New Delhi, Nov 10 India is likely to see a compound annual growth rate (CAGR) of 5-6 per cent in premium hotel room additions between FY25 and FY28, as demand is expected to grow at a faster pace of 8-10 per cent, according to a report on Monday.
As a result, occupancies across premium hotels are projected to improve by 200 bps to 72-74 per cent, and average room rents (ARRs) to Rs 8,200-8,500 in FY26, 3-6 per cent higher over the previous year, said rating agency ICRA in its report, maintaining a ‘Stable’ outlook on the Indian hospitality industry.
“India’s annual premium hotel room inventory across 12 major cities crossed the 1 lakh mark in FY2023, and is slated to cross 1.2 lakh keys in the next fiscal,” said Srikumar Krishnamurthy, Senior Vice President and Co-Group Head–Corporate Ratings, ICRA.
However, demand growth is expected to continue to outpace the supply addition, at least over the next three years.
ICRA expects the premium room inventory across these cities to grow at a CAGR of 5-6 per cent over FY25-FY28, while demand is expected to augment in the range of 8-10 per cent in this period.
The premium hotel key additions are democratised in this cycle, across tier 1 and tier 2/3 cities, given the increased acceptance of the latter among travellers, and space and land constraints in the former.
With three years of double-digit revenue expansion over FY2023 to FY2025, and the growth momentum continuing in the current fiscal, the Indian hospitality industry has fared well in recent years.
Buoyed by the strong demand sentiments and the improved earnings profile of hospitality players, the sector continues to see investments for supply additions and room upgradations, to encash on the opportunities, the report mentioned.
Certain pockets within the hospitality segment such as airport hotels and spiritual tourism have garnered healthy interest over recent years, with 2,000-2,500 premium keys in the pipeline in each of these segments, which is estimated at around 10-15 per cent of the total premium supply pipeline.
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