India's Hospitality Sector to Grow 10.5 Percent Over Next Three Years
Tuesday, 03 September 2024, 11:00 IST
According to Axis Securities' latest sectoral report, India's hospitality industry is expected to expand at a Compound Annual Growth Rate (CAGR) of 10.5% over the next three years. This growth is anticipated to create an additional annual demand of Rs 8,200 crore. The expansion will be fueled by increasing numbers of domestic travelers, foreign tourists, and the Meetings, Incentives, Conferences, and Exhibitions (MICE) segment.
The report highlights that the limited supply of luxury rooms suggests strong future demand and expansion in the sector. Currently, the total hospitality industry in India includes 212,000 rooms, with an industry size of Rs 82,000 crore. Domestic travelers are projected to drive approximately 50% of the industry's growth, while foreign tourist arrivals are expected to account for 30% of the incremental growth. The remaining 20% is anticipated to come from the MICE (Meetings, Incentives, Conferences, and Exhibitions) segment.
"These factors are expected to remain sustainable over the next three years and will significantly drive sector growth", the report added. The hotel sector is seeing high demand that continues to outstrip supply, according to a report by Hotelivate Research. The report forecasts that demand will grow at an annual Compound Annual Growth Rate (CAGR) of 10.8%, while overall supply is projected to increase by only 8%.
By 2027, the number of hotel rooms is expected to increase to 241,000, up from the current 188,000. The report indicates that approximately 18,000 new rooms will be added each year from 2024 to 2027. It also notes that demand in the hospitality sector is not confined to metropolitan or Tier 1 cities; Tier II and Tier III cities are also experiencing strong demand. In these regions, demand is growing at an annual rate of 13%, while supply is expanding more slowly at 10% per year.
"Enhanced road connectivity and expanded railways are fueling growth from rural to urban areas, further boosting demand. The Indian hotel industry is strategically positioned to capitalize on these trends, contributing significantly to the tourism sector and overall economic growth", the report added citing the factors supporting the demand.
The analysis also observed that, despite an average annual addition of approximately 18,000 rooms, the top six players in the market contribute about 30% of the total annual room increase. This conservative and steady approach is attributed to the market expanding more rapidly than the rate at which these industry leaders are adding new rooms.
The report highlights that the limited supply of luxury rooms suggests strong future demand and expansion in the sector. Currently, the total hospitality industry in India includes 212,000 rooms, with an industry size of Rs 82,000 crore. Domestic travelers are projected to drive approximately 50% of the industry's growth, while foreign tourist arrivals are expected to account for 30% of the incremental growth. The remaining 20% is anticipated to come from the MICE (Meetings, Incentives, Conferences, and Exhibitions) segment.
"These factors are expected to remain sustainable over the next three years and will significantly drive sector growth", the report added. The hotel sector is seeing high demand that continues to outstrip supply, according to a report by Hotelivate Research. The report forecasts that demand will grow at an annual Compound Annual Growth Rate (CAGR) of 10.8%, while overall supply is projected to increase by only 8%.
By 2027, the number of hotel rooms is expected to increase to 241,000, up from the current 188,000. The report indicates that approximately 18,000 new rooms will be added each year from 2024 to 2027. It also notes that demand in the hospitality sector is not confined to metropolitan or Tier 1 cities; Tier II and Tier III cities are also experiencing strong demand. In these regions, demand is growing at an annual rate of 13%, while supply is expanding more slowly at 10% per year.
"Enhanced road connectivity and expanded railways are fueling growth from rural to urban areas, further boosting demand. The Indian hotel industry is strategically positioned to capitalize on these trends, contributing significantly to the tourism sector and overall economic growth", the report added citing the factors supporting the demand.
The analysis also observed that, despite an average annual addition of approximately 18,000 rooms, the top six players in the market contribute about 30% of the total annual room increase. This conservative and steady approach is attributed to the market expanding more rapidly than the rate at which these industry leaders are adding new rooms.
