Branded hotels in India are expected to experience robust double-digit revenue growth this financial year and the next, driven by surging demand outpacing supply, according to a report from Crisil Ratings.
The agency projects that revenue for branded hotels will grow by 13-14 percent this fiscal year, followed by a slightly lower 11-12 percent growth in the next. This growth is largely attributed to the continued strength of domestic leisure and business travel, with additional support coming from the growing Meetings, Incentives, Conventions, and Exhibitions (MICE) segment, as well as a rise in foreign tourist arrivals.
The forecast follows a strong 17 percent growth recorded by the sector last fiscal, as per the Crisil report released on Thursday.
To meet the increasing demand, the pace of room additions, which accelerated last fiscal, is expected to further pick up. The rating agency predicts that hotel room supply will grow by 20 percent cumulatively over this fiscal and the next.
Operating margins for branded hotels are expected to improve by 100-150 basis points this fiscal, with similar levels expected to be maintained in the next. One basis point is equivalent to one one-hundredth of a percentage point.
“The domestic leisure segment will continue to drive growth, supported by rising travel aspirations and better regional connectivity. Additionally, the positive economic outlook and government initiatives such as ‘Meet in India’ to promote corporate events will support the business and MICE segments,” said Mohit Makhija, Senior Director at Crisil Ratings.
Makhija added that foreign tourist arrivals are expected to surpass pre-pandemic levels this fiscal year.
These trends are anticipated to push up average room rates for branded hotels by 6-7 percent this fiscal year, despite already being on a high base. However, room rate growth is expected to moderate to 3-4 percent in the following fiscal as significant new room capacities come online.
The number of branded hotel rooms is projected to increase by 8-9 percent this fiscal year, with further growth of 11-12 percent expected in the next. Leisure and non-metro destinations are set to account for 65 percent of these additions, while the top seven metros will contribute 25 percent. The remaining room additions are expected to be concentrated in emerging spiritual tourism destinations.
Pallavi Singh, Associate Director at Crisil Ratings, said, “The hotel industry is expanding more into non-metros and emerging leisure destinations as travelers seek more choices and infrastructure in these regions continues to improve.”
(Inputs from ANI)