In hotel development circles an eternal debate is business hotels or leisure properties? In 2022-2023, it’s the leisure hotels that seem to have commanded top dollar. For the second year in a row hotels in leisure destinations commanded the highest RevPar (revenue per available room) with resorts in Kumarakom topping the list in FY23, consultancy Hotelivate said in its latest report.

Hotels in metros also reported strong growth in occupancies and average room rates last fiscal. However, only Delhi and Mumbai featured in the pecking order of 15 markets with the highest RevPar. This is in contrast with the pre-pandemic period when top markets comprised both metros and leisure destinations.

RevPar refers to revenue generated per available room whether occupied or not. It is an industry metric that hotels use to price their rooms.

Changing pattern

“Traditionally the top 15 markets have a mixture of urban and leisure markets. During and after the global pandemic we have seen a complete change with leisure markets clocking higher RevPar numbers led by average rate growth. During 2022-23 Kumarakom has overtaken Rishikesh to become the highest RevPar market in India. They are closely followed by Kovalam, Udaipur and Srinagar,” Hotelivate said in its report released on Monday.

This is significant as, unlike Rishikesh which gets heavy pilgrim traffic, the backwaters destination Kumarakom in Kerala is a pure leisure destination with luxury resorts and boutique properties. It also hosted a G20 sherpa meeting earlier in the year. 

According to Hotelivate, properties in Kumarakom had a RevPar of ₹11,758 in FY23. Properties in Rishikesh and Kovalam garnered RevPar of ₹10,506 and ₹9,087 respectively taking the second and third spot.

Mumbai stood sixth with its hotels having RevPar of ₹7,226 while Delhi was ranked eleventh with RevPar of ₹6,016. The two cities have the largest inventory of hotel rooms in the country after Bengaluru.

Floods in 2018 and then Covid-19 pandemic impacted hotels in Kerala but properties were able to charge high rates on the back of strong demand.

Hotels in urban areas have higher year-round occupancies compared to leisure destinations and have also increased their room rates on the back of strong demand. But typically metro hotels also have a large corporate customer base which have contracted rates that pull down the RevPar in comparison to leisure destinations.

In FY23 branded hotels in India registered occupancy of 66.1 per cent (the second highest in a decade) with average daily rate of ₹6,869 (the highest in ten years).

In FY24 Hotelivate estimates nationwide hotel occupancies between 68-70 per cent with nationwide rates crossing ₹7,500. With supply pressure during 2024/25 the occupancy will decline slightly but average rates will remain relatively stable, it said.

Top 15 markets by RevPar in FY23
New Delhi 
Source - Hotelivate