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Mohit Makhija, Senior Director at Crisil Ratings Ltd
What are the hits and misses for the Indian hospitality industry in 2023?
The Indian hospitality industry experienced a hit in 2023 with a 78 per cent surge in revenue in 2023, propelled by strong domestic demand in business and leisure segments. Events such as the G20 presidency and ICC Men’s Cricket World Cup contributed to this success. However, the miss was evident in international demand, about 10 per cent below pre-pandemic levels, reflecting slower recovery.
What is the growth estimate for the Indian hospitality sector next fiscal?
The industry is expected to maintain healthy growth at 10-12 per cent in fiscal 2025, driven by sustained domestic demand and gradual uptick in international demand. Increased MICE activities will also contribute to the sector’s growth
How will demand-supply dynamics impact growth?
Strong demand is anticipated to sustain in the next fiscal, resulting in double-digit revenue growth for the Indian hotel industry. However, the growth rate is expected to taper due to high base. Supply addition is projected to remain muted at 5 per cent annually, ensuring favourable demand-supply dynamics
Will average room rates and occupancy sustain?
ARRs are estimated to grow 8-10 per cent this fiscal, remaining above ₹8,000, and are expected to rise 3-5 per cent next fiscal. Occupancy rates are expected to stay strong at 74-75 per cent, surpassing the fiscal 2023 levels by 100-200 basis points.
How will real estate costs impact the hospitality sector?
Rising land and construction costs are influencing greenfield capacity additions by hotel owners. To optimise new capital expenditures, branded hotel operators are increasingly adopting asset-light expansion strategies, such as management contracts and franchise models.
What are the other trends expected in the hospitality industry?
Sustained domestic demand and gradual increase in international demand are foreseen to drive momentum in the hotel industry in fiscal 2025. Additionally, traction in destination weddings in India could provide a boost, while economic slowdown and their impact on business travel will be closely monitored.
Published on December 31, 2023
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