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CareEdge Research Report
The robust resurgence in demand, coupled with the gradual alignment of supply and demand of branded hotels room inventory, has been a noteworthy facet of the hospitality sector's post-pandemic trajectory. The sector is currently in the second year of an upcycle. In FY23, revenue per available room recorded an impressive year-on-year growth of almost 88 per cent, reaching levels approximately 9% higher than the pre-pandemic period, at Rs 4,200-4,400 (average for branded rooms in India).
Pan India, average room rates are expected to be around Rs 7,200 to Rs 7,400 in the current fiscal, which is likely to rise further to Rs 7,700 to Rs 7,900 in FY25.
We estimate FY24 will end at RevPAR growth of 12-14 per cent on the high base of FY23. This growth momentum going forward is expected to be sustained in FY25, resulting in likely YoY revenue growth by 9-11% backed by healthy domestic leisure and business travel and complemented by increasing foreign tourist arrivals, contributing to an improved credit profile for industry players.
The positive momentum in operating margins, which averaged 27-30% in FY23 (for a few key major players the margins are in the range of 33-35%) is also anticipated to persist over the next two years as the sector forges ahead.
While supply of room inventory is expected to experience a delayed catch-up due to the protracted setup period for greenfield hotels, organised players are strategically expanding their footprint in an asset-light manner.
Anticipated supply growth is estimated to range from 4% to 5% compounded annual growth rate over the next four-five years, adding over 50,000 rooms to the country's current inventory of approximately 160,000 branded rooms.
Medium-term growth prospects are promising, bolstered by new tourism policies, increased budget allocations by GoI, and the government's ambitious plans to expand and improve infrastructure through airports and road and highway development which is expected to bolster connectivity and thus aid travel and tourism.
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