Indian Hospitality Industry To Clock Revenue Growth Of 11-13 Per Cent In FY25 On Robust Domestic Demand: CRISIL Ratings

The survey found that strong demand dynamics along with improved supply lines would help the industry maintain a healthy performance over the near term

The occupancy rate in the industry is expected to stay healthy at the current levels of 73-74 per cent in FY24.

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The Indian hospitality industry is anticipated to log a revenue growth rate of 11 to 13 per cent in the upcoming 2024-25 fiscal year, helped by a consistent demand at the domestic level and an increase in foreign travellers, a survey by CRISIL Ratings revealed on Monday.

The agency estimated that the sector will clock a revenue growth of 15 to 17 per cent possibly in the ongoing fiscal year, reported PTI. The survey found that strong demand dynamics along with improved supply lines would help the industry maintain a healthy performance over the near term. 

The study explained that the industry is expected to maintain a strong momentum in the current fiscal year and continue it to the next. “This, along with limited capital expenditure, will keep the credit profiles strong,” it added.

Commenting on the industry trends, Anand Kulkarni, Director, CRISIL Ratings, said, “The domestic travel demand, which remained a key driver this fiscal, will sustain next year as well. This momentum will be supported by healthy economic activity which drives business demand and continuing leisure travel demand, which reinvigorated post the pandemic. While the demand will remain strong, the growth rate is expected to taper off next fiscal due to high base.”

Kulkarni noted that the average room rates (ARRs) are anticipated to rise by 5 to 7 per cent in the upcoming fiscal year, against the growth of 10 to 12 per cent in the current fiscal, and the occupancy rate in the industry is expected to stay healthy at the current levels of 73-74 per cent.

The report also stated that foreign tourist footfall is expected to stay 10 per cent below the pre-pandemic level ‘and pick-up in the same will provide a fillip to the hotel demand next year. Besides, demand in the MICE (meetings, incentives, conventions and events) segment is also expected to remain healthy as corporates have resumed their activities post the pandemic-induced hiatus’.

Nitin Kansal, Director, CRISIL Ratings said, “High land costs, sizable rise in construction costs, long gestation period coupled with cyclicality in the sector are resulting in cautious new capex in the sector. Therefore, brands may keep adding rooms through management contracts, which will limit their upfront capital costs.”

The report also found that hotels have employed multiple cost-efficiency measures like better manpower planning and optimising food and beverage expenses in the last two fiscal years. It noted that while these costs are inclined to gain gradually, operating leverage would help maintain a robust operating profitability at 32 to 33 per cent in FY24 and FY25.