HOME > MARKETS > ECONOMY NEWS
  ECONOMY NEWS
ECONOMY
Hospitality industry likely to register 9-10% growth in next 4 years: ICRA
Dec-17-2018

Credit rating agency, ICRA in its latest report has said that the hospitality industry is expected to show a strong annual growth of 9-10 percent over the next four years, on the back of robust domestic demand and a muted supply pipeline. It also said that the domestic demand will continue to be driven by increased air connectivity, and higher appetite for domestic leisure travel in FY19. That apart, it expects domestic demand to get a boost from the robust corporate performance which has witnessed the strongest top line growth in the last 10 quarters in the September quarter of the current fiscal year.

However, ICRA warned that the supply side is likely to lag demand over the medium term and grow at a subdued 3.6 percent over the next five years. But, it said that the situation is set to improve given the inventory and the number of premium rooms across 12 key cities is likely to go up from 82,800 in FY18 to 98,900 by FY23. It also pointed out that this low supply growth is expected to be the backbone for the current up-cycle, as demand is expected to grow at a much faster rate. It noted that the demand-supply gap is expected to go up from around 1 percent in FY18 to 5 percent in FY23. It added that margins are likely to expand due to operating leverage, with return of stronger revenue growth.

According to the report, interest and debt cover are likely to improve gradually over the medium term but the return on capital employed is expected to remain at sub-cost of capital at least till FY20. It also noted that the total debt for the industry is set to improve to 1.2 times in FY23 from 3.9 times in FY18 and 3.1 times in FY19. It also stated that the debt reduction measures undertaken by some large industry participants have resulted in sizable reduction in leverage levels as of March 2018 as a result return on capital employed is expected to improve upwards of 15 per cent in FY23 from 6.3 per cent in FY18.

  RELATED NEWS >>