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Hotel shares are going hot

March 03, 2003 12:10 IST
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Hotel scrips seem to be among the biggest beneficiaries of the Union Budget for 2003-04.

In fact, stocks of major hotel chains spiraled up in the first session after the Union Budget - ITC Hotels (up 9.80% to Rs 54.90), EIH (up 7.35% to Rs 190.65), Indian Hotels (up 5.58% to Rs 218.65), EIH Associated Hotels (up 5.26% to Rs 13), Asian Hotels (up 2.71% to Rs 87.05), Oriental Hotels (up 4.85% to Rs 80), EIH (up 4.09% to Rs 178) and Hotel Leela Venture (up 3.48% to Rs 17.85).

Budgetary incentives have been instrumental in perking up these scrips what with the abolition of expenditure tax on hotels, the retention of exemption on luxury tax by the Centre and the optional exemption/reduction of luxury tax levied by state governments. This will prove a relief for the sector as, on an average, luxury tax charged by state governments amounts to around 15%.

Now occupancy rates in hotels are likely to get a vertical boost. Already occupancy is increasing in hotels across major cities and leisure destinations like Goa, Kerala, Agra and Rajasthan. With the cut in taxes, hotel guests are likely to spiral further.

On the Budget day itself, the market capitalisation of 22 Hotels grew by Rs 177.23 crore (Rs 1.77 billion) or 7.11% to Rs 2,668.63 crore (Rs 26.68 billion) from Rs 2,491.40 crore (Rs 24.91 billion).

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