Mumbai, Jan 30 India’s hotel industry is in a "sweet spot" and is likely to deliver around 16 to 21 per cent earnings growth over the next three years, driven by rising room rates and improving occupancy, a report said on Friday.
The report from HSBC Global Investment Research said industry‑wide EBITDA is expected to grow at a "robust 16 to 21 per cent compound annual growth rate over FY25–FY28," supported by average room rate growth of 5 to 7 per cent a year.
Further, improvements in occupancy levels across key urban and leisure markets, the addition of high-margin managed room inventory, and a healthy contribution from other segments such as meetings, incentives, conferences, and exhibitions will also drive the growth.
Such events, including corporate events and weddings, generate 30 to 45 per cent of sector revenue, the report said.
EBITDA margins for companies covered by the research firm are also likely to expand by about 140 basis points on average over the next three years.
The EBITDA margin growth is supported by "traffic mix improvement, operational efficiencies, and a shift towards managed room inventory, which is usually a high-margin business," the report noted.
"The industry is in a sweet spot. Demand is strong, broad-based, and sustainable, while capacity is struggling to keep up, with room rates having risen for four years and occupancy at an all-time high," it said.
Valuations remain undemanding despite intact fundamentals, strong balance sheets, and healthy margins, even as foreign tourist numbers are growing, and domestic travel has never been better.
The supply of rooms is struggling to catch up with demand, even as more capacity is added. According to the CEO of Hilton Hotels, India is the biggest opportunity in the global hospitality industry for the next 10 to 30 years, the report cited.
The valuations are at about a 17 per cent discount to the five‑year average, and the recent weakness stemmed from geopolitical tensions and weather disruptions, which create a buying opportunity, the report said.
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