Hotels to see 9-11% revenue growth in FY25; third straight year in current upcycle: CareEdge Ratings Report

CareEdge Ratings said on Thursday that in financial year 2024, the hospitality industry will clock a revenue per available room growth of 12-14% on a high base of the previous fiscal. As per CareEdge Ratings, the growth momentum in the hotel industry is expected to be sustained in financial year 2025, resulting in a likely year on year revenue growth by 9-11% backed by domestic leisure and business travel and complemented by increasing foreign tourist arrivals, contributing to an improved credit profile for industry players.

This will make it the third straight year of an upcycle. Pan-India, average room rates (ARRs) are expected to be around Rs 7,200 to Rs 7,400 in the current fiscal, which is likely to rise further to Rs 7,700 to Rs 7,900 in the next fiscal. The ratings agency said the hospitality sector's 'commendable' recovery in occupancy rates and average rates has in turn cushioned its revenue per available room, which is estimated to have climbed to an average range of Rs 4,800 to Rs 5,000 by the end of this fiscal, up from the 4,300-range registered in financial year 2023.

While supply of room inventory is expected to experience a delayed catch-up due to the protracted setup period for greenfield hotels, organized players are strategically expanding their footprint in an asset-light manner, CareEdge Ratings said. Anticipated supply growth is estimated to range from 4% to 5% compounded annual growth rate over the next four to five years, adding over 50,000 rooms to the country's current inventory of approximately 160,000 branded rooms.


“While the material contribution from international travelers is yet to materialize, currently the domestic demand is the key driver," said Ravleen Sethi, associate director, CareEdge Ratings.

"With the current travel momentum expected to continue and anticipated demand likely to outpace current supply, FY25 is likely to witness steady high occupancies in the range of 68-70% and continued RevPAR growth at 9-11% which shall aid in overall improvement of the credit profile of the players in the industry”, she added.