Indian Economy News

Hotels set for a 11-13% revenue growth next fiscal on a high base

  • IBEF
  • February 20, 2024

CRISIL Ratings analysis indicates a promising outlook for the Indian hospitality industry, with an anticipated revenue growth of 11-13% in the upcoming fiscal year. This growth follows a robust 15-17% increase in the current fiscal year, driven by solid domestic demand and an expected rise in foreign traveller interest. The industry's favorable demand dynamics and controlled new supply are poised to sustain healthy operating performance in the near term. CRISIL Ratings foresees this positive trend in operating performance to benefit industry profitability, with Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) maintaining strong momentum over the current and upcoming fiscal years. Additionally, limited capital expenditure is expected to contribute to maintaining strong credit profiles for hotel companies.

The director at CRISIL Ratings, Mr. Anand Kulkarni, highlighted the sustained domestic travel demand as a key driver, which is expected to continue into the next fiscal year. He emphasized that this momentum will be supported by robust economic activity driving business demand and a resurgence in leisure travel post-pandemic. While the demand outlook remains strong, growth rates are anticipated to moderate in the next fiscal year due to a high base. Consequently, Average Room Rates (ARRs) are projected to grow at a slower pace next fiscal compared to the current year, and occupancy rates are expected to remain healthy at around 73-74%. CRISIL Ratings also anticipates a boost in hotel demand next fiscal year from an uptick in inbound foreign travel. The Meetings, Incentives, Conventions, and Events (MICE) segment is forecasted to sustain healthy demand as corporates resume activities post-pandemic. Mr. Nitin Kansal, director at CRISIL Ratings, highlighted that greenfield capital expenditure is expected to remain subdued, with a modest 4-5% room addition per fiscal over the next few years. Despite a rebound in demand lifting industry sentiments, cost dynamics continue to pose challenges for new capital expenditure, with high land costs and other factors influencing investment decisions.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.