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July 01, 2018

Sector Report: Hotels

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

 

Table of Contents

 

Part A: Opinion

  • Executive summary
  • Pan-India Hotels Performance
  • Profitability
  • City-wise Hotels Performance

Part B: Industry Information

  • Market sizing
  • Classification and hotel concepts
  • Value chain
  • Industry characteristics
  • Demand Supply scenario
  • Revenue and Cost Structure
  • Player Profiles

Part C: Industry statistics

  • City-wise Hotels Performance
  • Tax structure
  • Classification
  • Room Supply

 

Summary

 

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

 

Huge supply additions and slowdown in demand have accounted for premium category hotels reeling under severe stress since fiscal 2012. Afterplummeting to a decade low of 59% in fiscal 2014, the industry occupancy rate (OR) increased marginally to 60% in fiscal 2015, 62% in 2016 and 64%during fiscal 2017, because of moderation in supply growth and pick-up in 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 the improvement 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 supply additions.

 

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

 

Due to intense competition and economic slowdown from fiscal 2011 to 2017, RevPAR growth across India dipped at 2% CAGR. RevPAR dipped7% in fiscals 2013 and 2014, owing to huge supply addition, and grew 4% on-year in fiscal 2016 because of limited supply addition and improvingeconomic conditions. Demand for premium hotels is expected to grow at CAGR of 6% during fiscal 2018 to fiscal 2022. Ease of travel achieved due tointroduction of facilities, such e-visa, is also expected to have a positive impact on domestic tourism growth in the long run (although the impact is likelyto be marginal in the short term). During the same period, supply is expected to increase at CAGR of 4%, resulting in OR increasing to 68% by fiscal2022 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 outpaceroom supply (expected to increase 4% CAGR) during fiscal 2018- fiscal 2022. While OR in leisure destinations is expected to grow to 70%, ARR isexpected to grow at 4% CAGR. Consequently, RevPAR for leisure destinations 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 points to 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.