ICRA maintains the subdued revenue growth outlook for the Indian Hotel Industry over the next 12 months. Industry wide revenues are expected to grow by 5-8 per cent in 2014-15. However, growth is expected to strengthen to 9-11 per cent in 2015-16 driven by a modest increase in occupancy and small traction in rates. Over the next 12 months, ICRA expects Revenue per Available Room (RevPAR) to improve by 7-8 per cent driven by up to 5 per cent pickup in occupancies and 2-3 per cent growth in Average Room Rates (ARR). Further, margins are expected to remain largely flat for 2014-15 while a moderate albeit sub-par expansion is expected in 2015-16.
While occupancies pan India are showing signs of improvement during 2014-15, this appears to be driven by few pockets like Mumbai where occupancies grew by an astonishing 15 per cent year-to-date in December 2014, supported by traffic for large conferences and weddings. This traction comes after almost two years of negligible supply addition. Bengaluru also exhibited some stabilisation with incremental supply being slowly absorbed. However, the newer properties launched during 2012-14 continue to struggle with weak RevPARs. The National Capital Region (NCR) is exhibiting wide variation in performance across the troika of Delhi, Noida and Gurgaon, with Delhi exhibiting 1-2 per cent growth in ARR and Occupancies during Q3, 2014-15 while rates in the Delhi Aerocity area and Gurgaon remained weak.
India has around 29,000 premium rooms under development- to be launched over the next six years. The next supply bump will hit the market in 2016 across Bengaluru, Mumbai, Kolkata and Noida with over 6,500 rooms. Markets such as Pune and Gurgaon will also see sizable room additions. Unless demand keeps pace, the widening supply-demand gap in these cities will impact rate integrity over the next two years.
