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Revenues of Indian hospitality industry likely to grow by 7-9% in FY25: ICRA
Jan-08-2025

Credit rating agency ICRA in its latest report has said that the revenues of the Indian hospitality industry are likely to grow by 7-9% YoY in FY25 and 6-8% YoY in FY26, over the high base of FY24. Further, ICRA estimates pan-India premium hotel occupancy to improve to around 72-74% in FY26 from around 70-72% in FY25. The average room rates (ARRs) for premium hotels are projected to rise to Rs 7,800-8,000 for full-year FY2025 (up 8% YoY) and subsequently improve further to Rs 8,000-8,400 in FY26. ICRA’s sample set, comprising 13 large hotel companies, is expected to report strong operating margins of 31-33% for FY25, against 33% for FY24 and 20-22% pre-Covid. 

According to the report, sustained domestic leisure travel, demand from meetings, incentives, conferences and exhibitions (MICE), including weddings, and business travel (despite a temporary lull during the General Elections) have driven demand in YTD FY25. ICRA anticipates this trend to continue over the next 9-12 months. Spiritual tourism and tier-II cities are expected to contribute meaningfully in FY26 as well. Domestic tourism has been the prime demand driver in YTD FY25 and is likely to remain so in the near term. Foreign tourist arrivals (FTA) are yet to recover to pre-Covid levels and the improvement would depend on the global macroeconomic environment.

The report further said the demand outlook over the medium term remains healthy, supported by a confluence of factors, including improvement in infrastructure and air connectivity, favourable demographics, and anticipated growth in large-scale MICE events, with the opening of multiple new convention centres in the last few years, among others. It said healthy demand amid relatively lower supply would lead to higher ARRs. Several hotels have also been undergoing renovation, refurbishment and upgradation in the last few quarters, and these are likely to support the ARRs further, going forward. Larger players would also benefit from revenues/share of profits generated from hotel expansions through management contracts and operating leases. 


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