Icra Expects Indian Hotel Industry To Grow By 13-15% In FY2024

Icra Expects Indian Hotel Industry To Grow By 13-15% In FY2024

Icra Expects Indian Hotel Industry To Grow By 13-15% In FY2024

The rating agency Icra estimated pan-India premium hotel occupancy at 70 to 72 per cent in FY2024, after recovering to 68 to 70 per cent in FY2023.

Pan-India premium hotel average room rates (ARRs) are expected to be at Rs 6,000 to 6,200 in FY2024. While the occupancy is expected to be at decadal highs, the RevPAR is expected to remain at a 20 to 25 per cent discount to the FY2008 peak.

Consistent improvement in consumer sentiments despite the inflationary environment, stable corporate performance, and domestic air passenger traffic inching above pre-Covid levels augur well for travel and hotel demand. The demand recovery has been strong in the last year, and Icra anticipates it to continue in FY2024 as well.

Sustenance of domestic leisure travel, higher bookings from meetings, incentives, conferences, and exhibitions (MICE) and business travel, along with an increase in foreign tourist arrivals (FTAs), would support demand. The industry is also likely to benefit from specific events like the G20 summit and the ICC World Cup 2023, it added.

Vinutaa S, Vice President and Sector Head– Corporate Ratings, Icra said, “Gateway cities like Delhi and Mumbai are likely to top the occupancy chart at 75 per cent plus in FY2024. Demand is expected to remain healthy across markets, although Bengaluru and Pune are likely to be laggards compared to other key cities. While the G20 summit would support occupancy across cities in FY2024, improved economic activity and business associations stemming from these meetings are likely to translate into incremental demand for hotels over the medium term.”

He added that Icra expects an improving trend in ARRs as well across markets in FY2024, driven by healthy occupancy. Further, mid-scale hotels have also witnessed traction across cities and are likely to continue reporting healthy ARRs and occupancy in FY2024.

The rating agency estimated a 13 to 15 per cent revenue growth for the Indian hotel industry in FY2024, notwithstanding the potential impact on demand from exogenous shocks, if any. Sustenance of a large part of the cost-rationalisation measures undertaken during the Covid period, along with operating leverage benefits, resulted in a sharp expansion in margins.

Its sample set, comprising 12 large hotel companies, reported operating margins of 32 per cent for FY2023, against 20 to 22 per cent pre-Covid.

While there could be some moderation in margins from these levels with an increase in some cost-heads, including refurbishment/maintenance, the margins are still expected to be higher than the pre-Covid levels over the medium term.

“The staff-to-room ratio remains below pre-Covid levels and is expected to continue to be so going forward as well. Accordingly, Icra has a positive business outlook on the Indian hotel industry,” it mentioned.

Leave a Reply

%d bloggers like this: