The domestic hotel industry continues to grow at a slow pace despite the strong demand growth for rooms, ICRA said in a report.
Pan-India average occupancy and Average Room Rate (ARR) in the industry witnessed a marginal improvement of 1-2 per cent annually, driving Revenue per Available Room (RevPAR) for the first quarter of FY18 up by 3 per cent, ICRA said.
The RevPAR has been annually growing for the past 12 quarters, it added.
According to ICRA, despite the continued occupancy traction and the marginal improvement in ARRs, a healthier traction in ARR is necessary over the coming quarters to generate adequate returns, considering the significant capital investments undertaken by the industry.
Revenue growth for the industry sample remained subdued with the adjusted industry revenue witnessing 2 per cent annual growth during the quarter, while on unadjusted basis, it declined by 2.3 per cent during the quarter, it said.
"With no large project announcements over the past year, muted supply pipeline is expected to be the backbone for the current up-cycle, even as demand continues to grow by over 12 per cent, led by slow recovery in the domestic economy, increasing Foreign Tourist Arrivals (FTA), and higher Meeting, Incentives, Conferences and Exhibition (MICE) activity," ICRA Senior Group Vice President, Corporate Sector ratings, Subrata Ray said.
Going by the recent trends in foreign tourist arrivals into the country and forex earnings growth, improving domestic macro-economic data (barring the transitory dip in economic activities due to demonetisation), and expected ease of business post implementation of GST (barring the initial hick ups post the roll out), ICRA expects 5-6 per cent growth in RevPARs during FY18, he said.
RevPAR growth is estimated to accelerate to 7-8 per cent during FY19 and FY20, driven largely by anticipated traction in ARRs, he added.
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