According to a CARE Ratings survey, India's domestic hotel industry is espected to experience an increase in guestroom revenue at about 11-13 percent CAGR over the next five years. The rise is due to economic growth, a consistently growing middle class and rising disposable income.
Domestic travelers have continued to be the majority generators of guestroom night demand in India. Foreign demand, on the other hand, has remained stable. Going forward, with the rise in spending by domestic travelers, domestic demand is also likely to grow at a healthy pace.
CARE also predicts a boost in the industry's momentum while experiencing revenue growth of about 7-9 percent. "However, rupee appreciation as compared to currencies of other countries and liquor ban in some states would restrict the growth to some extent," it said.
According to CARE, the domestic business traveler segment has increased to make up 34.4 percent of the total demand. Meanwhile, domestic tourists or leisure travelers constitute 19.8 percent as of 2015-2016, a decrease from the 21.7 percent in 2014-2015.
As for foreign tourists, the group is predicted to reach 12-13 million by the end of 2020, mainly as a result of rising international trade, multinational companies setting up operations in India, more airports, increased connectivity, among others.
The survey also forecasts the future inventory across 11 major markets will shrink to around 57,000 guestrooms within the next five years. Therefore, with increasing demand on the back of improvement in economic activities and lower guestroom additions, CARE expects the industry to sustain the average guestroom rates going forward and grow at an average of 3.5 percent per year.
In 2016, India’s existing guestroom supply increased by 5.5 percent YOY to 113,622 as of March 31, 2016. As a result, occupancy is also expected to increase to an average of about 66 percent by the end 2021, compared to the 63.4 percent in 2016.