Branded hotels in India are set to experience strong double-digit revenue growth in the coming financial years, driven by rising demand outpacing supply.
The agency forecasts that revenue for branded hotels will grow by 13-14 percent in the current fiscal year, followed by a slightly lower 11-12 percent growth in the next. This growth is fueled by the ongoing strength of domestic leisure and business travel, along with the growing Meetings, Incentives, Conventions, and Exhibitions (MICE) segment and a rise in foreign tourist arrivals.
To meet the growing demand, hotel room additions, which increased last fiscal, are expected to accelerate further. Crisil predicts that hotel room supply will grow by 20 percent over the current and next fiscal years.
Operating margins for branded hotels are also expected to improve by 100-150 basis points this fiscal, with similar levels predicted for the following year. A basis point is equal to one one-hundredth of a percentage point.
Mohit Makhija, Senior Director at Crisil Ratings, stated, “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 like ‘Meet in India’ to promote corporate events will support the business and MICE segments.”
Makhija also noted that foreign tourist arrivals are expected to exceed pre-pandemic levels this fiscal year.
Despite high base rates, these trends are expected to push up average room rates for branded hotels by 6-7 percent this fiscal. However, room rate growth is expected to moderate to 3-4 percent in the following fiscal year as significant new room capacities are added.
Branded hotel room supply is projected to grow by 8-9 percent this fiscal year, with a further 11-12 percent growth expected next year. The majority of these additions will be in leisure and non-metro destinations, which are expected to account for 65 percent of new rooms. The top seven metro cities will contribute 25 percent, with the remaining additions focused on emerging spiritual tourism destinations.
Pallavi Singh, Associate Director at Crisil Ratings, said, “The hotel industry is expanding more into non-metro and emerging leisure destinations as travelers seek more options, and infrastructure in these regions continues to improve.”
