India's hospitality sector is poised for substantial growth, with Crisil Ratings projecting an 11-13% revenue increase in 2024-25, buoyed by robust recovery post-Covid-19. Domestic demand and rising overseas visitors are expected to drive growth to 15-17% this fiscal year. Strong operating performance and minimal capital spending will bolster profitability and credit profiles. Domestic travel demand, supported by economic activity, will sustain industry development, albeit at a slower pace due to a high base effect. While foreign tourist numbers remain below pre-pandemic levels, their gradual increase will boost hotel demand, especially in the MICE category. Favourable supply dynamics will further fuel industry resilience, with brands favouring management contracts to minimize upfront capital costs amidst sector challenges.
According to Crisil Ratings, India's hospitality business is expected to rise by 11-13% in revenue in 2024-25, following a good recovery from the Covid-19 pandemic. According to the survey, the industry's revenue growth will be driven by consistent domestic demand and an increase in overseas visitors, which will push growth to 15-17% in the current fiscal year.
Researchers also stated that the industry's operating performance will remain strong in the short term, as demand will surpass the little new supply. The industry's profitability will also benefit from the positive operating performance, as EBITDA (profits before interest, taxes, depreciation, and amortisation) will maintain its strong momentum in the current and next fiscal years. According to the analysis, the industry's minimal capital spending will help it maintain excellent credit profiles.
The report stated that domestic travel demand, which was the primary engine of the industry's recovery this fiscal year, will continue to underpin the industry's development next year. According to the report, domestic travel demand will be sustained by strong economic activity, which will produce business demand, as well as continued leisure travel demand, which will rebound following the pandemic. According to the analysis, domestic travel demand would expand at a slower rate next year due to the high base effect.
It was also stated that the number of foreign tourists in India, which increased this fiscal year, will remain 10% lower than pre-pandemic levels next year. The findings of the report stated that an increase in foreign tourist arrivals will boost hotel demand next year. According to the research, demand in the MICE (meetings, incentives, conventions, and events) category would be strong, as corporations restart their activities following the epidemic.
The report also pointed out that the favourable supply situation will be one of the critical drivers of the industry’s strong performance. The report said that the greenfield capex will be muted, as the new room addition will be only 4-5% per fiscal in the next couple of years. The report said that the high land costs, high construction costs, long gestation period and cyclical nature of the sector will deter new capex in the industry. The report said that the brands will prefer to add rooms through management contracts, which will reduce their upfront capital costs.
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