, the second quarter tends to be a little lean or weaker quarter for tour operators, especially hotel companies, but this time around, the second quarter has been very strong and enters the seasonal third quarter and the second seasonal half, probably Indian Hotels or the entire hospitality industry will report numbers that will likely be the strongest they’ve ever reported in the last decade.
We love industry leader Indian Hotels and have it in all of our wallets. The hospitality industry is at a point where the industry, after a very long time, is experiencing strong pricing power as demand outstrips supply in the hospitality industry and occupancy rates are significantly higher, probably the highest of the last decade.
I have come across an anecdotal situation where in many towns and hill stations outside of Mumbai and other key metropolitan cities, hotels are completely sold out during festival season. In addition, we have a record number of business trips and MICE activities, which contributes to this. Additionally, we are also in the midst of a wedding season which, again, will be strong. So overall, this year is going to be a very good year for the travel industry as a whole and for the hospitality industry in particular.
I think it’s just not a year, but the hospitality industry will likely have very strong demand momentum and pricing power over the next three to five years.
(Disclaimer: The recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)