Hotel industry in India is expected to clock in double-digit RevPAR growth, in the range of 12-15 per cent, in the fourth quarter of FY24, said analyst reports. According to Elara Capital, the 12-15 per cent RevPAR growth in Q4 is likely to be driven by a 200 bp improvement in occupancy and a double-digit rise in average room rate (ARR). “Healthy economic growth, robust demand for meetings, incentives, conference and events (MICE), scheduling of various events, high double-digit growth in foreign tourist arrivals and 5 per cent growth in domestic passenger traffic were key drivers for Q4,” said Prashant Biyani, Vice President – Institutional Equity, Elara Capital.
According to HVS Anarock, Feb’24 was a strong month for the hotel industry with industry RevPAR of Rs 6,497, up 10 per cent above Feb’23 levels with ARRs being 8 per cent higher YoY while occupancies were also up by 200bps YoY at 72-74 per cent.
ICICI Securities said that March 2024 is expected to report double digit YoY RevPAR growth and FY24E is expected to be another stellar year for the Indian hospitality industry. “With various industry estimates pegging industry supply CAGR at 5–6 per cent over FY24- 28E vs demand CAGR at 10 per cent, we expect high single-digit ARR CAGR of 7- 9 per cent across hotels over FY24-26E with occupancies rising 100- 200 bps each in FY25E and FY26E,” said analyst report by ICICI Securities.
Per the ICICI Securities report, the Feb’24 industry RevPAR is seen up by 10 per cent on-year to Rs 6,497 with ARRs rising 8 per cent YoY to Rs 8,900 and occupancy up 200 bps YoY to 73 per cent. During the period, it added, Mumbai, Delhi and Chennai crossed the 80 per cent occupancy mark while Delhi and Hyderabad clocked YoY ARR growth of 17-18 per cent.
New openings up 26%
According to HVS Anarock, the industry witnessed a 26 er cent growth in new hotel openings to146 but reported a 10 per cent decline in room additions to 9,833 between April 2023 and February 2024. With regards to new hotel signings, Elara Capital stated, the industry has seen a 35 per cent increase in new hotel signings to 289 in FY24 YTD, leading to a 54 per cent rise in new room additions to 28,139.
Going forward, new asset additions/completions remain key for companies to deliver EBITDA CAGR of 15- 20 per cent over FY24–26E, said ICICI Securities. “We expect management contracts to remain the preferred choice of expansion for most hotel companies (over 80 per cent of incremental room addition over FY24- 28E) with pure asset owners looking to either acquire operational hotels or utilise existing land banks to drive growth,” it said.
Business travel major growth driver
In terms of growth drivers, analysts said that business travel as well as weddings led to major business gains for the industry. “Strong economic growth (in the range of 6.5-8.0 per cent in Q4FY24E) as well as MICE have been key demand drivers for business destinations. We expect ARR growth to be ~15 per cent in Q4FY24E, driven by dynamic pricing. The Miss World Contest, various pharmaceutical events & conferences, Ed Sheeran and IPL are among the key events that took place in Q4,” said Elara Capital.
Going forward, strong leisure and growing business travel will continue to accelerate ARR growth and increase occupancy. “With the opening of the Lord Ram temple at Ayodhya in Uttar Pradesh, religious tourism (leisure) has gotten a leg up. New hotel signings show an accelerated trend. The macroeconomic environment for India remains robust, which is expected to sustain demand for the hotel industry,” concluded Elara Capital.