Indian hotel market ‘stuck in orbit’ despite favourable demand-supply equations

The Indian Hospitality – Trends & Opportunities Report 2019 released by hotel consultancy firm, Hotelivate after analysing the performance metrics of 1,068 branded hotels spread across 13 cities in the country, has noted the industry remained ‘stuck in orbit’ and failed to reap the benefits of the extremely favourable market conditions and demand-supply equations.

The annual report for 2018-19 said that the ‘occupancy and Average Room Rate (ARR) barely moved’ despite favourable demand and supply equations.  The nation-wide hotel occupancy grew only 1.4% over last year to reach 66.7% in 2019.

As per the report, 15% of the 1,068 hotels tracked, registered 80% or more occupancy and three-fourths of them had clocked occupancy of 70% or more in 2018/19.  Despite such high performance, the nation-side occupancy saw only a marginal growth of 1.4% resulting in 3.6% increase in average rate, and 5% growth in revenue per available room (RevPAR).  However, 5% growth in RevPAR in a year is the highest in a decade after the global recession of 2008/09.

While hotels across all star-categories witnessed RevPAR growth last year, the highest growth was in the 2-star category, 18%.  The category also witnessed highest average rate growth also last year riding on over 6% growth in occupancy, the report notes.  Another notable performance was in the 5-star deluxe category.

While all the major cities analysed witnessed increase in RevPAR last year, Noida/Greater Noida witnessed the highest growth of 25.4% due to improved business sentiment and new supply stagnation. In terms of occupancy, Mumbai continued to enjoy an upper hand over other cities with 77.1%. In the occupancy front, except for Bengaluru which witnessed a de-growth of 3.4% largely because of consistent flow of new supply, all other markets experienced robust occupancy growth.

In the light of growing signs of recessionary trends in the market, the report cautions the industry of slower than anticipated growth in coming months. The report asks to pay close attention to strategies than can retain or grow the market share and optimise revenues, while being clear that this is still very much an up-cycle.