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September 01, 2018

Sector Report: Hotels

This report is available to users in India for ₹40,000 + applicable taxes

 

Table of Contents

  • Summary
  • Pan-India Hotels Performance
  • Profitability
  • Agra
  • Ahmedabad
  • Bengaluru
  • Chennai
  • Goa
  • Hyderabad
  • Jaipur
  • Kolkata
  • Mumbai
  • NCR
  • Pune
  • Kerala

Summary

 

Industry profitability improves on account of increase in occupancy rates infiscal 2018

 

Huge supply additions and slowdown in demand have accounted for premium category hotels reeling under severe stresssince fiscal 2012. After plummeting to a decade low of 59% in fiscal 2014, the industry occupancy rate (OR) increasedmarginally to 60% in fiscal 2015, 62% in 2016 and 64% during fiscal 2017, because of moderation in supply growth and pick-upin demand. OR increased to 65% in fiscal 2018 while demand grew at 5%, better than the inventory growth of 4%.

 

Addition of supply and slowdown in demand from fiscal 2014 to 2016 led to a stable average room rate (ARR). With theimprovement in demand, but intense competition, average room rate (ARR) growth remained marginal at 2% in fiscal 2018.Revenue per available room (RevPAR) grew by 3% during the same period, backed by improved demand and lower supplyadditions.

 

Industry expected to witness better times with steady growth in demand butlow supply addition

 

Due to intense competition and economic slowdown from fiscal 2011 to 2017, RevPAR growth across India dipped at 2%CAGR. RevPAR dipped 7% in fiscals 2013 and 2014, owing to huge supply addition, and grew 4% on-year in fiscal 2016because of limited supply addition and improving economic conditions. Demand for premium hotels is expected to grow atCAGR of 6% during fiscal 2018 to fiscal 2022. Ease of travel achieved due to introduction of facilities, such e-visa, is alsoexpected to have a positive impact on domestic tourism growth in the long run (although the impact is likely to be marginal inthe short term). During the same period, supply is expected to increase at CAGR of 4%, resulting in OR increasing to 68% byfiscal 2022 from 65% in 2018. ARR is expected to grow at CAGR of 3%.

 

Room demand (6% CAGR) in leisure destinations - Goa, Agra, Jaipur and Kerala (Kochi, Kovalam and Thiruvananthapuram) -is expected to outpace room supply (expected to increase 4% CAGR) during fiscal 2018- fiscal 2022. While OR in leisuredestinations is expected to grow to 70%, ARR is expected to grow at 4% CAGR. Consequently, RevPAR for leisuredestinations is expected to grow at CAGR of 5% annually to Rs 5,750 till fiscal 2022.

 

Room demand in business destinations - Mumbai, North Capital Region (NCR), Kolkata, Chennai, Pune, Ahmedabad,Bengaluru and Hyderabad - demand is expected to grow at a moderate rate of 9% & 7% respectively during the same period,with supply additions in both the cities at 7% and 3% CAGR respectively. While OR is expected to increase by 400 basis pointsto 68%, ARR is estimated to increase by CAGR of ~2%. As a result, RevPAR in business destinations is expected to rise by %CAGR to Rs 5,500 till fiscal 2022.