India’s hotel Industry to grow at 9% CAGR
- IBEF
- December 13, 2024
According to a report by Axis Capital, India's hotel industry is poised for sustained growth as demand continues to outpace supply. The report projects a 12% compound annual growth rate (CAGR) in demand for FY24-27, compared to a more modest 9% CAGR in supply. This favourable supply-demand dynamic, structural growth drivers, and improved operating metrics are expected to prolong the industry's current upcycle. The hotel sector is recovering from overcapacity, following rapid supply growth of 15% CAGR during the FY08-15 cycle. However, supply growth is expected to be more moderate, ensuring a more balanced and extended upcycle. Luxury hotels, with higher capital expenditure and longer gestation periods, remain less cyclical. India's branded hotel supply remains one of the lowest globally, highlighting significant growth potential, especially as the focus shifts to Tier-two cities.
The report identifies several structural drivers behind sustained demand growth. Leisure travel, which constitutes 46% of total hotel demand, has consistently grown over the past three decades, bolstered by rising disposable incomes and increasing upper-income households. At 31% of total demand, business travel is set for recovery as corporate profits improve and travel budgets rise. The Meetings, Incentives, Conferences, and Exhibitions (MICE) segment is expected to expand, supported by higher wedding budgets and increased global events in India. Additionally, international tourism, still recovering from the pandemic, is expected to grow, spurred by infrastructure improvements and enhanced offerings. The industry is set to benefit from higher occupancy rates and Average Room Rate (ARR) growth. However, risks such as seasonality and economic downturns remain.
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.
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