New Delhi
According to a report by JM Financial Institutional Securities, the hotel industry is set to experience one of its strongest periods in the last decade during the second half of FY24. Several significant events, including the Cricket World Cup, the Miss World 2023 pageant finale, and a robust wedding season, are expected to contribute to this positive trend. The report also emphasizes that while occupancies and Average Room Rates (ARR) are likely to grow further, they may not follow a consistently upward trajectory. Short-term disruptions are possible, such as the high base of FY24, General Elections in May 2024, the potential risk of the Indian Premier League (IPL) relocating, and an unfavorable mix due to an increased share of corporate travel, potentially nearing pre-Covid levels. As demand from underperforming segments like corporate travel and inbound tourism gains momentum in the second half of FY25, it is anticipated that occupancies will rise to 70-72 percent. This upward trend is expected to result in low double-digit ARR growth during this period, even after accounting for the exceptionally high rates during One Day International (ODI) matches in various venues. For the covered hotel companies, the report projects ARR growth at a more moderate rate of 6-8 percent in FY25, compared to 10 percent in FY24. It also assumes a 100-150 basis point expansion in EBITDA margins due to positive operating leverage. The report highlights that in the third and fourth quarters of FY24, the domestic hotel industry is on track to achieve the highest numbers in a decade. Strong domestic tourist demand and major global events are contributing to this surge, with ARR expected to increase by 15-20 percent Year-on-Year in FY24. However, the high base of FY24 is likely to lead to a slowdown in growth in FY25.
