BUZZING BUSINESS

Thriving demand and financial f east ignite a buzzing future for Indian hotels

India’s hotel industry is surging after the pandemic, with booming demand outpacing supply and propelling optimism for continued growth in the second half of this fiscal year. Fuelled by this surge, analysts have significantly revised their earnings growth estimates for the industry. Several factors are responsible for this industry boom.

IMPROVING FUNDAMENTALS

The hospitality industry in India has witnessed massive growth in the past six years, with total investments nearing $1 billion. An average annual investment of $172 million underscores the industry’s consistent appeal to investors. In 2022, the sector experienced a notable surge in room openings, adding 19,860 rooms.

A recent study by Hotelivate sheds light on the industry’s dynamics, revealing a 10.3% growth in room supply to 1,65,172 rooms in FY23 from 1,49,722 rooms in FY22. Bengaluru has emerged as a new hotspot, surpassing the Delhi-NCR region in terms of inventory. This signals a shift in the industry’s landscape, indicative of a robust and evolving market.

Analysts tracking the hotel sector suggest that the growth in room supply in FY23 has outpaced the industry’s 10-year Compound Annual Growth Rate (CAGR), emphasizing the increasing demand for accommodations. Over the past ten years, the room supply in India’s hospitality industry has seen a consistent 5% CAGR.

Since FY23, there has been a noticeable uptick, indicating a surge in industry investments. Analysts suggest additional investments are key to meet the growing demand for rooms. This positive trajectory is responsible for improved business fundamentals in India’s hotels industry in recent years.