Representative image of a hotel room.
Credit: iStock Photo
Bengaluru: The country's premium hotel revenue per available room (RevPAR) is projected to hit a decadal high in financial year 2024-25 (FY25), a rate expected to improve in FY26, said rating agency Icra in a webinar on Tuesday.
The RevPAR is expected to increase to Rs 5,500-5,800 per day in FY25 against Rs 5,000-5,300 in FY24, and rise further to Rs 5,800-6,200 in FY26.
Meanwhile, the average room rates (ARRs) for premium hotels are projected to rise to Rs 7,800-8,000 for full-year FY25 (up 8 per cent YoY) and subsequently increase to Rs 8,000-8,400 in FY26.
Overall, revenue of the Indian hospitality industry is expected to grow by 7-9 per cent year-on-year (YoY) in FY25 and 6-8 per cent YoY in FY2026, over the already high base of FY24.
One concern highlighted was land availability issues, creating a supply constraint in the main areas of tier-I cities and metros. “The addition to premium hotel supply in these areas is largely on account of rebranding or property upgradation and the greenfield projects are largely in the suburbs,” said Vinutaa S, Vice President and Sector Head, Corporate Ratings, Icra Limited.
In terms of inventory growth, it is currently at a low compound annual growth rate (CAGR) 4.5-5 per cent for the period FY23 to at least FY26. This is expected to facilitate a longer upcycle stemming from limited supply and strong demand to support hotels.
Still, margins are expected to remain flat for FY25 and FY26 on a YoY basis, with strong revenue growth offset by increases in costs.
Pan-India premium hotel occupancy is also expected to improve to 72-74 per cent in FY26 from 70-72 per cent in FY25.
Driving demand in both fiscals is sustained domestic tourism, demand from meetings, incentives, conferences and exhibitions, weddings, and business travel. Another demand driver in FY26 will be global capability centres (GCCs). Spiritual tourism in tier-II cities also are expected to contribute significantly in FY26.
The cumulative air traffic in tier-II cities has witnessed a CAGR of 10 per cent between FY16 and FY24, higher than the 6 per cent CAGR seen in the top six cities. This is stemming from the low base they had earlier as well as traction in terms of industrial growth and leisure travel.