India's Branded Hotels Projected to Achieve Double-Digit Growth in FY25 and FY26: Crisil

New Delhi, Dec 26 (NationPress) Branded hotels in India are set to experience a double-digit revenue growth of 13-14 percent this fiscal year (FY25) and 11-12 percent in the subsequent year (FY26), propelled by demand exceeding supply, as indicated in a Crisil report published on Thursday.

The operating margin is expected to enhance by 100-150 basis points (bps) this fiscal and maintain similar levels in the following year, benefiting from the effects of operating leverage and various cost optimization strategies implemented, according to the report from Crisil Ratings.

The report further emphasized that while domestic leisure and business travel will remain the main demand influencers, the MICE (meetings, incentives, conventions and exhibitions) sector's growing momentum and an increase in foreign tourist arrivals will provide additional support.

This forecast follows a strong 17 percent growth noted in the previous fiscal year.

“The domestic leisure segment will persist in driving growth, supported by rising travel aspirations and improved regional connectivity. Additionally, a positive economic outlook and the government's ‘Meet in India’ initiative aimed at promoting corporate events will bolster the business and MICE sectors,” stated Mohit Makhija, senior director at Crisil Ratings.

Foreign tourist arrivals are also projected to exceed pre-pandemic levels this fiscal year.

These elements are anticipated to elevate the average room rates (ARRs) of branded hotels by 6-7 percent this fiscal year, building upon an already elevated base, according to Makhija.

To accommodate the growing demand, the rate of room additions, which has been on the rise since the last fiscal year, is expected to accelerate, primarily through an asset-light management contract approach.

Consequently, supply is predicted to increase by a cumulative 20 percent over this fiscal and the next, as noted in the report.

Strong cash flows, asset-light expansion, and substantial equity raising will help keep debt levels manageable, thereby enhancing credit profiles.

The number of branded hotel rooms is expected to grow by 8-9 percent this fiscal year and 11-12 percent in the following year, with leisure and non-metro destinations accounting for 65 percent of these additions.

Pallavi Singh, associate director at Crisil Ratings, remarked that the hotel industry is expanding further into non-metro and emerging leisure destinations as travelers seek more options and the infrastructure in these areas improves.