India's Branded Hotels Forecast Double-Digit Revenue Surge Amid Demand Boom

Crisil Ratings projects robust double-digit revenue growth for India's branded hotels, driven by surging demand surpassing supply. Key contributors include domestic travel, MICE activities, and rising foreign tourist influx. Anticipated increases in room supply and rates, coupled with economic optimism, underpin this vibrant outlook for the hospitality sector.

The Indian hospitality sector is poised for significant growth with branded hotels expecting to see double-digit revenue increases in the current and following fiscal years, according to Crisil Ratings. The agency forecasts a robust 13-14% revenue rise for this year, followed by an 11-12% growth next year.

Key demand drivers include domestic leisure and business travel, alongside a boost from the MICE segment and an uptick in foreign tourist arrivals, as noted by Crisil's latest report. This follows a notable 17% growth in the previous fiscal year.

To accommodate rising demand, the pace of room additions, which accelerated since last fiscal, is set to increase further. Crisil anticipates a 20% cumulative rise in supply across this fiscal and the next, with operating margins projected to improve by 100-150 basis points.

"Growth will be driven by the domestic leisure segment, thanks to rising travel aspirations and improved regional connectivity," stated Mohit Makhija, Senior Director at CRISIL Ratings. Makhija also highlighted India's positive economic outlook and the government's 'Meet in India' initiative as catalysts supporting business and MICE segments, adding that foreign tourist arrivals are expected to exceed pre-pandemic levels this fiscal.

The expected demand surge will drive up average room rates by 6-7% this fiscal, slowing to 3-4% in the next fiscal as new room capacities emerge. A rise in branded hotel rooms is anticipated at 8-9% this fiscal and 11-12% the following year, with leisure and non-metro areas accounting for 65% of new additions.

The major metros will account for 25% of new room additions, with remaining developments focused on evolving spiritual tourism destinations. Pallavi Singh, Associate Director at CRISIL Ratings, noted the industry's shift towards non-metro and emerging leisure destinations driven by traveler demand for diverse options and enhanced infrastructure.

(With inputs from agencies.)