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Hotel Industry Growth: Credit ratings agency CareEdge reports that the hotel industry’s key performance indicators are rising strongly, driven by a strong recovery in demand and supply disruptions caused by the epidemic.
The occupancy rate this fiscal year has increased significantly, averaging about 67-68%, which is higher than 65% in fiscal 2023 and a significant increase from 50% in fiscal 2022. Rising occupancy rates have enhanced pricing leverage among industry players and led to higher average room rates.
The average room rate (ARR) is expected to be in the range of Rs 7,200 to Rs 7,400 this financial year and is expected to further increase in the range of Rs 7,700 to Rs 7,900 in FY25. The recovery in occupancy and average room rates in the industry has boosted its revenue per available room (RevPAR), which is estimated to have climbed to an average range of Rs 4,800-Rs 5,000 by the end of FY24, up from the Rs 4,300 range in FY23, which is expected to It will grow by 9% to 11% in fiscal 2025.
The industry’s overall profitability has improved significantly, with operating-level profitability of 27.2% in fiscal 2023 among a sample of 62 listed companies analyzed by CareEdge Ratings. This is a significant increase from the 14.3% recorded in FY22 and the 19.3% reported in FY19. Despite facing challenges such as rising raw material costs, high labor costs and increasing borrowing costs, industry players have demonstrated resilience by improving ARR and handling these adversities expertly.
The industry’s entry into the growth phase in FY23 will be characterized by significant improvements in key financial parameters. The fixed cost savings efforts pursued over the past two years have provided a foundation for operating margin growth in fiscal 2023, a trend that is expected to continue.
Domestic travel is expected to be a significant driver of demand, outpacing supply growth, supported by government infrastructure initiatives, increased air and rail passenger traffic and rising preference for branded accommodation.
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