ICRA expects 8 pct to 9 pct RevPar growth in FY2018 for Indian Hotel Industry

New Delhi [India], Mar 6 (ANI): Credit rating agency ICRA on Monday announced its expectations RevPar for Indian Hotel Industry to grow by eight percent to nine percent in FY2018 aided by stronger domestic demand, strong flows in FTA and the return of pricing power across markets barring few micro-markets in NCR, Kolkata and Chennai.

Based on the actual performance of industry during FY2017, wherein the industry revenues remained largely flat constrained by the impact of demonetisation primarily on food and beverage (F&B) and banqueting income (MICE) during Q3 FY2017, ICRA estimates four percent to five percent growth in industry revenues for FY2017.

In line with ICRA's estimates, Pan-India average room rates (ARR) grew by two percent during 9m FY2017, while average occupancy grew by two percent marginally lower than our earlier estimates of three percent to four percent growth during FY2017.

Marginal underperformance in occupancy growth can be attributed to the impact of demonetisation on leisure room demand during November-December 2016 (peak season for the industry) at few destinations.

Contributed equally by growth in occupancies and ARRs, pan-India revenue per available rooms (RevPAR) for 9m FY2017 has increased by four percent, says ICRA in the report.

According to Subrata Ray, Sr. Group VP and Head - Corporate Ratings, ICRA Limited, "India has over 25,000 premium rooms under construction to be launched over the next four years, based on industry announcements. This will take the premium supply in the country to over one lakh rooms by FY2020 in the 12 key cities we track. Bulk of this supply, barring in Mumbai, is front-ended i.e. sizable inventory will hit the market over the next 18 months (mainly in Bengaluru and Kolkata)."

"While the supply growth, based on announcements, has been pegged at eight percent CAGR over FY2017-FY2020, we expect actual supply growth to fall to around six percent given the delays in few projects and the typical lead time required for final approvals," added ray.

Overall, ICRA believes FTAs and spends still remain below potential; hence, there is further scope for strong y-o-y growth in FTA and foreign exchange earnings. Domestic travel, going by a proxy of domestic Revenue Passenger Kilometre (RPKM) trends, which has grown by more than 20 percent y-o-y during each of the past 13 months, continued to remain healthy.

While the business sentiments and discretionary spends were impacted temporarily by demonetisation in November 2016, the positive long-term impacts of the same coupled with scheduled roll out of goods and services tax (GST) in July 2017 shall further boost domestic economy and hence, travel.

Provisions announced in the Union Budget 2017-18 for the creation of five special tourism zones (STZs); and the launch of Incredible India 2.0 campaign are also expected to be long-term positive for the industry. (ANI)