Indian hospitality industry poised for a remarkable rebound in FY24

The global hospitality market is expected to experience significant growth between 2024 and 2031. As of 2022, the market has been advancing steadily and with the increasing implementation of strategies by key players, there is anticipation for further growth over the forecasted period.

After a sparkling 2023, the hotel sector is hopeful of continued momentum in 2024. The Indian hospitality and tourism sector is expected to see accelerated hiring going forward after witnessing a robust growth year with domestic travels leading the way, according to industry players.

With a report by the Hotel Association of India (HAI) projecting the hotel industry's direct contribution to India's GDP to reach $ one trillion by 2047, experts believe there will be a minimum of 25 per cent rise in the need for workforce, with the adjacent industries like travel, aviation, ticket booking, travel guides and consultants also being in heavy demand.

"The hotel industry's direct contribution to India's GDP reaching $ one trillion by 2047 is a significant milestone. This substantial growth will undoubtedly bolster job creation within the sector. There will be an increasing demand for digital content creators, social media managers, sustainability consultants for hotels and resorts, vegan — food & beverage specialists, spa & healthcare specialists," the Association added. The Indian hotel industry is poised for a remarkable rebound in the fiscal year 2024, with experts predicting double-digit revenue growth. This positive outlook is largely attributed to several key factors that have been supporting the industry’s recovery.

A recent report by ICRA sheds light on the robust trends in the Indian hotel sector and points out the key drivers for this resurgence.

The demand from Meetings, Incentives, Conferences, and Exhibitions (MICE) is also contributing to the industry’s growth. As businesses start to return to normal operations, the need for conferences and corporate events has surged. Hotels are benefiting by hosting such events, which has become a significant source of revenue.

The Foreign Tourist Arrivals (FTAs) are likely to increase in the latter half of the fiscal year 2024, contributing to the industry’s growth. The ease of international travel restrictions and a desire to explore India’s diverse culture and landscapes are anticipated to attract more foreign tourists.

The G20 Summit and the ICC World Cup 2023 have provided a substantial boost to the Indian hotel industry. ICRA estimates that premium hotel occupancy in India will reach around 70-72 per cent in FY2024, a notable improvement from the previous year. This increase is complemented by a rise in Average Room Rates (ARRs), which are expected to be in the range of Rs. 6,000-6,200 in FY2024. Although occupancy is reaching a decade-high, the Revenue per Available Room (RevPAR) is anticipated to remain 20-25 per cent lower than the peak levels of 2008.

The medium-term outlook for the Indian hotel industry remains positive. Factors such as improved infrastructure and air connectivity, favourable demographics, and the opening of multiple new convention centres in recent years are expected to sustain healthy demand. Larger hotel chains are also set to benefit from expansions through management contracts and operating leases.

The demand will vary depending on the location, competition and other property-related dynamics. Gateway cities like Mumbai and Delhi are likely to witness occupancy rates of over 75 per cent, thanks to transient passengers, business travellers, and MICE events. Pune and Bengaluru may lag behind but are still expected to see a significant improvement in FY2024. The pandemic prompted cost-rationalization measures in the industry, and these measures have persisted, resulting in an expansion of profit margins compared to pre-COVID levels. Companies have also embraced renewable energy sources, helping control operating costs.

While the demand is surging, supply growth in the hotel industry is expected to increase at a CAGR of 3.5-4 per cent over the medium term. However, supply is likely to lag behind due to land availability issues, especially in premium micro-markets in metros and larger cities. This supply constraint is encouraging the rebranding and upgrading of existing properties and the development of new hotels in suburban areas.

The Indian hotel industry is on a trajectory of robust recovery and growth in FY 2024, with positive demand trends, resilient domestic travel, international events and cost-saving measures contributing to the resurgence. The industry’s ability to adapt and innovate in the face of challenges has allowed it to capitalize on emerging opportunities and position itself for a bright future.