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

The Indian hotel industry will witness a modest growth of 5 to 6% in the current fiscal due to delays of under-construction projects, according to ratings agency ICRA.

The revenue growth for the industry is expected to remain weak in the first half of 2015 with a growth rate of just 3 to 4% and operating margins are likely to be flat, it said.

Occupancies in the hotel for FY2015-16 is expected to improve by 2 to 4% and revenue per room will go up by 3 to 5%, said ICRA in its research on the Indian Hotel Industry.

"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% during 2015-16, with flat operating margins," the report said.

It further added: "Room inventory in the country is expected to grow by 12% during 2015-16, as compared to 4% during 2014-15," the report said.

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

However, domestic travel has shown strong growth trends in last 12 months as per the domestic Revenue Passenger Kilometre (RPKM).

Meanwhile, the report also cautioned that a 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".