Hotels Have Reason To Be Bullish Regarding Indian Tourism Industry

The Indian hotel industry is expected to see a seven to nine per cent growth in revenues in FY2025 with occupancy likely to be the highest in a decade. That’s the view of industry ratings agency ICRA, which pointed out at sustained domestic leisure travel, demand from meetings, incentives, conferences and exhibitions (MICE), including weddings and business travel. Spiritual tourism and city breaks are also expected to contribute to the revenue growth in FY2025. Domestic tourism has been the prime demand driver in FY2024 and is likely to remain so in the near-term.

The number of foreign tourists, though, is below the pre-Covid days. An increase in foreign tourists depends on the global macroeconomic environment. ICRA “estimates pan-India premium hotel occupancy at decadal highs of (around) 70-72 per cent in FY2024 and FY2025, after recovering to 68-70 per cent in FY2023”. The pan-India premium hotel average room rates (ARRs) are expected to go up to around Rs. 7,200-7,400 in FY2024 and rise further to Rs. 7,800-8,000 in FY2025.

Meanwhile, the demand outlook over the medium term remains healthy as it “supported by a confluence of factors, including improvement in infrastructure and air connectivity, favourable demographics, and anticipated growth in large-scale MICE events with the opening of multiple new convention centres in the last few years, among others”. Meanwhile, SKYE Hospitality, a comprehensive hospitality and strategy consulting firm, has released its inaugural market report on the Indian hotel industry’s performance for the first half of 2024. This provides intriguing insights into the sector’s dynamics. According to the report, 2,706 new rooms were introduced to the market in the first half of 2024. Of them, 994 rooms (around 37 per cent), were upscale, while the remaining 63 per cent were premium.

Approximately, 22 new projects were launched, with prominent hospitality brands like IHCL, ITC, Radisson, Hyatt, ROHL, Bharat Hospitality, and Wyndham among the key contributors. In terms of regional distribution, 34 per cent of the new supply was concentrated in the west, followed by 28 per cent in the east. The north and south regions accounted for 26 per cent and 12 per cent of the new developments, respectively.

Taj Hotels is currently developing over 20 projects, while Vivanta has around 50 new projects in progress. Global brand Accor is also expanding, with plans to add 5,500 new rooms across its Pullman, Novotel, and IBIS brands. The Oberoi Group is planning to add about 50 new projects over the next five years, including the launch of a new smaller-format hotel brand, “Oberoi Nature.” By 2028, the industry is expected to earn $50.9 billion as visitor exports compared with $28.9 billion in 2018.The tourism and hospitality industry is expected to create 53 million jobs by 2029.

The direct contribution of the hotel industry to GDP was $40 billion in 2022 and is expected to reach $68 billion by 2027 and $one trillion by 2047. The growth can be attributed to factors like GDP growth to 4.8 in 2027, 9.5 in 2037, and 19 in 2047, where the income level will increase from INR 2,473 in 2022 to INR 9,926 in 2037, and INR 26,974 in 2047. The inflow of domestic tourists is estimated to increase to 1.4 billion by 2027, 4.8 billion in 2037, and 15 billion in 2047.