The future supply pipeline is focused on leisure destinations, including religious tourism hubs. Despite some short-term challenges, there is strong optimism that hotels will continue to do well, underpinned by rising discretionary spending and higher occupancy rates.
But as the travel and hospitality industry looks toward FY26, a steady decline in stock markets poses challenges, raising concerns about its impact on consumer spending on travel.
According to the India Hotel Market Review 2024, released on Friday by hotel consultancy Horwath HTL, hotel operators could adapt to any potential changing consumption environment by targeting higher occupancy rates, aiming at growing from the current 68-70% to about 80% or more in major business cities.
There’s also a growing focus on scaling up operations, with larger companies looking to acquire smaller ones, backed by their stronger financial positions. The industry is also expecting big airport and infra projects like the Navi Mumbai and Jewar airports to drive demand, alongside growth in cities like Bengaluru, Delhi, and Hyderabad. Despite short-term challenges, Goa will also reposition itself for the future, while new convention centres in Mumbai, Delhi, and Jaipur are expected to attract more business travellers, it added.
Cities like Mumbai will contribute with a sizeable hotel opening pipeline in 2025. It will see the opening of French major Accor-group run Fairmont Mumbai, which has been delayed to early 2025, and the Hyatt Regency which is expected to open in late 2025. The airport at Navi Mumbai will also open in the coming weeks, which should lead to an increase in demand and performance for the foreseeable future.
“India’s hotel market is positively placed for a good 2025 with growth in demand and supply, and healthy room rates. Limited new supply in major markets will push up occupancies and rates. External factors could unpredictably cause some bumps, but this is not expected in the normal course,” Vijay Thacker, partner and chief executive, Crowe Advisory India, and managing director at Horwath HTL India, told Mint. “At the current point, discretionary spending remains strong, with sentiment aided by the income tax cuts,” he added.
But interestingly, calendar year 2024 showed pan-India occupancy at 63.9%, and average daily room rates across all categories of hotels at around ₹8,000. Another metric by which hoteliers measure performance — revenue per available room or RevPAR — crossed around ₹5,000. “There was a 10.7% growth in RevPAR which is very satisfying in a year when a quarter was lost in elections, the next quarter was somewhat soft with a slowing economy and lacking major big ticket events like the G20 summit or the Cricket World Cup, a year prior. The sail winds slowed for Goa,” said Thacker.
For the first time, hotel chains crossed the 200,000 branded room mark, adding 14,000 rooms to India’s inventory in 2024. By 2029, India is expected to add another 1,13,000 rooms to its inventory, most of which will open by 2029. Interestingly, the report said that while there was a wave of hotel openings in 2024, the real number of new rooms remained small. About 231 new hotels opened last year, adding about 13,700 rooms to the total inventory of the country, with an average of 59 rooms per hotel.
In 2024, the country’s hotel market added 14,400 new rooms. Of these, 11,700 came from newly-built hotels, 2,000 from brand conversions, and 700 from expansions or project completions. On an average, newly-built hotels had a smaller inventory of 69-70 rooms.
About 67% of the 2024 hotel additions and a similar 65% of the upcoming pipeline are in regions beyond the top 10 hotel markets in the country, indicating a broader distribution of demand. Leisure destinations are a key focus, accounting for 43% of the pipeline, including a 12% increase in religious tourism hotspots.
Financial performance
The report said the market capitalisation of the sector has increased almost 12 times from ₹20,700 crore in March 2015 to ₹2,50,000 crore as of January 2025. Of this entire pie, Indian Hotels Company Ltd contributed 40%. The reason for this growth is also that all listed companies have underlying real assets; none of the listed companies are only into managing other owners’ assets. More listings this year are likely to add to the valuation, it said.
In terms of performance, many hotel companies have shown strong growth in their businesses, leading to increased revenues and improved Ebitda margins. Data for listed companies, covering about 44,000 rooms, demonstrated an average Ebitda margin of 36% for FY24, up one percentage point from FY23 and hovered around 32% for H1 or April-September of FY25. Revenues have been substantially supported by growth in business from food and beverage outlets.
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