Indian hotel industry to witness decadal-high occupancy of 70-72% in FY2024: ICRA

Indian hotel industry to witness decadal-high occupancy of 70-72% in FY2024: ICRA

The put up Indian hotel industry to witness decadal-high occupancy of 70-72% in FY2024: ICRA appeared first on TD (Travel Daily Media) Travel Daily.

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ICRA estimates pan-India premium hotel occupancy at ~70-72% in FY2024, after recovering to 68-70% in FY2023. Pan-India premium hotel common room charges (ARRs) are anticipated to be at ~Rs. 6,000-6,200 in FY2024. While the occupancy is anticipated to be at decadal highs, the RevPAR is anticipated to stay at a 20-25% low cost to the FY2008 peak.

Consistent enchancment in client sentiments regardless of the inflationary setting, secure company efficiency, and home air passenger site visitors inching above pre-Covid ranges augur effectively for journey and hotel demand. The demand restoration has been robust in the final one 12 months, and ICRA anticipates it to proceed in FY2024 as effectively.

Sustenance of home leisure journey, larger bookings from conferences, incentives, conferences, and exhibitions (MICE), and enterprise journey, together with a rise in international vacationer arrivals (FTAs), would assist demand. The industry can be probably to profit from particular occasions just like the G20 summit and the ICC World Cup 2023.

Vinutaa S, Vice President and Sector Head – Corporate Ratings, ICRA Limited, stated: “Gateway cities like Delhi and Mumbai are likely to top the occupancy chart at 75%+ in FY2024. Demand is expected to remain healthy across markets, although Bengaluru and Pune are likely to be laggards compared to other key cities. While the G20 summit would support occupancy across cities in FY2024, improved economic activity and business associations stemming from these meetings are likely to translate into incremental demand for hotels over the medium term. ICRA expects an improving trend in ARRs as well across markets in FY2024, driven by healthy occupancy. Further, mid-scale hotels have also witnessed traction across cities and are likely to continue reporting healthy ARRs and occupancy in FY2024.”

ICRA estimates a 13-15% income development for the Indian hotel industry in FY2024, however the potential affect on demand from exogenous shocks, if any. Sustenance of a big half of the cost-rationalisation measures undertaken in the course of the Covid interval, together with working leverage advantages, resulted in a pointy enlargement in margins. ICRA’s pattern set, comprising 12 giant hotel corporations, reported working margins of 32% for FY2023, in opposition to 20-22% pre-Covid. While there could possibly be some moderation in margins from these ranges with a rise in some cost-heads, together with refurbishment/upkeep, the margins are nonetheless anticipated to be larger than the pre-Covid ranges over the medium time period. The staff-to-room ratio stays beneath pre-Covid ranges and is anticipated to proceed to be so going ahead as effectively. Accordingly, ICRA has a optimistic enterprise outlook on the Indian hotel industry.

“The healthy demand uptick resulted in a pick-up in new supply announcements and commencement of deferred projects over the last 12-15 months. The incremental premium supply is concentrated in select markets, with Mumbai and Bengaluru accounting for a bulk of the upcoming inventory. There are sizeable supply announcements in tier-II and religious destinations as well. However, the hotel supply pipeline is expected to grow only at a three-year CAGR of 3.5-4%, adding approximately 15,000-16,000 rooms to the pan-India premium inventory of ~95,000 rooms across 12 key cities in India. This will facilitate an upcycle, as demand improves over the medium term and outpaces supply. The current inventory growth is significantly lower than the expansion of approximately 18% witnessed during FY2009-2013, after the global financial crisis. In terms of trends, rebranding has been prevalent, and a significant part of the pipeline is expected to be through management contracts and operating leases. Also, not many mergers and acquisitions are being witnessed, attributable to demand pick-up, even as ECLGS support for the industry has waned,”  Vinutaa reiterated.

ICRA expects the uptick in earnings and money flows to assist the capital construction going ahead. Asset monetisations, if any, would largely pertain to non-revenue producing property. Further, return on capital employed (RoCE) for ICRA’s pattern set is anticipated to enhance to 10-12% by FY2024, though the extent of enchancment would stay constrained by the excessive capital price of new properties owing to excessive land and development price. Nearly 98% of ICRA’s scores have a Stable outlook at current.




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