Hotel industry’s double-digit growth to continue this fiscal, says ICRA report

The hotel industry is expected to report double-digit revenue growth this fiscal year, according to a new report by ratings agency ICRA Limited, on the back of continued demand for domestic leisure and business travel and an increase in foreign tourist arrivals.

The industry has also benefited from the G20 summit and the ongoing ICC Men’s World Cup 2023, the report said. It is estimated that premium-hotel occupancy will remain at a high of 70-72% across India in the fiscal year, after recovering to 68-70% in FY23. 

The industry is poised for strong growth in the year, with occupancy at decadal highs and average room rates (ARRs) nearing their peak in FY08, the report said. Premium-hotel ARRs are expected to be between ₹6,000-6,200 this year. This recovery is being driven by a confluence of factors, including improvements in infrastructure and air connectivity, and favourable demographics, it added.

The report said operating margins are expected to be at 25-28% this fiscal, as against 28-30% in FY23 and 20-22% pre-covid. This is due to the sustenance of a large part of the cost-rationalisation measures undertaken during covid, along with operating leverage benefits, it said. But margins may moderate from the last fiscal year with hotels undertaking renovations and maintenance.

ICRA also said debt metrics for hoteliers are expected to be better than pre-covid levels in FY24.