Hotel outlook looks subdued: report

Ratings agency ICRA estimates Q3FY15 revenues to grow by 5-6% while growth for 2014-15 is expected to be in the range of 7-9%

The outlook for the Indian Hotel Industry over the next 12-18 months is expected to remain subdued given the gap between supply and demand, a report from ratings agency ICRA stated today.

However, measures by the GoI to drive tourism through several strong policy initiatives could bring in stronger demand, supporting the industry over the next 12-18 months, the report noted.

ICRA estimates Q3FY15 revenues to grow by 5-6 per cent while growth for 2014-15 is expected to be in the range of 7-9 per cent, largely driven by incremental rooms and food and beverage income. Growth is expected to accelerate to 9-12 per cent over the next two years.

Average room rates (ARRs) are expected to be largely flat while occupancies are estimated to improve by 2-4 per cent during 2014-15, ICRA said. Industry occupancy levels have witnessed improvement in the current fiscal however the same has been geographically concentrated in pockets like Mumbai.

Domestic demand has showcased a growth of over 10 per cent driven by both business and leisure travellers during 2014-15. However, falling global economic sentiments have affected inbound travel and with a booking window of 8-12 months for Western leisure travel, the impact is expected to be felt in 2015-16 as well.

As per ICRA Research, India has over 29,000 premium rooms under construction- to be launched over the next six years. Though there is a general perception of supply growth having eased, inventory accretion across the 12 key cities that ICRA's premium room database tracks estimates a 10 per cent increase for 2014-15, closely following the 11 per cent addition experienced in 2013-14.