Indian Hotels Industry expected to register a growth of about 7-9% in revenues for FY18: Report

Indian Hotels Industry expected to register a growth of about 7-9% in revenues for FY18: Report
09/09/2017 , by , in ALLIED

According to a report on the Indian Hotels Industry by CARE Ratings, the existing room supply for the country grew by 5.5% y-o-y in FY16 totalling to 113,622 rooms (as of 31 March 2016). The total number of rooms in the top 11 key cities covered by CARE Ratings is estimated at 84,396 as at the end of FY16. A larger part of the room inventory is concentrated in Mumbai, NCR and Bengaluru

The expected future inventory in 11 major markets (across categories – only branded) is lower at around 57,000 rooms for the next 5 years (FY16 to FY21)

It is expected the major markets in the industry to sustain the average room rates (ARRs) going forward and grow at an average of 3.5% per annum. The report also expects the occupancy to inch up to an average of about 66% by the end of FY21 compared with 63.4% in FY16

According to the report, the industry is expected to see an increase in room revenue at the rate of about 11-13% CAGR over the next 5 years. Domestic travellers continue to be the main contributors of room night demand in India.

The FTAs are expected to reach a level of 12 – 13 million by CY20, the key growth drivers for growth in FTAs flowing into India include increasing international trade, multinational companies setting up their operations in India, number of airports, connectivity etc., the report said.

The industry may register a growth of about 7-9% in revenues for FY18. However, the rupee (INR) appreciation as compared to currencies of other countries, liquor ban in some states, etc would restrict the growth to some extent, the report added.

Room tariff above Rs 5,000 was to attract the higher tax rate of 28%, however, this has been revised and only tariff above Rs 7,500 would fall in the highest tax slab under the GST regime. Accordingly, CARE Ratings believe that the effective tax rate would not have any major impact on the Average room rates (ARRs) and Occupancy rates (ORs) of the hotels given GST players would be able to avail the input tax credit for both goods and services.

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