The continuation of domestic leisure travel, the demand from meetings, incentives, conferences, and exhibitions (MICE), business travel, and an increase in foreign tourist arrivals (FTAs) are all expected to support the Indian hotel industry’s double-digit revenue growth in FY24, according to a report by ICRA. It further stated that the current ICC World Cup 2023 and the G20 conference have both benefitted the business.
According to ICRA, premium hotel occupancy in India is expected to reach about 70-72% in FY2024, following a recovery to 68-70% in FY2023. Average room rates (ARRs) for luxury hotels in India are projected to be between Rs.6,000 and Rs.6,200 in FY2024.
Although occupancy is anticipated to reach decadal highs, RevPAR is anticipated to stay at a 20–25% discount to the peak of FY2008. The improvement of air connectivity and infrastructure, favorable demographics, and the projected growth in large-scale MICE events with the opening of several new convention centers in recent years, among other factors, all contribute to the medium-term demand outlook’s continued health, the statement read.
Higher ARRs would result from the solid demand and comparatively reduced supply. Furthermore, through operational leases and management agreements, larger players would also earn from revenues and a portion of profits from hotel expansions.
The study claims that a significant increase in margins above pre-Covid levels has been attained by the maintenance of a significant portion of the cost-rationalization initiatives implemented during the Covid period, in addition to the advantages of operational leverage. The ratio of workers to rooms is still around 15–20% lower than it was before COVID-19.
It further stated that while pass-through of cost inflation and stringent management over fixed cost increases have sustained profits, the firms have boosted their use of renewable energy. Larger hotel businesses have found that asset-light expansions increase their margins. Even if they are still far larger than pre-Covid levels, there may be some decrease in margins from the FY2023 levels as a result of hotels renovating and maintaining their facilities.
According to the statement, the recent 12 to 15 months have seen an increase in supply announcements and the start of delayed projects as a result of the solid demand rise. On the other hand, supply would fall short of demand, growing at a CAGR of 3.5–4% over the medium term. Issues with land availability presently prevent supply expansion in upscale metropolises and larger cities’ micromarkets. Rebranding and property upgrades are the main reasons for the increase in the supply of premium hotels in these locations, and greenfield developments are mostly located in the suburbs.
“Religious, corporate, and tier-II leisure locations witness large supply announcements. In addition, compared to pre-Covid levels, the cost of building a room has increased by 20–25 percent due to cost inflation, according to ICRA.
