The Indian hotel industry witnessed a marginal growth of around 2 per cent in YoY RevPAR during the month of October 2024 while the overall occupancy declined by 100-300 bps on-year to 58-60 per cent, stated a report by HVS Anarock. The RevPAR growth was driven by an increase in ARR by approximately 6 per cent even as the industry witnessed a drop in occupancy. Meanwhile, per JLL’s Hotel Momentum India (HMI) Q2, 2024, during Q2 2024, the hotel industry registered 4.8 per cent growth in RevPAR primarily driven by a rise in Average Daily Rate (ADR). Excluding Goa, all other markets—Bengaluru, Chennai, Delhi, Hyderabad, and Mumbai—showed considerable growth in ADR and RevPAR figures, with Hyderabad leading the list, it noted.
Oct’24 RevPAR growth impacted by high base and festive season
ICICI Securities said that while Q1FY25 witnessed a sluggish start to the financial year with India’s hotel industry RevPAR growing at a mere 4-5 per cent at industry level, July 2024 (per HVS Anarock) saw a strong bounce back in demand with industry ARR growing by 8-10 per cent YoY to approximately Rs 7000 and occupancies rising 3-5 per cent YoY, leading to YoY RevPAR growth of around 15 per cent. The positive trend continued in August 2024 as well with industry RevPAR up by around 11 per cent YoY and it also reflected in September 2024 with industry RevPAR growth of 7 per cent (high base in New Delhi owing to the G20 Summit in September 2023 impacted YoY growth). This led to Q2FY25 industry RevPAR being 8 per cent higher on YoY basis.
Analysing the October 2024 trend wherein industry ARR grew by 6 per cent YoY and overall occupancy declined 100- 300 bps YoY leading to RevPAR growth of around 2 per cent, ICICI Securities said that this was led by high base in the previous year and the festive season this year. “With the twin festivals of Dusshera and Diwali largely falling in October 2024 together and high base of October 2023 owing to men’s cricket ODI World Cup held in Oct-Nov’23, especially in cities like Ahmedabad, we believe occupancies for business hotel demand may have been impacted in markets such as Mumbai and Chennai.” It further added that in terms of ARR, there was a wide variance with markets such as Hyderabad seeing 22 per cent YoY growth along with Jaipur and New Delhi growing 13-15 per cent YoY.
Going forward, the brokerage firm said that the demand is expected to normalise for the remainder of H2FY25, and the key monitorable may be the sustenance of demand growth over the high base of H2FY24, which is expected to be in high single digits (RevPAR growth of 7–8 per cent). “While business hotels continue to see strong demand, a key monitorable may be performance of leisure markets such as Goa and Rajasthan,” it said.
Demand outlook
While FY24 saw an industry RevPAR growth at 14 per cent, with various estimates pegging industry supply CAGR at 5-6 per cent over FY24-28 vs demand CAGR at around 10 per cent, ICICI Securities expected high single digit ARR CAGR of 6-8 per cent across hotels over FY24-26E with occupancies rising 100-200bps each in FY25E and FY26E.
“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 the existing land banks to drive growth,” the report concluded.