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Hotel industry to see just 6% growth in FY16: ICRA

DELHI

The Indian hotel industry will witness a modest growth of between five to six per cent in the current fiscal owing to delays of under-construction projects, said ratings agency ICRA in its latest report on the Indian hotel industry. It added that the revenue growth for the industry is expected to remain weak in the first half of 2015 with a growth rate of just three to four per cent. It also expected operating margins to be flat.

It said that hotel occupancies for FY2015-16 are expected to improve by two to four per cent and revenue per room will go up by three to five per cent. “In view of continued weakness in the Indian Hotel industry, ICRA has marginally revised growth estimates for the industry down to a top-line growth of 5 to 6 per cent during 2015-16, with flat operating margins,” the report said.

“Room inventory in the country is expected to grow by 12 per cent during 2015-16, as compared to 4 per cent during 2014-15,” it added.

Due to delays of under construction project, addition of new properties still continue to trickle in from projects announced during before 2009.

The report also cautioned that weak corporate results can impact discretionary travel.  “Travel for business can be curtailed in view of technological advancement which supports highly interactive meetings in virtual spaces,” it suggested. It also hoped that “pickup in consumer confidence, coupled with improved connectivity from newer airlines and higher travel is expected to revive demand for hotels soon”.

ICRA further said that online travel agents have led to a ‘sharp increase’ in bookings due to their competitive rates and hassle-free web-based transactions, but impacted the margins because of high commissions charged by them.

To get benefit of Internet boom, ICRA said hotel operators would have “to maintain tight control on rates offered across distribution channels while drawing more customers to their own websites, which can lower the cost of customer acquisition”.

Musafir Namah Bureau, PTI

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