Higher average room rate (ARR) and occupancy will help the Indian hotel industry log a strong improvement in profitability, as represented by earnings before interest, tax, depreciation and amortisation (Ebitda) margin, to around 34% this fiscal, compared with 24% pre-pandemic (fiscal 2020).
Revenue, on its part, will increase ~23% over the pre-pandemic level, riding on a strong recovery in business travel and continued traction in leisure travel.
The strong business performance, coupled with limited capital spend, will improve the credit profiles of players.
A CRISIL Ratings analysis of hotels with an aggregate of ~40,000 rooms1 across categories indicates as much.
Says Mohit Makhija, Senior Director, CRISIL Ratings, “Leisure travel had gained traction post the Delta wave last fiscal, while business travel has started picking up steadily after a much milder Omicron wave in Jan 2022. This has been fuelling demand in the MICE (meetings, incentives, conventions and events) segment. CRISIL Ratings believes that improvement in international business travel in the second half of this fiscal will strengthen the industry performance. Occupancy will rise to ~73% this fiscal (68% in fiscal 2020), while average room rate (ARR) should increase 8-10%.”