Slower pace of new property openings and a robust demand from domestic market will keep hotel room rates high during the forthcoming travel seasons as the branded room supply in India remains significantly underpenetrated.

The three months to June period saw 2,900 rooms getting added, pushing the total up by 1.4% to 191,000 rooms across the country, according to data from hospitality consultancy provider Horwath HTL. Within that, the top eight cities including Delhi, Mumbai, Bengaluru, Chennai, saw an increase of just 0.6%.  

Occupancy level at hotels of Tata group-promoted Indian Hotels Company (IHCL) in the Delhi-NCR region went up 2% to 82% while revenue per available room surged 10% to Rs 8,200 during Q1 FY25.  

However, extreme heatwaves and poor MICE (meetings, incentives, conferences and exhibitions) activities due to general elections, the growth rates during the period was poor, according to hoteliers and analysts. This is set to reverse during the rest of the year.

The July-September quarter will offset the weakness in demand seen in the April-June quarter, kick-starting a busy wedding season expected in the October-December quarter along with an acceleration in MICE activity, said experts.

In a post earnings conference call held earlier this month, Vikram Oberoi, managing director and CEO, EIH (which controls Oberoi hotels) said, “With foreign travel bouncing back and aided by strong Indian demand for luxury hotels and luxury travel, we should be able to take rates up. We should see strong demand and occupancy, reflected in both rate and occupancy, in Q3 and Q4.”

While the time taken by holidaymakers planning a leisure trip has shrunk to 3-5 days from 3-4 weeks earlier due to long weekends, holiday planners are witnessing a surge in demand for the upcoming season which typically starts in December.

Speaking to FE, Mahesh Iyer, managing director and CEO, Thomas Cook India said, “Forward bookings (for the November-December season) are looking reasonably strong at the moment. We are looking at a double-digit growth.”

Speaking at a recent earnings call, Ankur Dalwani, executive vice president and CFO, IHCL said, “If you see the actual additions (supply) on the ground, they still seem to be muted. The increase in the supply stock in Q1 is about 1.4%. Supply catching over demand is not a very imminent thing, which doesn’t seem to be happening in the next 2 to 3 years.”

Only around 50,000 branded rooms are expected to come into the market by the end of FY27, a compounded annual growth rate (CAGR) of 8% from 191,000 clocked by the end of FY24. This will be lower than the actual demand which is expected to grow at a CAGR of 10%, as per Hotelivate.

The penetration of branded rooms per 1,000 people in India stands at 0.1, while in the US it is 16.3 and in China it is 3.2.