The domestic hotel industry is expected to see room revenue rising at about 11-13 per cent CAGR over the next five years, mainly on the back of economic growth, a survey said.
According to the study by CARE Ratings, the industry is expected to register an overall healthy increase in revenue on back of economic growth and consistently growing middle-class along with rising disposable income.
"Domestic travellers continue to be the majority generators of room night demand in India. Foreign demand, on the other hand, has remained stable.
"Going forward, with the rise in spending by domestic travellers, domestic demand is also likely to grow at a healthy pace," it said.
For the current financial year 2017-18, CARE expects the momentum to pick up and the industry to register a growth of about 7-9 per cent in revenues.
"However, rupee appreciation as compared to currencies of other countries and liquor ban in some states would restrict the growth to some extent," it opined.
CARE said the domestic business traveller segment has grown to constitute 34.4 per cent of the total demand accommodated, whereas the contribution of domestic tourists or leisure travellers has declined from 21.7 per cent in 2014-15 to 19.8 per cent in 2015-16.
Foreign tourist arrivals are expected to reach 12-13 million by 2020-end, mainly on the back of increasing international trade, multinational companies setting up their operations in India, more airports and connectivity, among others.
As per the survey, the expected future inventory in 11 major markets (across categories - only branded) is lower at around 57,000 rooms for the next five years (FY16 to FY21).
"Therefore, with increasing demand on back of improvement in economic activities and lower room additions, we expect the industry to sustain the average room rates (ARRs) going forward and grow at an average of 3.5 per cent per annum," it said.
CARE also expects occupancy to inch up to an average of about 66 per cent by the end of FY21 compared with 63.4 per cent in FY16.
According to the findings, the existing room supply for the country grew by 5.5 per cent y-o-y in FY16 to reach 113,622 rooms as of March 31, 2016.