Morgan Stanley says The Leela is a pure play on India’s luxury hospitality boom; sees 35% upside in base case

Introduction: A Bullish Outlook from Wall Street Giant

In a recent report, global investment bank Morgan Stanley expressed strong confidence in Hotel Leelaventure Ltd, citing it as a "pure play" on India's booming luxury hospitality sector. The brokerage has assigned an 'Overweight' rating to the stock and sees a potential upside of 35% in its base case scenario, making it one of the standout picks in the Indian tourism and hospitality space.

India’s Hospitality Sector Witnesses Structural Tailwinds

India's luxury hotel industry is witnessing a robust recovery and expansion driven by post-pandemic travel resurgence, increased domestic tourism, rising disposable incomes, and a sharp uptick in premium and heritage tourism. According to industry estimates, India’s hospitality market is projected to grow at a CAGR of 10–12% over the next five years, with the luxury segment likely to outperform due to higher margins and limited high-end supply.

Morgan Stanley’s report underscores this trend, stating:

“India’s luxury hospitality segment is undergoing a structural transformation. With increasing affluence, brand consciousness, and the rise of experiential travel, The Leela stands to benefit disproportionately.”

The Leela: Premium Positioning with Strong Brand Equity

The Leela operates some of India’s most iconic luxury properties, including The Leela Palace in New Delhi, Bengaluru, Udaipur, and Jaipur. Its properties are often associated with opulence, heritage-inspired architecture, and exceptional service quality.

Morgan Stanley highlights that The Leela’s unique positioning gives it pricing power and insulation from competitive pressure that affects mid-range hotel chains. Furthermore, the company has a strategic asset-light expansion model and brand licensing agreements that allow it to scale without over-leveraging its balance sheet.

“The Leela’s limited but high-value inventory, strong brand recall, and international-grade service quality make it a key beneficiary of the luxury travel wave in India,” the report noted.

Financial Performance: Turning the Tide

Hotel Leelaventure Ltd has reported a steady improvement in financial metrics in recent quarters. Revenue from operations for FY24 saw a year-on-year increase of 28%, while EBITDA margins improved by over 300 basis points, driven by higher occupancy rates and average room rates (ARRs).

Analysts at Morgan Stanley also noted that The Leela’s debt levels have been brought under control following its restructuring and asset sale to Brookfield Asset Management in 2019, which gave the company fresh liquidity and a stronger financial foundation.

What Makes The Leela Stand Out?

Morgan Stanley’s investment thesis on The Leela revolves around five key factors:

1. Pure-play luxury focus – Unlike conglomerates such as IHCL (Taj) or EIH (Oberoi), Leela is more focused on the ultra-luxury market.

2. Limited supply, high demand – The luxury hotel segment in India is still underpenetrated compared to global peers.

3. Operating leverage – As fixed costs remain steady, any increase in occupancy or pricing leads to sharp profit expansion.

4. Event-driven catalysts – Upcoming global events like G20 extensions, ICC cricket tournaments, and increasing MICE (Meetings, Incentives, Conferences, Exhibitions) demand will support growth.

5. Brand monetization – The Leela has begun licensing its brand to third-party managed hotels, enabling asset-light scalability.

Risks and Challenges

Despite the optimism, Morgan Stanley’s report also lists some potential risks:

• High dependence on discretionary spending, which may falter in the event of an economic slowdown.

• Sensitivity to geopolitical and macroeconomic shocks, especially in tourism-heavy zones.

• Limited geographical diversification, with most properties concentrated in select urban and tourist hotspots.

However, the report emphasizes that the risk-reward ratio remains favorable, especially in a long-term context.

Investor Outlook: A Premium Bet for Long-Term Portfolios

The Leela’s stock has gained over 40% in the last 12 months, but Morgan Stanley believes the rally is far from over. The brokerage has assigned a target price implying a 35% upside from current levels under its base case, with further potential under a bullish scenario.

“Investors looking to play the India consumption and tourism story with a premium tilt should consider The Leela as a strategic long-term holding,” the note stated.

With India being increasingly viewed as a global luxury destination — bolstered by government tourism campaigns, infrastructure upgrades, and international events — Hotel Leelaventure may continue to ride high on structural tailwinds.

Morgan Stanley’s bullish call on The Leela reinforces growing investor confidence in India's high-end tourism and hospitality potential. As rising affluence fuels demand for luxury travel, and India positions itself on the global hospitality map, The Leela's unique brand identity, financial turnaround, and focused strategy could make it a compelling story in the years ahead.