The hotel industry in India touched new highs in Q4 of the FY 2023 due to the steady rise in both the average room rate (ARR) and occupancy rate (OR) compared to the previous quarter and pre-pandemic levels. This led to higher revenue per available room (RevPAR).
The growth in occupancy rate was driven by strong demand from events such as wedding, and international events including G20 meetings as well as the DIOR global event in Mumbai held in March.
As per the latest report by Motilal Oswal the ARR continued to rise to Rs 7,867 (up 9 QoQ and 25 percent v/s Q4 of FY2020). For the complete FY 2023, the hotel industry witnessed a sharp recovery with ARR and OR surpassing and touching the pre-Covid levels, supported by new travel themes, large global events, and favorable demand-supply dynamics.
As per the report, the ARR and OR are expected to continue its strong momentum in the near term, led by favorable demand-supply dynamics and demand drivers such as the G20 Summit meetings, the ICC ODI Cricket World Cup, and the resumption of foreign inbound travel.
The Motilal Oswal report points out that the ARR should continue to inch higher, thereby boosting RevPAR. Interestingly for Q4 FY 2023, the number of domestic passengers grew 5 percent QoQ (up 6 percent versus Q4 FY19) to 37.5 million.
Domestic air traffic witnessed record high passenger traffic in April 2023 and May 2023 at 12.9 million and 13.1 million respectively. The report observes that the rising airfares could hinder the near-term travel demand outlook.
As per HVS Anarock, Mumbai continues to be the top market with OR hovering around 76-78 percent in March 2023. As per HVS Anarock the occupancy for the industry for CY 2022 was in the range of 59-61 percent, up 15-17 pp YoY, while it was 5-7 pp lower than that of CY 2019. ARR, however, recovered fully in CY 2022, exceeding CY 2019 levels by almost 1-3 percent and was 37-39 percent higher than CY 2021 levels. RevPAR increased 89-91 percent in CY22 compared to the previous year and was only 7-9 percent lower than that of CY 2019.
Industry reports suggest that India-wide occupancy is expected to improve to 66 percent in CY 2023, coupled with a 16-17 percent increase in ARR, thereby pushing RevPAR to Rs 4,690 in CY23 (18 percent higher than CY 2019). Among leisure destinations, Goa registered remarkable growth in CY 2022, with OR reaching pre-pandemic levels, while ARR surpassed the pre-pandemic levels by a staggering 18-20 percent.
Bengaluru, Hyderabad, and Gurugram, the cities traditionally dependent on IT demand, experienced a sluggish recovery compared to other regions. This can be attributed to the prevalence of work-from-home arrangements.
In CY 2022, a total of 166 new hotels (14,885 rooms) were signed, while 90 hotels (5,702 rooms) underwent a process of re-branding. It has been observed that the average room count is decreasing as hotel operators venture into smaller markets.
As per the Motilal Oswal report post-pandemic, hotel re-branding and conversion gained momentum and accounted for 27.7 percent of all the keys signed in CY 2022. Several trends will also play a major role in the near future in the Indian market as the foreign tourist arrival (FTA) has not yet fully recovered but on the other hand the domestic demand is driving the sector. In the near future an increase in FTAs is expected to boost demand for rooms and the food and beverage segment.
