Synopsis:
Hotels are optimistic about future growth opportunities, foreseeing sustained prosperity in the industry. Amid evolving travel trends and consumer preferences, hotels are gearing up for expansion, positioning themselves to capitalize on the anticipated upsurge in demand.
The hotel industry has made a robust comeback following what one hotelier referred to as the "dark days" that lasted for nearly two and a half years due to the Covid pandemic. The recovery, which commenced in the second half of FY 22, has gained momentum, aided by a surge in tourist arrivals and the numerous G20 meetings.
Cricket excitement, the ensuing festive season, and the Christmas and New Year holidays are expected to sustain the positive momentum. Consequently, the average occupancy rates in the country are currently at approximately 65% across various segments and as high as 70% in major metropolitan areas.
Vinutaa S, Vice President and Sector Head (Corporate Ratings) at ICRA, noted, "The average room rates (ARRs) for premium hotels across India stood at Rs 5,900-6,000 in H1 FY24, reflecting a growth of 10-15% compared to H1 FY23. Some upscale hotels in leisure and gateway destinations even reported higher ARRs." This increase in ARRs was supported by strong demand, particularly given the relatively lower supply. Additionally, some hotels are in the process of renovating, refurbishing, and upgrading their properties, which is expected to further bolster ARRs in the future.
ICRA anticipates that the average room rates (ARRs) for premium hotels across India will likely range from Rs 6,000-6,200 in FY24, as compared to Rs 5,800-5,900 in FY23. This is expected to experience a further increase to approximately Rs 6,200-6,300 in FY25. While occupancy rates are projected to reach decade-high levels in FY24, the revenue per available room (RevPAR) is expected to remain at a 20-25% discount compared to the peak observed in FY08.
According to Rajiv Kapoor, the General Manager at Fairmont Jaipur, industry metrics are showing signs of improvement. The hotel has witnessed an 8% increase in the average daily rate (ADR) compared to the previous year. Kapoor further commented, "The industry's profit margins are on an upward trajectory. Last year, our margin was 50.5%, which has now risen to 51.6% this year."
Following the pandemic, domestic travel, especially what is referred to as "revenge travel," has played a crucial role in rejuvenating the hotel industry. The recent conclusion of the G-20 Summit, along with events like the Indian Premier League and the cricket world cup, has added to the industry's positive momentum. Pradeep Shetty, President-Designate of The Federation of Hotel & Restaurant Associations of India, noted, "The holiday season is expected to provide a further boost."
"The influx of foreign tourists has seen an increase, and the resorts sector is thriving," noted Shetty, who also serves as the President of the Hotel and Restaurant Association of Western India (HRAWI).
According to Vivek Shukla, the CEO of The Lalit Suri Hospitality Group, the hospitality industry is currently undergoing a period of remarkable growth, driven by a favorable economic outlook and a surge in both business and leisure travel. In recent years, significant improvements in the country's infrastructure, including a robust network of airways, railways, and roadways, have contributed to this growth.
Aside from the G-20 Summit and cricket excitement, the upcoming wedding season, meetings, incentives, conferences & exhibitions (MICE), and a renewed interest from global tourists are also expected to have a positive impact, according to Shukla.
Aashish Gupta, the consulting CEO of the Federation of Associations in Indian Tourism & Hospitality (FAITH), mentioned that the inbound tourism season has commenced but is still in the process of recovery. It has been affected by various factors, including the Russia-Ukraine conflict, issues in Canada, and the evolving situation in West Asia and the Middle East. Additionally, rising airfares and the necessity for extensive international marketing efforts will influence inbound tourism.
Regarding the 20-30% reduction in the employee-to-room ratio between fiscal years 2020 and 2022 by some segments of the industry, Rajiv Mehra, President of the Indian Association of Tour Operators, noted that retrenched employees have been rehired. In fact, there is currently a shortage of skilled manpower in the industry.
