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HomeBusinessHotels to see 9-11% Revenue Growth in FY25: CareEdge Ratings Report

Hotels to see 9-11% Revenue Growth in FY25: CareEdge Ratings Report

MUMBAI: Robust demand coupled with gradual alignment of demand-supply of branded hotel room inventory will see the hotel industry end at

RevPAR growth

of 12-14 per cent in FY 24, estimates

CareEdge Ratings

. The growth momentum in the hotel industry is expected to be sustained in

FY25

, resulting in likely y-o-y

revenue growth

by 9-11% backed by healthy domestic leisure and business travel and complemented by increasing

foreign tourist arrivals

, contributing to an improved credit profile for industry players, it said.

This will make it the third straight year of an upcycle. “Pan-India, average room rates (ARRs) are expected to be around Rs 7,200 to Rs 7,400 in the current fiscal, which is likely to rise further to Rs 7,700 to Rs 7,900 in FY25. The hospitality sector’s commendable recovery in occupancy rates and average rates has in turn cushioned its RevPAR, estimated to have climbed to an average range of Rs 4,800 to Rs 5,000 by the end of FY24 up from the 4,300-range registered in FY23 and is expected to grow by 9-11% in FY25 on the high base of FY24,” it said.
While supply of room inventory is expected to experience a delayed catch-up due to the protracted setup period for greenfield hotels, organized players are strategically expanding their footprint in an asset-light manner. “Anticipated supply growth is estimated to range from 4% to 5% compounded annual growth rate over the next 4-5 years, adding over 50,000 rooms to the country’s current inventory of approximately 160,000 branded rooms,” it said.
Currently, supply is more balanced across different segments, as compared to an earlier mix that was heavily weighted towards luxury and upper upscale hotels, the report said. “Over the years the supply concentration in the luxury-upper upscale segment has reduced from 39% in FY15 to 32% in FY23 and is expected to reduce further to 26% by FY27 as the majority of new supply is coming in Upscale, Upper midscale and Midscale/Economy sections. This reduction in supply share is despite new rooms being added in all the segments; better balance has arisen due to material supply growth by rooms in upscale, upper midscale and midscale-economy segments,” it said adding that many global/Indian hotel operators have also launched sub-brands with a clear focus on quality within key destinations which not only helps them in swiftly building a pool of quality inventory with presence across segments but also aids in better allocation of their capital.

“On the back of the surge in domestic demand and underlying GDP growth, the players in the industry are witnessing strong capacity utilization. With the sharp increase in capacity utilization combined with stable supply growth, hotels are seeing significant ability to yield the demand for branded hotels on an ongoing basis which shall support the strong ARR at current levels or drive some growth as well. While the material contribution from international travelers is yet to materialize, currently the domestic demand is the key driver. With the current travel momentum expected to continue and anticipated demand likely to outpace current supply, FY25 is likely to witness steady high occupancies in the range of 68-70% and continued RevPAR growth at 9-11% which shall aid in overall improvement of the credit profile of the players in the industry”, said Ravleen Sethi, Associate Director, CareEdge Ratings.