According to an Investment Information and Credit Rating Agency (ICRA) report, the Indian hotel industry is predicted to see double-digit revenue growth in FY24, driven by the continuation of domestic leisure travel, demand from Meetings, Incentives, Conferences, and Exhibitions (MICE), business travel, and an increase in Foreign Tourist Arrivals (FTAs). The ongoing ICC World Cup 2023 and the G20 conference have also helped the business, it continued.
The report further mentioned that the premium hotel occupancy across India is expected to reach approximately 70-72% in FY24, following a recovery to 68-70% in FY23. Average Room Rates (ARRs) for premium hotels across India are projected to be between Rs. 6,000 (US$ 72.14) and Rs. 6,200 (US$ 74.55) in FY24.
Although occupancy is anticipated to reach decadal highs, RevPAR is anticipated to stay at a 20–25% discount to the peak of FY08. The improvement of air connectivity and infrastructure, favourable demographics, and the projected growth in large-scale MICE events with the opening of several new convention centres in recent years, among other factors, all contribute to the medium-term demand outlook’s continued health.
The healthy demand amid relatively lower supply would lead to higher ARRs. Further, larger players would also benefit from revenues or shares of profits generated from hotel expansions through management contracts and operating leases.
According to Ms. Vinutaa S, Vice President and Sector Head, Corporate Ratings, ICRA Limited, with stable corporate performance and positive consumer attitudes, demand is predicted to stay high across markets in FY24. However, demand for a particular hotel would rely on factors like location, competition, and other dynamics specific to the facility. Additionally, domestic travel would be the main factor, even though FTA activity is probably going to increase in the second half of FY24.
She further added that Mumbai and Delhi, being gateway cities, are likely to report occupancy north of 75% in FY24, benefitting from transient passengers, business travellers, and MICE events. Even though Pune and Bengaluru may trail behind other markets, they should see notable improvements in FY24 over FY23, notwithstanding this.
In FY24, the ARRs would see a healthy year-on-year (Y-o-Y) increase, although it would still lag below the FY08 peak. Demand for mid-scale hotels was also impacted by the steep increase in the ARRs of premium hotels.
The report also mentioned that the continuation of many of the cost-rationalization initiatives implemented during the COVID era, along with the advantages of operating leverage, has led to a notable increase in margins when compared to pre-COVID levels. The ratio of workers to rooms is still about 15–20% lower than it was before COVID-19.
