India Report: New Forecast Shows Hotels Gain on Travel Boom

Boosted by the travel boom, the Indian hotel industry is set to report double-digit revenue growth in fiscal 2024, as projected by ratings agency ICRA.

Optimistic Outlook for Hotel Occupancy: ICRA estimates premium hotel occupancy across India to reach a decade high at 70-72% in the fiscal year, after recovering to 68-70% in fiscal 2023. This optimistic outlook is underpinned by robust demand, relatively limited supply, and an anticipated increase in average room rates (ARRs), with ARRs for premium hotels anticipated to fall within the range of INR 6,000-6,200.

What’s Driving This? The medium-term demand prospects remain promising, driven by enhancements in infrastructure, air connectivity, favorable demographics, and the expected growth of large-scale meetings, incentives, conferences, and events, particularly with the opening of multiple new convention centers in recent years.

Larger hotel chains stand to benefit from revenue-sharing arrangements and profits derived from hotel expansions through management contracts and operating leases.

Asset-Light Expansions: The staff-to-room ratio remains approximately 15-20% lower than pre-pandemic levels. Asset-light expansions have proven margin-enhancing for major hotel chains. However, there may be some moderation in margins from the levels seen in fiscal year 2023 as hotels undertake renovation and maintenance activities, albeit significantly higher than pre-pandemic levels.

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