The hotel industry in India has witnessed a strong Q3 FY primarily driven by an improved RevPAR (Revenue Per Available Room) and by an increase in the ARR (Average Room Rate) while the occupancy was lower versus pre-Covid levels.
As per a recent report by Motilal Oswal the occupancy rate (OR) stood at 65 percent in Q3, a little lower than pre-Covid levels impacted by the accumulation of major festivals in October 2022. It is expected that the OR is expected to again surpass the pre-Covid levels in the coming quarters on the back of strong demand drivers such as the wedding season, G20 Summit meetings, the ICC ODI Cricket World Cup and the resumption of foreign inbound travel. ARR should continue to inch higher, thereby boosting RevPAR.
The report has taken into consideration the latest performance of different hotel brands such as the Indian Hotels (IH), Lemon Tree Hotels (LEMONTRE), Chalet Hotels (CHALET), EIH the flagship company of the Oberoi Group, Oberoi Realty (OBER), Brigade Enterprises (BRGD), and ITC.
The Motilal report says that compared to pre-Covid levels (Q3 FY 20), the hospitality basket reported a higher flow through (incremental EBITDA to incremental revenue) in the Q3 with LEMONTRE leading the pack (133 percent), followed by EIH and IH-standalone.
As per HVS Anarock, in Q3 FY 23 the hotel industry ARR rose sequentially by 23 percent to Rs 7,233 (up 16 percent versus Q3 FY20), while OR fell 170 bp versus Q3 FY 20 to 65 percent due to a decline in October 2022 compared to the previous month. OR was affected by a drop in business travel in October 2022 because of the festival season, but it bounced back in November 2022 and December 2022 to 69 percent each from 57 percent in October 2022.
As per the RBI, FASTag collections per day in Q3 FY 23 increased 11 percent to Rs 1,526 million from Rs 1,375 million in Q2 FY 23, indicating a consistent increase in travelers opting for hotels within accessible destinations by car.
As per HVS Anarock, Mumbai continues to be the top market with OR crossing 80 percent in December 2022. Goa recorded the highest ARR of over Rs 13,000 in December 2022, up to 31 percent from December 2019.
As per HVS Anarock, the industry is in the beginning of a five-year growth story, which will compensate for muted growth over the last 15 years. In FY 2024 domestic business is expected to be healthy. The Indian hotel industry recorded its best performance since the pandemic began, with OR of 68-70 percent and ARR exceeding Rs 7,000. Interestingly October 2022, being a festive season, was not good for the industry. Similarly, business travel was subdued in the last 10-15 days of December 2022.
