Chart: Room rates in India hit new peak , averaged Rs 6,869/ day in FY2023

Room rates in India averaged Rs 6,869/day in fiscal year 2023, with February 2023 hitting a new peak at Rs 8,300/day compared with the earlier peak of Rs 8,000/day in fiscal 2008, according to a study by Kotak Institutional Equities

At the current trend, the brokerage expects full-year FY2024 to likely see a 15 per cent year-on-year growth in room rates on average.

February 2023 scaled new fresh peak:

"Being a cyclical business, we saw room rates rise rapidly at a 15% CAGR during FY2002-08, with a corresponding rise in occupancy from 52 per cent to 70 per cent. However, room rates trended soft for the subsequent eight years, falling at an average 4.5 per cent per annum, with room rates dropping to Rs5,527/day and occupancy dropping closer to 60 per cent," noted the report. 

 

Room rates again started rising, albeit gradually at a CAGR of 3 per cent from FY2016 to FY2020, with occupancy improving to 66 per cent by FY2020, subsequently impacted by the pandemic that saw room rates plummet to Rs4,630/day on an average in FY2021.

Room rates have since seen a sharp bounce-back after the pandemic, scaling new peaks. 

A major catalyst driving demand for hotel rooms is the wedding season. Estimates from the Confederation of All India Traders (CAIT) reveal that around 38 lakh weddings are set to take place during the current season, presenting a Rs 4.7 lakh crore worth of business opportunities. 

Among cities, Bengaluru, Mumbai and Delhi account for 26 per cent of hotel inventory, as of March 2023. 

Recurring sporting events throughout the year such as the Indian Premier League (IPL), Indian Soccer League (ISL), Hockey India League (HIL) and Pro Kabaddi League (PKL) have become a regular source of demand for branded hotel rooms. These events are generally at least a month-long, and there is a requirement to station the staff/event planners, along with the teams (players and coaches). These would continue to support demand for hotels in India in the years to come, especially as more sports (other than cricket) continue to gain prominence in the country.

India has seen a strong surge in leisure travel, with some leisure destinations like Udaipur seeing record room rates.

Some leisure destinations such as Udaipur and Goa seeing very strong room rates with rising leisure travel