Branded hotels in India would see double-digit revenue growth of 13-14 per cent this fiscal, FY25, and 11-12 per cent in the next fiscal FY26, driven by demand outpacing supply, says a report from rating agency Crisil Thursday.
Operating margin is expected to rise by 100-150 bps this fiscal and remain at comparable levels next fiscal with the benefits of operating leverage coming in and other cost optimisation measures undertaken, according to a report by Crisil Ratings.
It further stated that though domestic leisure and business travel will remain the major demand drivers, growing traction in the MICE segment (meetings, incentives, conventions and exhibitions) and pickup in foreign tourist arrivals will give an added boost.
This is coming after a strong 17 per cent growth was recorded last fiscal.
The domestic leisure segment will continue to drive growth on the back of rising travel aspirations and better regional connectivity. Furthermore, positive economic outlook and the government's 'Meet in India' initiative to promote corporate events will support the business and MICE segments," said Mohit Makhija, senior director, Crisil Ratings.
Foreign tourist arrivals are also expected to surpass the pre-pandemic levels this fiscal.
These factors will accelerate average room rates (ARRs) of branded hotels to the range of 6-7 per cent during the fiscal on already lofty bases, said Makhija.
To continue feeding into rising demand, growth of room additions, accelerated over last fiscal, should only gather steam and the acceleration would mostly be through management contract routes-the asset light models.
As a result, supply will increase by a cumulative 20 per cent over this fiscal and the next, the report mentioned.
Strong cash flows, asset-light expansion and sizeable equity raising will keep debt levels under check, thereby strengthening credit profiles.
The number of branded-hotel rooms is likely to increase 8-9 per cent this fiscal and 11-12 per cent in the next, with leisure and non-metro destinations accounting for 65 per cent of additions.
The hotel industry is expanding more into non-metros and emerging leisure destinations as travellers seek more choices and infrastructure in these regions improves, said Pallavi Singh, associate director, Crisil Ratings.
Read also| India's Equity Markets Reach $5.29 Trillion Market Cap, Becoming the 4th Largest Globally
Read also| Not Just India: US, China, and Canada Also Fine Deloitte for Violating Audit Standards
